Rigoberto still remembers the smell of the green bills sent monthly from his brother in New Jersey. “They were so stiff you could stand them up in a line one behind the other. With those 250 dollars he sent me, you could buy almost twice as much as now,” he remembers, coming out of the small Western Union in the Carlos III mall, where he just changed 300 dollars.
But in 2005, Fidel Castro was caught by authorities of the U.S. Treasury Department changing old notes for new, in a count of 4 billion dollars that Cuban entities had on deposit in branches of the Swiss bank UBS. This led to a fine of $ 100 million that the Swiss bank paid without protest, but they ended their transactions with Cuba.
Then a remarkably tense Castro placed a ‘revolutionary tax’ of 20% on the currency of his public enemy number one. By the way, the charge is a tax of 8% on other currencies. As a result, the dollar’s purchasing power fell into a tailspin. Even before the excessive tax on the dollar, the hard currency stores in Cuba had raised the prices between 15% and 30% on their goods.
Every year, in particular from Florida, the more than 800,000 Cubans who live there send some billion dollars to their families on the island, by Western Union, through “mules,” or agencies that spring up like weeds
That same amount in 1999 had a purchasing power 1.4 times higher compared to the present. Here’s an example. With $100 in 2011 you can buy $60 worth of goods versus $99 before. Right now, prices of food oils in hard currencies have been increased: those of domestic manufacture, from 2.15 to 2.40 and those imported from 2.40 to 2.60. Oil is one of the most consumed household products, because the amount assigned by the ration system — about a cup a person a month, is not enough.
Between the 10% ‘revolutionary tax’–since March it has been cut in half–and the price increases for staples, people see how magic dilutes dollars sent by relatives.
In 1993 hard-currency stores (TRD) sprung up and spread around the country. Before that, there were few shops selling in dollars and they were for diplomats, foreign experts and tourists. But the TRDs were born with a ferocious tax voracity.
With taxes of around 240% for most products offered. In addition to raising the dollars so necessary to the half-empty coffers of the nation, this caused a notable economic strain. As if that were not enough, Cuban companies, burdened by low productivity and high costs, happily sell goods for foreign currency in order to be profitable. This phenomenon we call “closed-circuit production.”
According to Orlando, a retired economist, these goods and services offered in dollars bring about a two-headed economy. “All companies that operate in foreign currencies, buy and sell their services in that currency, while their workers are paid in Cuban pesos.” The average wage in Cuba amounts to about $20 a month.
If you make a tour of stores in Havana, you will notice that there are a lot of domestically produced goods. The absurdity is that many times, items such as fruit juices, textiles or mayonnaise, cost more than imported ones.
Economists believe that this phenomenon will delay the unification of the two currencies: the Cuban peso (CUP) and Cuban Convertible Peso (CUC). A situation that strongly affects workers, who are paid in pesos and have to buy an important part of the basic market basket in hard currency.
If you want to dress in fashion, you have to pay with money in which the State does not pay you. It’s the same if you buy a washing machine. To repair the 60% of homes in poor condition in the country, you need hard currency. The worst thing is that to obtain hard currency you can’t depend on the labor force. Unless you are a notable musician, outstanding intellectual, elite athlete or government official, with the ability to travel abroad, your legal currency income will always be small.
Only 25% of State employees are paid a tiny percent of their salaries in hard currency. This happens with ETECSA, the only telecommunications company in Cuba, that pays department heads $10 to $40 a month in hard currency. “The ten dollar bill just enough to buy me a bottle of oil, a box of detergent and some soaps,” says Mirta.
That is why remittances are vital to families on the island. The figures speak for themselves. In one way or another, 60% of Cubans receive dollars or euros sent regularly by relatives and friends abroad. That slight majority, from 2000 to date, has seen the purchasing power of the dollar decline by 40%.
To this, add the global economic crisis engulfing the United States and Spain, the main countries where Cuban exiles live, many compatriots are really struggling. And to keep sending the same amount of money in 1999, even less. Now the money reaches only to eat.
Either way, recipients of remittances are privileged. There is 40% of Cubans who see dollars only in the movies. For them it’s a real headache.
April 5 2011