The monetary unification to take place in Cuba will be a "complex" process that will take "three years or more," said the former Minister of Economy and Planning José Luis Rodríguez, in an article published in Cubacontemporanea.com.
On October 22nd, Raul Castro's goverment announced, without elaborating, the beginning of a gradual process of unification of the convertible peso (CUC, which is equal to the dollar) and the Cuban peso (CUP, with a conversion rate of 25 for 1 CUC), which have been in circulation 20 years.
Rodriguez, who designed the system, warned that "the expectations of individuals with the elimination of the dual currency tend to be higher than what can really be expected to happen." The unification will only create conditions for improved economic management and measurement, but overcoming the problems currently affecting the production of goods and services and income of the population will only be possible with a profound structural change in the economy, he continued to say.
According to some experts, Cuba's two-currency system creates social inequality, because wages on the island are paid in CUP, thus making its unification one of the biggest demands of the population.
"The gradual monetary reunification should ensure greatest economic stabilityand security for all members of society, so expect the gradual introduction of differential exchange rates by sector," Rodriguez said.
According to some experts, Cuba's two-currency system creates social inequality, because wages on the island are paid in CUP, thus making its unification one of the biggest demands of the population.
Rodriguez said that "it will be necessary first to devalue the official exchange rate that now governs the operations" of firms (which is one to one exchange) and subsequently achieve their convergence with what the population is using (a 25 to one rate)," so all adjustment will take time to possibly extending to three years or more."
Authorities recognize that the existence of two different currencies and exchange rates produce distortions in business accounting and in the measurement of productivity and profitability.
"The gradual monetary reunification should ensure greatest economic stabilityand security for all members of society, so expect the gradual introduction of differential exchange rates by sector," Rodriguez said.
This involves "a complex process of the creation of financial reserves, together with the legal, accounting and statistical transformations to carry it out."
Rodriguez further indicated that for companies, 90% of them state owned, "will have some short-term costs and benefits that will become apparent in the medium term."