HAVANA – Moving to wean its communist economic system from the U.S. currency, Cuba (search) said that dollars will no longer be accepted at island businesses and stores in a dramatic change in how commercial transactions have been done here in more than a decade.
The resolution announced Monday by Cuba's Central Bank seemed aimed at finding new sources for foreign reserves and regain more control over its own economy as the U.S. government steps up efforts to prevent dollars from reaching the island as part of a strategy to undermine Fidel Castro's (search) government.
Cuba's national currency, the peso, cannot be used with international partners.
"Beginning on November 8, the convertible peso will begin to circulate in substitution of the dollar throughout the national territory," Castro said in a written message read by his chief aide Carlos Valenciaga.
In his message, Castro asked Cubans to tell relatives living abroad to send them money in other foreign currencies, such as euros, British sterling or Swiss francs.
The move was likely to hurt mostly those Cubans who receive American dollars from relatives living in the United States.
Cubans and others on the island can still hold dollars in unlimited quantities and can change them into pesos before the new policy takes effect. But they will have to pay a 10 percent charge to exchange dollars afterward. There will be no such charge on changing other foreign currencies, such as Euros, into convertible pesos.
"In the short term, there may be a slip in the remittances," said John Kavulich, president of the U.S.-Cuba Trade and Economic Council (search), which tracks business between the two countries. Some estimates on annual remittances to Cuba are as high as $1 billion.
"But going into the holidays, people in Miami and New Jersey won't want the holidays for their families on the island to be even more miserable," he said, predicting remittances from those major Cuban American communities would pick up again, despite the difficulty of sending them and the 10 percent charge.
Kavulich said the timing of the announcement seemed aimed at drawing attention to Cuba shortly before the U.S. presidential election.
"The Cuban government is hoping that Kerry will win and that by announcing this a week before the election it will keep Cuba in the news and relevant," said Kavulich.
He said that because Havana is blaming this new economic measure on the American sanctions, the debate over the U.S. trade embargo will be in the public eye when the elections occur.
Cuba also has been seeking to draw attention to the U.N. vote scheduled for Thursday on condemning America's trade embargo against the communist nation.
"The trick will be to force Cuban citizens to accept the Cuban convertible peso and be just as comfortable putting them in their mattress as their dollars," Kavulich said.
The U.S. dollar has been a primary form of currency in Cuba since the early 1990s, when the island government was forced to implement liberal reforms to cope with the loss of Soviet aid and trade. The possession of dollars was legalized in 1993 to draw hard currency from tourism and from family purchases at state stores.
The government said the change is necessary to protect its economy as the administration of President Bush seeks to punish banks and businesses that ship American dollars to Cuba, which has been under a U.S. trade and financial embargo for more than 40 years.
Earlier Monday, the U.S. Treasury Department announced in Washington that it had identified an electronic money transfer business that it suspects is linked to Cuba and thus will not be allowed to do business in the United States.
It alleged that the company, Sercuba, allows people in the United States to send money to Cuban nationals via a third country or through Sercuba's Web site in violation of the U.S. embargo.
Castro looked animated, despite the bright blue sling he sported over his olive green uniform to support a broken right arm. Castro has made a point of remaining involved in government affairs since accidentally falling Wednesday at a speech, also shattering his left kneecap.
The measure was tied to the U.S. Federal Reserve's decision in May to fine Switzerland's largest bank, UBS AG, $100 million for allegedly sending dollars to Cuba, Libya, Iran and the former Yugoslavia in violation of U.S. sanctions against those countries. UBS agreed to pay the fine without admitting the allegations.
The U.S. embargo was imposed in 1963 in the wake of Fidel Castro's defeat of the CIA-backed assault at the Bay of Pigs two years earlier. Americans are barred from traveling to the Caribbean island nation except with a U.S. government waiver.