Saturday, October 30, 2004
Cuba´s Dollar Measure: Timely, not Desperate
|The US currency circulated freely in Cuba for more than half a century, until 1959. A few more years and the Cuban peso would have been discarded as is Panama´s currency, where the US dollar is king.|
At the display of sovereignty and self-determination shown by the Revolutionary Government, the Eisenhower and later, the Kennedy administrations overreacted by placing a siege on this island that lasts to this day, made more inhumane and disregardful of international law over the years.
The Torricelli amendment (1992) and the Helms-Burton Law (1996) took care of that.
The US dollar was part of this aggression. It started by tthe ban on the use of the dollar by US banks, companies and citizens in connection to Cuba. The Department of the Treasury and in particular, the Office of Foreign Assets Control (OFAC) was then assigned the task of persecuting and confiscating all Cuban assets in the United States.
Ten administrations have served their terms and this normalization is a long way off. The US extreme right sectors not only have made sure sanctions and more noose tightening are applied on Cuba, but have achieved that the blockade be extended to extraterritorial limits in violation of international law.
Since the US dollar was again accepted as legal tender in 1993, due to the drastic changes in Cuban foreign trade partners and the opening of the economy to foreign investment and tourism, Cuban economic authorities always said it was adopted as a temporary measure, until a more comprehensive monetary reform could be put in place.
In ten years, the Cuban economy underwent an economic upheaval, introducing some mechanisms of market economy, going through a decentralization process while keeping state control over the most important areas of industry and agriculture, health, education and social security.
From a free exchange rate of 150 pesos to the dollar in 1993, the Cuban currency began gaining strength in the domestic market, to stabilize in the 20-26 range for more than five years now.
The same cannot be said of the dollar. Its fate has been more uncertain each day over the last two years, while its rival the euro, European common currency, has made the European Union stronger.
As Lord William Rees-Mogg, former editor of The Times of London put it recently, “the world´s exchange system should be regarded as completely out of control”, and in the midst of the turmoil, the dollar.
Since economic recovery in the US was announced over two years ago, the unemployment rate is still high, consumer confidence reaches all-time lows and interest rates have ceased to be an option to incentivate growth because they are at their lowest level.
Budget deficit is reaching all-time highs, trade has not been boosted as expected by the weak dollar, and the war on Iraq has also taken its toll.
Anyone using dollars began to loose money, but the United States is still the biggest partner for countries in the greenback zone. The monetary restrictions on Cuba began touching foreign partners, like the Union de Banques Suisses (UBS), demanded by US courts for sending and receiving dollars from countries in Washington´s terrorist list, like Iran, Lybia, Cuba and Yugoslavia.
Probably fearful of losing assets in the United States, UBS agreed to pay a 100 million USD fine, never admitting to its operations as a crime, being as they are, a normal international banking practice.
Long before this UBS case, about two years ago, Cuba withdrew US coins from circulation, leaving only the fractions of the Cuban Convertible Peso, equivalent to one dollar.
Later, the dollar was banned from payments between enterprises. The business sector was only allowed to make payments between entities in Convertible Pesos.
As part of the plan to gradually withdraw the dollar from Cuba´s economy, came the October 25 announcement. On that same day the greenback came close to its lowest value facing the euro and other hard currencies, 1.29 per euro.
As for the 10 per cent tax imposed by Cuba to all dollars changed in the country after November 8, it is not meant to punish anyone, but to cover part of the country´s losses in this currency´s value abroad and the handling charge of international banks.
Nothing so desperate about that, just timely.