Cuba’s Central Bank Responds to Fears on Monetary Unification

A man shows Cuban Convertible Pesos (CUC) before ordering beer at a local cafeteria that offers products for sale both in Cuban Pesos (CUP) and Cuban Convertible Pesos, in Cuba, in Havana, Cuba March 29, 2018. REUTERS/Stringer

HAVANA, march 30th (HT) The Central Bank of Cuba denied that the unification of the country’s monetary system is imminent, a rumor that caused a large influx of people at the banks in recent days, reported dpa news.

Currently in Cuba circulate the Cuban convertible peso or CUC, which has parity with the dollar, and the Cuban peso or CUP, which is changed at 24 for 1 CUC.

On several occasions since 2014, the Cuban authorities have announced that both currencies would merge leaving as valid the Cuban peso or CUP, in which the population mostly receives their salaries. Some economists expect a devaluation of the CUC to accompany the monetary unification.

“The Central Bank informs that the CUC will continue in circulation until the moment in which as part of the process of monetary unification its withdrawal is decided, when it will be officially reported,” announced an official note from the Central Bank of Cuba.

The date for the beginning of the monetary unification process has not yet been determined, the Central Bank said in its statement published by the official newspaper “Granma”. Insider information on the timing of the merger and exchange rate involved can prove highly profitable for those in the know.

The Central Bank assured that deposits will be guaranteed in bank accounts in foreign currencies, CUC and CUP pesos, as well as the cash held by the population.

The promised unification is one of the main reforms pending as Cuban President Raul Castro leaves office on April 19th. The younger brother of the late Fidel Castro has pointed out that double accounting distorts the national economy, confirmed by numerous economists.

In addition to the exchange of a CUC for 24 CUP for the population, the state companies have other rates of exchange in their accounting which, along with a lack of transparency, prevents knowing the real state of public accounts.

Officials and analysts agree that the double monetary circulation causes damage to the economy but also note that a drastic unification could worsen the economic situation in the short run, having to close unprofitable state companies that are now subsidized with beneficial exchange rates.