Global Policy Forum

Cuba to Stop Accepting US Dollars in Transactions

Agence France Presse
October 26, 2004

Cuba said that US dollars would no longer be accepted in stores on the island starting November 8, marking a sharp change in the country's financial policies in response to what the government called hostile US policies toward the communist-ruled nation. The Cuban Central Bank statement was read over national television with Cuban leader Fidel Castro on hand, making his first public appearance since undergoing surgery for his knee after a fall last week. The new restrictions will affect Cubans as much as foreigners visiting the country. Hotels, restaurants, car rental agencies and taxi drivers will henceforth accept only so-called convertible pesos, a local currency that can be used in specialized stores on the island but has no value internationally.

Cuban citizens will still be able to possess a certain amount of US dollars, but using them in commercial transactions or in retail will be banned, the statement said. If they want to shop at special stores that sell goods for foreign currency, they will have to convert their dollars to convertible pesos at a rate of one for one. But there will be a 10-percent tax imposed on each transaction. Other foreign currencies like the Canadian dollar, euro, pound sterling and Swiss franc will be accepted in the country as before. Banks will stop conducting dollar transactions beginning November 8, and companies or individual businessmen maintaining dollar-denominated accounts in them will have to convert them into convertible pesos. The new measure was adopted in response to tighter US sanctions announced by the administration of President George W. Bush last June that limit money transfers to Cuban citizens from relatives in the United States as well as family visits to the island. "It is important to denounce the schemes of the empire" against Cuba, Castro said in televised remarks, referring to the United States and its four-decade-old embargo on the island.

National television showed the president sitting behind a desk, which hid his legs. His arm was in a cast. The new restrictions were expected to affect Cubans with relatives in Florida and other parts of the United States, who have been allowed to receive financial assistance from family members, and trigger a strong reaction from the Cuban-American community. But it was not immediately clear if they would have any effect on the upcoming November 2 US presidential election, in which Florida is one of key battleground states. The United States has maintained a trade embargo against Cuba for 43 years. Free circulation of the dollar was allowed in Cuba in 1993 as part of economic reforms designed to soften the impact on Cuba of the collapse of the Soviet Union, its key supporter during the Cold War. The convertible peso was introduced in 1995.

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