Dual economy could trouble Cuba's future

Posted on Fri, Nov. 17, 2006

CUBA
Dual economy could trouble Cuba's future
Cuba's two economies, one for those with dollars and another for those
without, may cause headaches for future leadership.
cuba@MiamiHerald.com

HAVANA - MIAMI HERALD STAFF REPORT

Joel earns $200 per month in tips from playing percussion in a band that
performs for tourists in Old Havana -- more than 30 times what the Cuban
government pays him for the same work.

Meanwhile, Irene, a government secretary without access to U.S. dollars,
subsists on her monthly salary of 300 Cuban pesos -- the equivalent of
nearly $13.

''Those with dollars have a big advantage,'' Irene said as she sat
outside Havana's famed Coppelia ice cream shop. ``It's not fair.''

With Cuban leader Fidel Castro ailing, the inequities created by the
dual dollar-peso economy that Cuba established to overcome the
catastrophic collapse of Soviet subsidies may well become one of the
major challenges faced by his successors, experts say.

Cubans say the unequal system is the single most exasperating issue
facing them. So much of the economy runs on the dollar that the typical
family here needs greenbacks to buy everything from razors to bedsheets
to shoes -- items largely available only at government stores that price
their goods in dollar equivalents. Yet the average worker earns 250
pesos a month -- about $10.

''In Cuba, money is worthless,'' said dissident Lizette Fernández who
left Cuba in August and now lives in Hialeah. ``You get soap two times a
year, and when you run out, you have to go to the dollar store, where it
costs 75 (U.S.) cents. There is virtually nothing you need that you can
buy with Cuban pesos.''

Before she left Cuba, Fernández helped kick off a campaign demanding
that all government establishments sell goods in a single currency -- pesos.

Trying to overcome the Soviet Union's collapse in 1991, Castro legalized
the use of U.S. dollars here, opened the doors to foreign tourists and
began allowing Cubans to open small private businesses like restaurants
in their homes.

TROUBLESOME GAP

The changes are credited with keeping the economy afloat. But the
dollar's legalization also created a vast and potentially troublesome
gap between those who have dollars and those who don't.

''It was a Faustian bargain that Fidel had to make against his
ideological preferences,'' Brian Latell, a former CIA analyst and author
of the recent book, After Fidel, said in a telephone interview. ``There
is a dual society now in Cuba. . . . The social disparities from those
with access to dollars and those without is huge.''

INEQUALITY

With state salaries barely able to cover less than half a month's living
costs, those with dollars now live far better off than the rest.

''You have an inequality that is not supposed to exist in a socialist
economy. . . . This is a big issue for the government to solve in the
future,'' Philip Peters, director of the Cuba Program at the Lexington
Institute, a Virginia think tank, said by telephone.

Peters estimates that 60 percent of Cubans have access to dollars
through tips, special rewards to state workers, work on the side or
remittances from relatives or friends abroad. Those remittances have
been estimated at $1 billion a year.

The dual dollar-peso economy is also believed to be leaving Afro Cubans
behind. Since lighter-skinned Cubans have migrated in higher numbers,
their remittances mostly go to their lighter-skinned relatives on the
island.

NEED FOR DOLLARS

Castro again banned the use of cash dollars in 2004, apparently to
collect a fee on exchange transactions, and required Cubans to change
their greenbacks for so-called convertible Cuban pesos, or CUCs. One
dollar now equals about .80 CUCs.

But that measure has not ended the Cubans' need for dollars to use for
purchases at the government's ''dollar stores,'' which sell consumer
goods at CUC prices.

A store in Central Havana recently was selling a bottle of cooking oil
for 2.20 CUCs, a bottle of rum for 5.40 and a jar of mayonnaise for 4.10
-- the equivalent of 5.12 in U.S. dollars, 98.40 pesos and about 40
percent of an average monthly wage.

And in contrast to capitalist economies, taxi drivers, waiters,
bartenders, hotel receptionists -- anyone with access to tourists' tips
-- hold some of the most coveted jobs in Cuba.

A cab driver named Emilio said he works 15 days a month and earns the
peso equivalent of $12 a month from his state-run enterprise. But
Emilio's real income is $100 to $120 per month, thanks to dollar
payments from tourists and prostitutes. Emilio said the job is so
rewarding that some Cubans are paying $500 in bribes for the right to
drive a cab.

The surnames of Emilio and other Cubans interviewed for this story are
not being published to prevent government reprisals.

Even if they have dollars or CUCs, average Cubans cannot buy their way
into facilities or services that the government reserves for foreign
tourists, such as leading hotels, cellphones or some beaches.

Faced with the reality of too many things she could not afford -- and
dollars she did not have -- before she moved to Hialeah, Fernández and a
dissident organization that she ran, the Federation of Rural Latin
American Women, launched the effort to demand that all establishments
sell goods in pesos.

She said 28 women around the island are organizing small cells of women
who are gathering signatures backing the campaign, dubbed ''With the
Same Coin.'' A dissident still in Cuba said people support the move, but
are afraid to sign.

''We can't be second-class citizens just for being Cubans,'' said
Fernández. ``We have no rights, just because we have no dollars.''

The Miami Herald withheld the name of the correspondent who filed this
report because the author lacked the Cuban journalist's visa required to
work on the island.

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