Dollar Use Suspended in Cuban Economy

by Steve Eckardt

28 October 2004

Below please find a dispatch from Prensa Latina and one from the Cuban news agency AIN concerning Cuba’s the suspension of the U.S. dollar as a means of exchange in its domestic economy (click to jump to either and skip this introduction).

As Canadian professor Michael Lebowitz writes: “In the context of the continuing US blockade, the Helms-Burton Act, etc., last April the US government announced restrictions on visits by Cuban-Americans to their families in Cuba and restrictions on remittances to family members sent from the US.

“Both threatened significant reductions in the flow of USD to Cuba (and to Cuban family members), and these measures were the context for the Cuban response in May which increased the prices of imports.

“While these U.S. restrictions now in effect have been well-publicised (and are the source of discontent among some Cuban-Americans), they are part of a larger package which include

  • the fine of $100 million by the U.S. Federal Reserve in May of the largest bank in Switzerland (USB) for transferring US dollar notes to Cuba;
  • establishment of a task force to restrict the flow of foreign currencies to Cuba;
  • and this week’s crackdown (including the freezing of its US assets) on SERCUBA, a company that has facilitated the electronic transfer of funds by US residents to Cubans.”

Internal circulation of the U.S. dollar cost Cuba the loss of national sovereignty entailed by allowing a foreign currency to be a medium of exchange, exposed it to financial losses as the dollar falls steeply in the world markets, faced it with strangulation as Washington moves to prevent foreign banks from supplying Cuba with dollar notes, and opened it up to clandestine operations by Washington (as Fidel once said, “the dollar is the one weapon that the U.S. government has an unlimited supply of”).

News reports from Cuba indicate that yesterday there was an tremendous movement by the Cuban people to exchange dollars for pesos (66 times the normal), a strong demonstration of public confidence in this measure.

from a mailing to the Philadelphia Cuba Solidarity Coalition

US Dollar Suspended from Circulating in Cuba

[People interested in following news from Cuba should bookmark Prensa Latina’s free English-language wire-service,]

HAVANA Oct 26 (Prensa Latina) Cuba announced Monday that the US dollar will not circulate in the domestic market and will be substituted for the convertible peso as of next November 8.

Cuban president Fidel Castro stated over a TV broadcast that the measure was taken due to actions from the US government aimed at blocking the use of the US currency in Cuba’s international operations.

He made it clear that possession of the dollar or any other hard currency will not be penalized, but retail stores selling in US dollars will only accept Convertible Pesos (equivalent to US dollars).

Cuban Central Bank (BCC) resolution 80/2004, read in the popular program Round Table of Cuban TV, establishes that from November 8 onward, the exchange of US dollars for Convertible Pesos will bear a 10 per cent tax.

The measure is applied to nationals and foreign visitors in stores, hotels, bars, cafeterias, taxis, rent- a-car companies and any other business that presently accepts cash payments in US dollars.

The Bank’s resolution explains that this decision is based on the tightening of the US economic war against the people of Cuba over the last months, with measures aimed at systematically obstructing foreign financial flows from entering the country.

As part of that policy, it adds, the US government has strengthened pressures and threats on foreign banks to prevent Cuba from depositing money abroad to fulfill its trade obligations, the dollars spent by the population and by foreign visitors in the island´s outlets.

The document recalls that recently an Assistant Secretary of State of the US announced the creation of a task force to persecute Cuban assets in order to interfere and stop the hard currency flow from and to the island.

This, it adds, is a new, unprecedented aggression in the history of international financial relations.

The resolution specifies the decision was taken due to the situation created which urgently demands the protection of the country’s interests facing the severe damage caused by US actions.

The text affirms the population will be able to possess, without any restrictions whatsoever, as until today, the US dollars or whatever freely convertible currency, in any amount.

It makes clear that the 10 per cent tax established as a cover for the risks assumed by Cuba in handling US dollars, will not be applied to other currencies presently accepted in Cuba: the Euro, Canadian Dollar, Pound Sterling and Swiss Franc.

The holders of US dollar bank accounts in Cuba are totally guaranteed and withdrawals can be made without limit from these accounts at any moment, be it in US dollars or Convertible Pesos, without the 10 per cent tax.

As of next November 8, no new deposits in US dollars will be accepted, although they will be able to receive funds through bank transfers in any freely convertible currency and in cash of Convertible Pesos and the other currencies accepted in the country.

The same action will be applied to US dollar bank accounts held by natural foreign persons in Cuban banks. Among other specifics, the resolution indicates that deposit certificates in US dollars and Convertible Pesos are not subject to the tax and maintain the conditions originally agreed with the bank.

Also, transactions with credit or debit cards accepted in Cuba for any payment or withdrawal of cash will continue to work as to this date without having to pay the 10 per cent tax.In the US dollar accounts of business enterprises with mixed or foreign capital, and foreign representations in Cuba, including diplomatic missions, will not admit cash deposits in US dollars as of the 8th of November.

From those accounts, the recognized holder will be able to withdraw in US dollars or in Convertible Pesos without being burdened with the 10 per cent tax.

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Fidel Says Cuba Cannot Be Intimidated, as Monetary Reforms Announced

HAVANA Oct 26 (AIN) Cuban President Fidel Castro reiterated today that Cuba cannot be intimidated or threatened, as he explained the economic measures adopted by the island in response to hostile new regulations by the United States against the Caribbean nation.

In his first public appearance since an accidental fall last Wednesday, Fidel said no one could blame Cuba for the additional suffering caused both to its people and to those in the US citizens when Washington blocked Havana from using the dollar for its international financial operations.

During the broadcast of the Round Table radio-television program, it was also learned that starting next November 8, pursuant to a new regulation by the Central Bank of Cuba, Cuban citizens and foreign visitors will be required to use convertible pesos for any form of commercial operation.

Resolution No. 80 of the Central Bank explains that among the causes for that decision is the intensification of the economic war directed by the United States against the people of Cuba over the past several months with measures aimed at systematically interfering with the island’s international financial transactions.

Regarding this matter, the Cuban president affirmed that citizens will legally be allowed to retain any amount of dollars in their possession –that will not be a violation of the law.  Fidel reminded the public that for many years, possessing US dollars was forbidden and subject to legal actions.  He stated, “The penalty for the possession of foreign currency is not being reestablished because it is not a crime.”

He then explained that between tomorrow and November 7, everything will continue as present and US currency will be accepted as legal tender to buy from stores that operate in foreign currency.

In his explanation, Fidel added that whoever wants to change their dollars for convertible pesos will not be subjected to a new 10 percent tax until the November 8 date and that the exchange rate will be kept at the ratio of one Cuban convertible peso to one US dollar without any restrictions whatsoever.

Fidel then made it clear that those who have accounts in the nation’s banking system will not have to pay the tax.  The same will hold for those who open new bank accounts before November 8.  In such cases, the one-to-one exchange rate will be maintained as will be the freedom to withdraw the amount desired at any moment and without any limit.

Fidel then said that in order to protect the economic stability of Cuba, US dollars will no longer be accepted after the November 8 dateline in the nation’s network of stores that operate in foreign currency, banks, business or hotels.  He then added that after that date, an additional tax of 10 percent will be imposed on the buying of convertible pesos using the US dollars.

Fidel further explained that for each US dollar only 90 cents of convertible peso will be given, while the present exchange rates for the Euro, the Swiss Franc, Sterling and Canadian dollars will be retained without any kind of tax.

Fidel considered that the new aggressive economic regulations against Cuba are the “height of shamelessness and a step designed to suffocate the nation, to erect obstacles against the people.”

He then reminded the listening and viewing audience that for a long time the US dollar has circulated in Cuba without any problems, something that is now impossible.  This is why he described the new US measure as a diabolical invention that is only applied against Cuba.

Fidel then stated that the measures adopted by Cuba are in response to the toughening of US policy towards the nation and in reaction to pressures exerted by Washington upon foreign banks to block Cuba from depositing dollars abroad that are collected on the island.

The leader of the Cuban Revolution pointed to the fact that the United States is the owner of the dollar since that legal tender is the US’s national currency – for that reason it establishes regulations on the dollar’s use worldwide.  But, he said, so far they had not thought of such a barbaric act as this one.  Until now, the dollar circulated in Cuba normally, although the country could not use if for commercial transactions abroad.

Fidel denounced terrorist Cuban émigrés in Miami for the slanderous international campaign unleashed against the island for supposed money laundering and other alleged illicit operations related to money obtained by the nation from income generated from tourism and other services.

The first secretary of the Communist Party of Cuba assured that this new and absurd campaign against the nation must be halted.

He then warned the “Empire” and its Miami clique against having illusions that the Cuban people will defeated, starved or robbed of the fruits of their hard work.  “They can’t imagine this, though on more than one occasion they have been proven wrong.  However, they will continue to be wrong if they proceed down that road,” Fidel emphasized.

Fidel then underscored that this new escalation reveals the cruelty of the US government against even persons who live in that country.

He asked rhetorically what would become of Latin America without the family remittances sent by their fellow countrymen living in the US if these diabolic regulations were to be enforced upon them too.

Along that line, he made reference to the negative impact of the Helms-Burton and Cuba Adjustment Acts designed to promote destabilization. Fidel reiterated that Cuba is the only nation against which Washington arbitrarily limits the sending of family remittances due to the political objectives of the US.

Attempts by the White House to accuse Cuba of terrorism were described by Fidel as shameless in light of the US military machine’s tireless and indiscriminate bombing peoples of other lands.

He also considered allegations that Cuba is involved in money laundering and drug trafficking operations to be repugnant.

He pointed to the fact that the measures adopted by Havana are in no way aimed against Cubans or their relatives living in US territory. Later Fidel mentioned the steps adopted by the Cuban government to facilitate visits by US residents of Cuban origin, despite real dangers of bomb attacks and sabotage operations financed and organized by the South Florida Mafia.

In addition, he made reference to the use of government officials and other foreign personalities to supply money to Cuban-based mercenaries who are on the payroll of the Empire, something that the nation can punish through its laws in an exemplary fashion.

It remains to be seen, Fidel added, how many felonious tricks they have up their sleeves, as he decried illegal financial funding operations performed outside regular banking transactions.

Fidel then reassured citizens of the security and reliability of the Cuban banking system and highlighted that the Cuban peso is not being devalued. He emphasized that the convertible peso will keep its one to one exchange rate vis-à-vis the US dollar.

The Cuban President then stated that the latest criminal anti- Cuban actions taken by Washington will more negatively affect Cubans who live in the United States.  He asserted that those actions will receive no sympathy and that no one around the world supports them, something that will be demonstrated by the United Nations resolution against the economic blockade to Cuba that will be passed this upcoming October 28.



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