As another step to strengthen the circulation of its principal currency, the Central Bank of Cuba (BCC) recently announced the issuing of high denomination bills for the next few days. With this initiative, the currency monetary authority continues adapting retail commerce operations to a reality that has been changing for several years.
The BCC presented through the national press the 200-, 500- and even 1,000-Cuban peso bills, a novelty for a nation used to seeing the alternative of 100 pesos as the highest value when operating with that currency. Their circulation, which would become effective starting February 1, will consolidate the presence of the Cuban peso (CUP) in the face of the Cuban convertible peso (CUC), the option created as a temporary relief during the tensest moments of the economic crisis of the 1990s.
After oscillating for years, the exchange rate between both currencies was anchored at 25 pesos for one CUC for the operations of Exchange Houses (CADECA), to which only the population has access, while the official rate, which remains anchored at 1 CUP x 1 CUC x 1 dollar (USD), is only valid for juridical persons. That dual currency and exchange rate has generated a great many financial distortions, pointed out by economists and admitted by the government, to the point of placing the currency and exchange unification among the principal goals of the process of transformations officially undertaken in 2011.
As an explicit step of the programme to eliminate that duality, the government has gradually implemented since last year the possibility of buying in any of its currencies in a retail network initially conceived to only operate with CUC. That option helped consumers make their purchases from a point of view, but also made them face an unprecedented problem.
When faced by prices of products located in the range of hundreds of CUC, if they opted for paying with the country’s traditional currency, they had to go shopping with a backpack full of 20- or 50-peso bills, the most common high denominations in circulation. The 100-peso bill, the highest until now, was less visible on the money flows.
The difficulties that derived were criticised in TV reports prior to the recent announcement by the BCC and also recognised by officials of the commercial networks.
When the persons who go to those shops with CUP to buy expensive goods, they have to carry great amounts of bills in not very optimum conditions and that places, at par value, inconvenient obstacles for the salesclerks. In those cases “the process is made even slower since in addition to having to count all the money, a guarantee form has to be filled out, another of ownership, and a demonstration of the equipment’s use,” Bárbara Soto Sánchez, commercial vice president of CIMEX, one of the country’s major companies in the sphere of commerce, commented to the press.
Neither are the shops’ cash registers prepared to store such amounts of money.
“The salesclerks have to work more and monitor a greater amount of money, with which, in addition to the operation taking longer, decreases the incomes when the clients leave without making their purchases because of the long lines,” Soto added. The sale of electrical appliances and furniture represents 17 per cent of CIMEX’s incomes.
With the new bills, the BCC is confident it will resolve such conflicts when a large payment has to be made. But it has not explicitly recognised other objectives. The vice president of that entity, Francisco Mayobre Lence, explained that the issuing of these bills did not respond to an increase in financial operations.
“The economic transactions do not increase,” Mayobre said in a press conference. “It’s true we are incorporating bills of this type but other lower denomination bills are not coming out. The difference lies in that if before a client required 5,000 pesos we gave him/her 50 100-peso bills and now we will give five 1,000-peso bills.” In the end it’s the same amount of money, he insisted.
In any case, by taking out of its vaults that option the monetary authority continues preparing the ground to introduce, in a not very precise future, one of the most awaited measures of the current process of economic transformations: the currency unification. (2015)
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