Castro Moving Away From the Dollar
Beautiful Horizons blog
Fidel Castro is seeking to limit the use of the dollar in Cuba by assessing a 10% commission for exchanging dollars.
Foreign executives said the impact on their operations will be negligible. Western diplomats saw the announcement as a clever bid to rake in dollars the cash-strapped state needs to import food and oil.
As of Nov. 8, the Central Bank decreed that Cubans, foreign residents and tourists will have to use locally printed convertible pesos, pegged at present to the dollar, for cash purchases in stores, restaurants and other businesses.
Both of the comments in the first paragraph are probably true, but that doesn't stop Bloomberg.com from swallowing the Bush administration triumphalism here:
Castro's move is "an act of economic desperation and a clear signal that President Bush's strengthened policies towards Cuba have hurt the Castro regime,'' Juan Carlos Zarate, the U.S. Department of the Treasury's assistant secretary for terrorist financing and financial crime, said in a statement.
What the Bloomberg report fails to mention and the Reuters report does mention is this:
A 10-percent commission will be charged for changing dollars into pesos, but not for other currencies. [my emphasis]
Advantage, Reuters. So what I imagine Castro, the old bastard, is trying to do is a twofold scheme:
1.) Get a fast infusion of dollars as people rush to beat the deadline and pocketing ten cents on the dollar for a while as dollar remittances continue.
2.) Shift his focus from the dollar to the Euro and if the folks at Bloomberg would bother to read their own website, they might have seen the case for this.
What I think will eventually happen is that the Cuban-American community in Miami will start setting up a system to send remittances in Euros and who can blame them? Meanwhile, these comments really encapsulate the situation:
Western observers said the measure would allow the Central Bank to quickly absorb dollars now on the island.
"They just want to get those dollars out from under the mattresses and get people to start using Mickey Mouse money," said a European diplomat, who asked not to be named.
[...]
Ordinary Cubans, facing the 10 percent levy, said they were paying for the ideological war between Washington and Havana. Some said they would ask relatives in Miami to start sending euros.
"Fidel wants to recover the greenbacks and squeeze the people," grumbled Alfredo, a cafeteria employee.
[...]
Some Cubans said they were not concerned about the switch.
"I don't think about it. I'm leaving the country," a Havana resident said.
I couldn't agree more with all three of them.
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