The action reestablishes the one to one dollar-peso exchange rate. The decision is a discrete step to favor an improvement in the country’s currency balance, reads a note published by the Cuban press today, which was signed by the minister-president of the Cuban Central Bank Ernesto Medina Villveiran.
The note explains that in 2005, given the international economic and financial context of that time, as well as a series of specific factors that positively influenced the country’s economic performance, Cuba decided to revaluate the official rate of the CUC by 8 percent in relation to the US dollar and other foreign currencies. It also recalls that since 1994, when the Convertible Peso was established, up to April 2005 the one-to-one CUC-dollar exchange rate was maintained.
The reestablishment of the one-to-one exchange comes as a necessary revision of the current rate in tune with the dynamics of Cuban economy in the most recent years and following the loss inflicted by hurricanes in 2008, as well as the effects of the international economic crisis and its impact on the volatility of financial markets, the note reads.
The analysis of these factors has led the Monetary Policy Committee with the Cuban Central Bank to consider it convenient to devaluate by 8 percent the exchange rate of the Cuban Convertible Peso (CUC) in relation to the US dollar and other foreign currencies, which stands for the reestablishment of a parity between the CUC and the US dollar, reads the bank’s note.
The document also explains that the decision constitutes a discrete step to improving the balance of currencies in the country since it encourages export activity and the replacement of imports with local productions. All this along with a more effective planning of procedures to allocate hard currency, improved rationality in the management of monetary transactions and the increase of productivity and economic efficiency will favour better conditions for the country’s external financial relations.
The note also recalls that as was reported at the Sixth Session of the Cuban Parliament, in 2010 the country continued to lift limitations imposed in late 2008 on payments by Cuban banks to foreign providers and at the same time significant advancement has been achieved in the renegotiation of the debts with main creditors.
As of March 14 the new CUC-US dollar exchange rate is one to one in Cuban territory both for the entrepreneurial sector and the population, which usually does it through the local exchange service CADECA (a network of exchange bureaus).
However, a previous 10 percent tax on the exchange rate will be kept only in the case of those who directly purchase CUC with dollars, as a compensation for the cost and risks originated by the use of the American currency, as a consequence of the economic, financial and commercial restrictions imposed on Cuba by US laws.
Similarly, the new decision does not affect the current exchange rate for the Cuban Peso in relation to the CUC, which is established at 25 to 1 for CUC purchase and 24 to 1 for CUC sales.
Since 1994, two local currencies have circulated in Cuba the CUC (now changing one to one to the Dollar) and the CUP or Cuban Peso, which is the National Currency.
The Bank’s decision does not modify the current exchange rate established for Cuban Pesos (CUP) and Convertibles (CUC) in the state sector’s accountability activity, which keeps at one to one.