Cuba: A Tale of Two Currencies

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Dealing with security guards wasn’t exactly what we had in mind when we decided to go on an ice cream run. It was a mild March day in Havana, by Cuban standards. Yet, having just flown in from New York days prior, we hoped a scoop could ease the transition from the blustery weather back home.

We were eight NYU students part of a larger group taking a field intensive course in Cuba, and after a lecture, we had decided to head to La Coppelia. It is one of the world’s largest ice creams parlors and occupies an entire city block in the Vedado district of Havana. The central structure looks like something out of the Jetsons, but the area surrounding it is more like a park with tables and awnings where Cubans can enjoy their ice cream. As we approached, a guard stopped us in our tracks.

“Español?” he asked.

“Yes,” I replied in Spanish.

“Will you be paying in Cuban Convertible Pesos (CUCs) or pesos?” he continued.

“CUCs,” I said.

“Come with me.”

We followed him to a set of stairs. Another guard noticed us and gestured for us to follow him to the second floor. We were taken to a private room with a handful of people inside. We sat down and ordered.

Something was off. We had bypassed a line outside that snaked around the block. More entrepreneurial types even hawked cones and various ice cream-accouterments in line as customers patiently waited, but we received special treatment.

Come to find out, this event was a microcosm of a pressing reality in Cuba—the plight of two currencies. The issue has already fractured Cuban society, but as the country makes preparations to integrate further into the global market economy, the situation is an indication of the island’s fragility.

The two-currency system was created in 1994 as a way to deal with a weak economy. The Convertible Cuban Peso emerged as a second currency, and was pegged to the U.S. dollar. The Cuban government originally implemented CUCs to be used in the tourist industry and for luxury goods, but over time, this has created issues of access. What makes the situation more complex, is that there are two valuations of the peso in this system. At official exchange offices, or CADECAs, the rate is approximately 25 pesos per CUC. However, for state purposes the peso to CUC exchange is seen as one to one.

La Coppelia is a perfect example. Run by the state, it accepts both currencies and the price is the same across the board: if one scoop of vanilla costs one CUC, for those paying in pesos, the price would be one peso. In absolute U.S. dollar terms, the price would equate to about $1 USD for those paying in CUCs, and 4 cents for those paying in pesos. This is a dramatic difference, but it also explains the line. Most Cubans choose to endure the wait to pay four percent of the price we paid,

Though, not all Cubans even have access to CUCs. La Coppelia is one of the few cases where the dichotomy is so blatant. But consider a doctor who makes $64 USD per month. Paid out in Cuban pesos, this equates to $1,675 pesos per month. However, the real value of this salary depends on where it is used. If it is falsely inflated by the state, like it is at La Coppelia, the doctor’s monthly salary will be equivalent to $1,675 CUCs. At a CADECA, however, the doctor could only exchange that monthly salary for $67 CUCs.

Doctors used to be some of the highest paid professionals in Cuba. But now, lesser skilled entrepreneurs that are paid in CUCs have been able to exploit the two-currency system. Taxi drivers, hotel staff, and restaurant owners are perfect examples. For instance, if a typical taxi driver charges 8 CUC to take someone from the Vedado district of Havana to Old Havana, he or she only needs to complete this trip nine times per month to make more than a doctor. The trip takes less than 15 minutes.

The dual currency system has fractured the Cuban society. It can only be dealt with by uniting the two currencies—which the Cuban government announced it would do back in 2013. But even then there is potential for crisis. If the Cuban government were to announce overnight that one currency was no longer relevant, inflation would skyrocket—precipitating a serious economic crisis. Not to mention this would discourage foreign investment, which the island is so desperate for. Unfortunately, there is no easy solution, these are some of the growing pains that Cuba must endure in order to successfully transition to a full-fledged member of the global economy. Cuba cannot continue to have its ice cream and eat it too.

This article was originally published on worldpolicy.org on April 30, 2015. 

From Havana, With Love

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“Hello, happy holidays!” In mid-March?

Strolling down the cobble stone streets that skirt the Plaza of the Cathedral and the Plaza de Armas, this phrase is ubiquitous. As any visitor of Old Havana can attest, Cubans often hurl this at passing tourists irrespective of the season. To U.S. citizens, the moment may falsely present itself as an opportunity to laugh. Look how out of touch Cubans are, they might say. After digging a bit deeper, a more troublesome reality is revealed: the U.S. and Cuba are on completely different wavelengths. This failure of Cubans and U.S. citizens to connect with one another over a simple greeting is a microcosm. It reveals that as the United States and Cuba grow ever closer politically, the way the United States has been conditioned to view Cuban society is no longer accurate or relevant. Cuba is not the static, backward, Cold War relic often represented in the U.S. media. And the picture of the old Cuba, once frozen in time, versus the new thawing Cuba is inaccurate. The persistence of this antiquated narrative is therefore a social problem for the United States. And if Washington hopes to normalize relations with Cuba any time soon, efforts must begin by tabling the paradigm on the home front.

Every winter under the noses of the United States, Canada’s snowbirds flock to Cuba to escape the frozen tundra of their homeland. This has had a tremendous influence not only on the Cuban economy but also on Cuban society. Canadians’ propensity, for instance, to call their vacation a holiday is likely the explanation for the popularity of the phrase “happy holidays”—wishing tourists a happy vacation. This is evidence that Cuba remains one of the only bastions of tourism that has successfully avoided U.S. influence. However, U.S. travelers are ill equipped to understand this reality. A chuckle or remark about how out of touch Cubans are would be better served if directed inwardly.

The U.S. is out of touch. Cuba has a booming tourism industry, and is being influenced by face-to-face contact with other cultures. These are details the U.S. narrative fails to encapsulate.

Historically, Cuba has also been represented as a Cold War relic. This characterization fails on two accounts. First, it suggests that Cuba has undergone no internal change, when in fact it is extremely dynamic. Second, it implies that with the U.S. embargo and a lack of influence, Cuba is virtually the same as during the Cold War. Politically this may carry weight. Economically, though, Cuba has undergone significant changes: from relying heavily on Soviet imports, to a restructuring in the “Special Period” of the 90’s, to a burgeoning private sector in the 21st century. Also, Cuba’s human rights record—specifically with respect to LGBT rights—has drastically improved since the early years of the revolution. As in any country, Cuba has seen waves of change. Unfortunately, change for Cuba has been defined in the U.S. as complete regime change. Therefore, these developments go unrecognized and the common narrative fails to adapt.

In order to support claims that Cuba is somehow backward or not modern, authors point to the World Bank statistic that only 25 of every 100 Cubans have access to the Internet. This assumes, though, that only those with access to the web are capable of accessing information. In fact Cubans have found a work around. El paquete semanal, or the weekly package, is a one-terabyte hard drive distributed on the black market that includes the most recent television shows, movies, games, documentaries, and information from around the world. Prices vary from 10 cuban pesos ($0.40 USD) to $10 USD depending on the amount of content and the type of package. While many Cubans lack Internet, el paquete broadens access to entertainment and information. This is not reflected in statistics. Therefore the official U.S. narrative is incomplete at best. Greater access to the internet does not breed modernity so much as access to information. And the Cuban people have access to information—albeit in an extralegal way.

Normalizing relations may be a diplomatic endeavor, but the importance of public opinion in the United States cannot be overstated. It will take an Act of Congress to dismantle the trade embargo completely. And U.S. citizens continue to elect senators and congressmen that espouse an antiquated view on the Cuban issue. They represent major barriers to normalization. Therefore, if President Obama is serious about pursuing strategies to throw out a policy that began just one year after he was born, he must actively pursue to change how Cuba is envisaged in the U.S. imagination. If not, a ‘happy holiday’ in Cuba for U.S. citizens might remain a dream.

This article was originally published on the Global Politics website on April 5, 2015.