December 11, 2020
By Marc Frank
HAVANA (Reuters) – Cuba said late on Thursday it would start its long-awaited monetary reform in January, eliminating its dual currency and labyrinthine multiple exchange rate system in a bid to improve business conditions in the crisis-stricken economy.
In a televised address to the nation, President Miguel Diaz-Canel said the Cuban peso would be fixed at a single exchange rate of 24 per dollar in the first devaluation of the peso since the country’s 1959 revolution.
“We consider the conditions have been created to enable us to announce the start of the task of (monetary) ordering from Jan. 1,” said Diaz-Canel, sitting next to Cuban Communist Party chief Raul Castro.
For more than three decades, two currencies have circulated in Cuba’s state-run economy: the peso and the convertible peso (CUC), pegged to the dollar.
These have been exchanged at various rates: 1 to 1 for state-owned businesses, 24 pesos for 1 CUC for the public and others for joint ventures, wages in island’s special development zone and transactions between farmers and hotels.
The government has said it will eliminate the CUC as part of the currency reform, although Diaz-Canel did not refer explicitly to it on Thursday, simply saying there would be just one exchange rate from January of 24 pesos per dollar.
Economists say the reform spells short-term pain for Cubans but is important in the long-term as varying exchange rates have obscured the real functioning of the economy and effectively subsidized some sectors.
Diaz-Canel said it was no “magic solution” to the cash-strapped country’s economic problems.
“However it will favor the creation of the necessary conditions to advance in a more solid manner,” he said.
(Reporting by Sarah Marsh and Nelson Acosta; Editing by Jacqueline Wong and Christopher Cushing)
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