What is the Cuban government doing?Ĭuba announced it would increase government workers’ salaries and pensions to adjust for inflation. It’s already been a tough year for those workers, many of whom are employed in the country’s tourism sector, which has been decimated by coronavirus-related travel restrictions and the Trump administration’s harsh policies toward the island. So what happens to all those convertible pesos floating around?Ĭubans will have through June 2021 to trade in CUCs for Cuban pesos, according to a decree published in the Cuban government’s official gazette on December 10.īut the devaluation of the currency at 24 Cuban pesos to 1 CUC means they’ll lose a significant amount of money in doing so, something that is likely to hit private-sector workers who have been paid in CUCs for years particularly hard. CUCs are used in businesses that involve foreign money - such as tourism or buying goods imported from abroad.īut most Cubans who don’t work in the tourism sector are still paid in CUPs, and this dual system has created a lot of disparities - which is one reason why CUCs are being scrapped. For the average Cuban, one CUC is worth 25 times more than one CUP, and not everyone can get their hands on them. Signs that read ‘No CUC’ in reference to the convertible peso hang on the walls of a store in Havana, Cuba Confusing. The CUP is still used for everyday domestic transactions, and many Cubans are paid their wages in CUPs. It is pegged 1:1 to the dollar but exchanged with the public at a rate of 24 to buy and 25 to sell. The CUC has historically been used for state business and buying goods from abroad, but it can’t be taken out of the country. The use of US dollars had previously been banned in 2004 when the government created the CUC. That, in turn, let the government snap up those dollars to help deal with its liquidity crisis, Reuters news agency reported.

Earlier this year, Cuba reallowed “dollar stores”, which let people buy goods like food, toiletries and electronics with bank cards loaded with US dollars or other foreign currency. That is what Cuba elected to do after the collapse of the Soviet Union, when Havana legalised the use of the US dollar alongside the Cuban peso in 1993.

Cuba’s tourism industry has been hit hard by coronavirus-related travel restrictions and the Trump administration’s tightening of the embargo OK, so does that mean they use only a foreign currency instead of their own?Ĭountries can opt to fully adopt the US dollar or another foreign currency as their own, but though it may provide stability, it gives governments far less control over their monetary policy.Ĭountries can also choose to use both a domestic currency and a foreign one at the same time.

Sometimes, countries officially turn to the US dollar in what’s known as “dollarisation”, or the euro. If people use another currency unofficially, it can create a thriving black market and exert extreme pressure on the national economy. When a country’s domestic currency is unstable, subject to high rates of inflation or generally not trusted to hold its value, people may start to use a second currency they think will fare better - especially when it comes to buying imported goods. The Cuban peso, known as the CUP, was created as the island’s currency by the first president of the country’s post-revolution Central Bank, Ernesto “Che” Guevara.īut thanks to an embargo by the United States and some of the island’s state-run economic policies, the value of Cuba’s currency evolved to become a tricky issue. So what does that mean for Cubans and visitors to the island? Here’s what you need to know. Keep reading list of 4 items list 1 of 4 Cuban doctors arrive in Panama to boost COVID fight list 2 of 4 Cuba attracts $1.9bn in foreign investment despite US sanctions list 3 of 4 Biden’s team is planning a Cuba reset: Sources list 4 of 4 Cuba to have unified exchange rate starting in January end of list

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