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Cuba says goodbye to its two-currency system


It is a small revolution looming in Cuba. The island will turn the page of its unique system in the world. A single local currency will be in effect from January 1, 2021, President Miguel Diaz-Canel announced on Thursday. The measure, which had been announced for years and constantly postponed, is intended to make the Cuban economy more readable for foreign investors. “We consider that the conditions are met to announce the start of this reform from January 1, 2021, with a single exchange rate of 24 Cuban pesos for one dollar”, announced the president on television, alongside the ex-president and first secretary of the Communist Party Raul Castro.

“We recall the importance of this task, which will place the country in better conditions for the transformations that the updating of our economic model requires,” he added. The Communist leader acknowledged that this is “one of the most complex tasks” facing the country, already affected by “the effects of the strengthening of the (American) embargo, the situation of the Covid pandemic -19, the international economic crisis and the impacts caused on our economy “. Indeed, the process, postponed for years while waiting for the best time to do it, finally comes in the worst context, while the Cuban economy is expected to fall by 8% this year, according to forecasts by Cepal, commission. UN Economic Policy for Latin America.

Inflation risk

The reform will eliminate the convertible peso or CUC, aligned with the dollar and born precisely in 1994 to accompany and then replace this currency. Only the Cuban peso or CUP will remain, which is worth 24 times less. This unification comes as the island has reintroduced the dollar since October 2019, with the opening of appliance and food stores where you can only pay with this currency. The value of the CUP could suffer against this strong currency. In addition, state enterprises, which benefit from a reduced rate of one UPC for the dollar, will see their production costs rise and therefore their prices. The government has already announced that it will carry out a significant wage hike to offset the expected high inflation.

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