www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=6617323

Cuba to get rid of U.S. money after a decade

Tue Oct 26, 2004 03:03 PM ET
By Anthony Boadle

HAVANA, Oct 26 (Reuters) - Cubans rushed to change dollars into local pesos on Tuesday as President Fidel Castro's communist government prepared to end circulation of the U.S. currency after a decade.

Many lined up anxiously to change their dollar savings only to be told they would have to wait until Thursday.

Castro, appearing on television in a sling only five days after fracturing a knee and an arm, said on Monday night Cuba was ending cash operations in his arch-enemy's currency in response to tightened U.S. sanctions.

Foreign executives said the impact on their operations will be negligible. Western diplomats saw the announcement as a clever bid to rake in dollars the cash-strapped state needs to import food and oil.

As of Nov. 8, the Central Bank decreed that Cubans, foreign residents and tourists will have to use locally printed convertible pesos, pegged at present to the dollar, for cash purchases in stores, restaurants and other businesses.

A 10-percent commission will be charged for changing dollars into pesos, but not for other currencies.

Ordinary Cubans, facing the 10 percent levy, said they were paying for the ideological war between Washington and Havana. Some said they would ask relatives in Miami to start sending euros.

"Fidel wants to recover the greenbacks and squeeze the people," grumbled Alfredo, a cafeteria employee.

The dollar was legalized in Cuba in 1993 after the fall of the Soviet Union plunged the island into economic crisis and forced it to open up to tourism and foreign investment.

Dollars became the dominant currency and are used to buy most consumer goods in dollar stores, which will now only accept local pesos, which have no value outside Cuba.

Some dollars come from tourists, but most are sent by relatives in the United States, an estimated inflow of $1.1 billion a year that has helped keep the economy afloat.

U.S. FINANCIAL SQUEEZE

The Bush administration last year began tightening an embargo on Cuba by increasing restrictions on travel and cash flows to the island to undermine Castro, in power since 1959.

The Cuban president said Cuba ended the circulation of dollars because of the U.S financial squeeze.

The U.S. Federal Reserve fined UBS, Switzerland's largest bank, $100 million in May for illegally transferring new dollar notes to Cuba and three other countries subject to U.S. sanctions -- Libya, Iran and Yugoslavia.

Bankers said that made it difficult for Cuba to deposit dollars abroad and renew old U.S. bills in circulation.

Foreign businesses said they will hardly be affected. Operations in Cuba have been in pesos since July 2003, a first step away from the dollar. Additional exchange costs will be passed on to clients.

"This makes a lot of sense for Cuba," a European finance executive said. "It makes accounting a bit more complicated, because I now have to go through a third currency."

Western observers said the measure would allow the Central Bank to quickly absorb dollars now on the island.

"They just want to get those dollars out from under the mattresses and get people to start using Mickey Mouse money," said a European diplomat, who asked not to be named.

The U.S. State Department called it a "confiscatory measure" by Castro that indicated the sanctions were working.

"It shows that he's cynically trying to preserve a bankrupt regime at his people's expense," State Department spokesman Adam Ereli said.

Some Cubans said they were not concerned about the switch.

"I don't think about it. I'm leaving the country," a Havana resident said.

In another 10 years Cuba will be free and a vacation spot welcoming US dollars.

 YA!  That'll teach us!

Quoted: In another 10 years Cuba will be free and a vacation spot welcoming US dollars.

More like 2-3 years, if not sooner.

[Castro]

First, I fell down like a complete klutz!

Now, watch me slit my own throat!

[/Castro]



I'm still trying to figure out what the Cuban people did to piss off God so much...

Fidel won't probably see the day, when Cuba goes to the Peso 100%

Quoted: "I don't think about it. I'm leaving the country," a Havana resident said.

You would do a lot better if you decided to help overthrow your Govt.

"Give me all your worthless Yanqui dollars, comrades!  I will exchange them for valuable Cuban pesos!"

Honestly, I would have hit Cuba before Iraq... They are closer and a much bigger PITA, IMHO.  Plus, most everything would be peachy right now.

This must be the October Surprise!

The US Dollar is a fiat currency anyway.

It's just funny money anyway.

Bay of Pigs Redux! Turn Cuba into an island Guantanamo prison for all the terrorists.

And start importing Cubano cigars again.