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    Naive Commentary about Two False Currencies

    Naive Commentary about Two False Currencies / 14ymedio, Miriam Celaya

    14ymedio, Havana, Miriam Celaya, 11 January 2017 — It is not common, in
    the middle of all the gloom and the torrents of noteworthy dates that
    constitute the bulk of the official press, to find a journalistic work
    that brings to light — even partially — the obstacles that derive from
    one of the most stubborn problems of the Cuban economy: the
    double currency system.

    A report published this Sunday in Juventud Rebelde (Rebel Youth)
    evauated the sales results in both national currencies (CUP and CUC) in
    the so-called shopping centers. The report indicates that almost three
    years after the start of this “experiment,” it becomes apparent that the
    resulting benefits are reduced almost exclusively to the simplification
    of the exchange process.

    In the case of more comprehensive terms, the improvement is that
    shoppers who only have ordinary currency (CUP) interested in making
    purchases at the foreign currency shops do not need to exchange their
    currency into CUC at the currency exchanges (Cadeca) before they shop,
    thus avoiding the consequent inconvenience of long lines, wasted time
    and sometimes traveling from distant places, as they can now transact
    their purchases in the stores themselves in CUP.

    Another advantage that, without going into the sordid details, reporters
    mention, is that with the undifferentiated use of both currencies “the
    illegal currency market has been restricted to a minimum.” In practice,
    this does not mean that the underground exchange markets have
    disappeared or been weakened — as the article implies — but that the
    excellent health the illegal transactions continue to enjoy occurs in
    closed spaces. As is well known, some go this route when they sell their
    properties intending to emigrate, so they can take some hard currency
    capital (in dollars or euros) with them.

    In contrast to the two modest improvements mentioned, the report lists a
    string of difficulties, among which are the errors derived from the lack
    of training of personnel in how to operate with the two currencies,
    which has caused numerous mistakes; the instability of the specialized
    labor force and the “lack of experience” in the “accounting treatment of
    monetary duality”; along with the “insufficient capacity of safes and
    cash registers” to store the cash in the stores.

    The lack of an automated system to register operations with the new
    payment instrument — that is, Cuban pesos — is another problem, which
    means “accounting errors” or “differences in the daily schedule due to
    errors in the operation of cash registers”, among other limitations, not
    attributable to the stores, but related to the eternal governmental
    improvisation and emergency strategies to alleviate deep and old evils.

    A recurring problem is the displeasure of those customers who pay in CUP
    and get their change back in CUC. The lack of coins and small bills in
    the shopping centers is ever-present, so that customers are
    short-changed, which harms their buying power and benefits the employee
    in charge of collecting payments, who, at the end of the day, pockets
    the overage from the cash register. The matter is aggravated by the
    increased demand for stores to keep available change in CUC, because it
    is mandatory that customers paying in CUP be given their change in hard
    currency.

    Among the most interesting points, although scarcely mentioned
    tangentially in the report, is the complaint of an interviewee who
    criticizes the confusion created by the buy-sell in two currencies,
    especially by the exchange rate that the stores apply (where 1 CUC is
    equivalent to 25 CUP), while in the currency exchanges, the Cadecas, the
    exchange of 1 CUC is equivalent to 24 CUP.

    Stores go beyond their function as commercial entities when they
    carry out a banking operations or currency exchnages that would legally
    be the job of the National Bank, a distortion proper to a system where
    the bankrupt economy cannot offer real financial support to its
    currency, so money has no realistic value. On the other hand, there is a
    single entity, the State-Party-Government, as sole administrator and
    owner of everything, from Banking to commercial establishments and most
    services, so that the currency has a virtually symbolic function and,
    significantly, is only valid within the national territory.

    Since we are talking about monetary distortion, the most palpable
    reflection of the ambivalence of such a fictional* currency as the CUC
    is the capricious difference in values that it acquires in its popular
    usage, depending on whether it is whole or fractional currency. In the
    informal market, the fractional currency – that is coins – loses value.

    This aberration manifests itself in every informal transaction, for
    example, in what the passenger of a private sector taxi pays for the
    service: if the trip costs 10 Cuban pesos (CUP) and the passenger pays
    with a CUC, he will probably get 14 CUP in change, the equivalent of the
    CUC at a rate of 24 CUP, which is the same value one finds in the Cadecas.

    However, if that same passenger pays for the service with coins in CUC
    currency (say, 50 cents), the norm is that he won’t get any change back,
    though the driver is supposed to give back 2 CUP. Mysteriously, there
    appears to be an unwritten law where the use of coins in CUC currency
    places it in the informal market at an equivalent of only 20 pesos CUP.

    The same thing happens if a one peso CUP purchase is made (informally, 5
    cents CUC), as in the case of a plastic bag or newspaper bought from
    street vendors, usually elderly retirees looking to increase their
    meager income in this way.

    Another notorious issue that is mentioned is the high prices of store
    products, which become more evident when the payment is in CUP.
    Obviously, the use of the CUP in the commercial and service networks
    highlights the enormous inflation that has been enthroned in Cuba which
    is masked, somehow, when the sale is transacted only in CUC.

    It does not cause the same psychological effect to buy a bag of powdered
    milk at 5.65 pesos CUC as it does to pay 141.25 pesos CUP, which is
    35.3% of the average Cuban monthly salary (400 pesos CUP). In addition,
    there is talk of “high prices” in Cuba when we should be discussing the
    devaluation of the CUP currency and workers low wages, which depress the
    consumption capacity of the average Cuban to a minimum.

    Other many collateral points of the report deserve to be mentioned, such
    as the refusal of most commercial establishments to offer statements to
    the official press — a formidable obstacle that constitutes the daily
    bread of the independent press trying to question officials, official
    institutions, or to cover supposedly public events — and the reporters’
    allusion to the informative, cultural, social and civic role that they
    must fulfill. But it is not possible to cover in one article the extent
    of the debates these subjects deserve.

    Despite everything, with its successes and evasions, the article in
    Juventud Rebelde gets credit for uncovering at least the tip of the
    iceberg of some of the most serious wrongs that the Cuban economy
    exhibits, and implicitly points to the urgent need to put an end to the
    dual currency system, a thorny question that – inexplicably — was not on
    the agenda at last December’s National Assembly sessions.

    None of the problems nor their solutions were there. The villain remains
    hidden behind an army of scapegoats and small-time officials. We
    shouldn’t overlook the efforts of those who, from the dictatorship’s
    monopoly of the press, strive to pull the monkey’s chain**, even if they
    continue to fear him.

    Translated by Norma Whiting

    Translator’s notes:
    * Despite its name, Cuban Convertible peso, the CUC can only be
    exchanged for foreign currencies within Cuba, and in fact it is illegal
    to take Cuban currency out of the country.
    ** A common expression in Cuba – referencing ordinary people’s
    relationship to power – is “You can play with the chain but not the monkey.”

    Source: Naive Commentary about Two False Currencies / 14ymedio, Miriam
    Celaya – Translating Cuba –
    translatingcuba.com/naive-commentary-about-two-false-currencies-14ymedio-miriam-celaya/

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