One of the objectives of the current process of economic ‘updating’ is the restoration of a single currency system, but so far policy has been hesitant. The reasons for caution are understandable. The recent memory, of a collapse in the black market value of the Cuban peso in the early 1990s, serves as a warning about what might happen if mistakes are made.
Since 2005, the CUP:CUC exchange rate has been fixed at CUP24:CUC1. The long-standing aim of policy is to steadily raise demand for CUPs by increasing the proportion of goods and services sold in this currency within the domestic economy, until conditions are right for unification. However, no hint has been given about the specific conditions that the authorities consider necessary for the move to be made, or the timetable for currency unification. The amount of domestic retail sales in CUPs has been rising, while the limited available balance of payment data (discussed further below) suggests that international reserves are being accumulated in preparation for eventual unification, but there is no apparent sense of urgency. Meanwhile, the distortions and inefficiencies remain, stunting productivity in both state and non-state sectors, and fostering the growth of new inefficient activity.
In the past year, there have been some signs that the authorities may be moving towards the elimination of currency dualism, albeit with great caution and no sign of haste. A formal pilot programme initiated in January 2013 enables transactions between some state enterprises that operate in CUCs (exporting enterprises, mainly in tourism) to use different CUP:CUC rates (reported to be between CUP7:CUC1 and CUP11:CUC1) for their transactions with other enterprises that sell supplies. The suppliers may be state, cooperative or private, and are mainly agricultural. Officials have indicated that the results of this change are being monitored closely. Although they concede that it is not possible to assess the impact of a change in the Cadeca rate at the national level on the basis of isolated case studies, the experiment provides the first clear confirmation that a revaluation is actively being considered.
