HAVANA – The value of a dollar in Cuba (search) dropped to 90 cents on Monday as a surcharge on the American greenback took effect, the latest step in the island nation's conversion from an economy based on U.S. currency to one using the new convertible peso (search).
Cubans and tourists lined up to change dollars into pesos over the weekend. As of last week, U.S. currency no longer was accepted at Cuban stores, restaurants, hotels or other businesses, and the new 10 percent surcharge is meant to further discourage people from bringing currency from Cuba's No. 1 enemy to the island.
President Fidel Castro (search) has said the widespread use of the American money was being halted to guarantee Cuba's economic independence.
Pedro Michelena stood in line at a cash exchange station on Sunday to trade in the dollar he was paid for watching the car of foreign tourists.
"(Monday) it will be worth only 90 cents," the 82-year-old said.
The retired Cuban said that last week he changed the other U.S. currency he possessed — $26 — to get the Cuban convertible peso — the local currency tied to the dollar and now the dominant legal tender on the island.
For a decade, the dollar was Cuba's dominant currency and was used to buy everything from shampoo to canned food to furniture. Cubans as well as tourists visiting the island now must use the convertible peso.
No figures have been provided on how many dollars have been exchanged or deposited since the currency switch was announced Oct. 25. Cubans, who are still allowed to hold the American currency, are believed to have been hoarding several hundred million dollars at home, most of it money received from relatives in the United States.
Some independent analysts believe many with savings will continue to maintain a dollar stash, though smaller.
Castro said the change was necessary to protect the island nation from an increasing U.S. crackdown on the flow of American currency into Cuba. The U.S. currency was made legal tender in 1993 to help attract hard currency after the island lost Soviet aid and trade.
The Cuban convertible peso, like that of many other smaller nations, has no value outside the country. There also exists another currency on the island, the regular peso, but at 1/26 of the U.S. dollar, it has little value inside Cuba.
"We see this as a symbolic action to send the message to the United States ... that the Communist Party is still in control, and don't forget it," said Farid Abolfathi, an economist in Boston with the economic research group Global Insight.
Abolfathi said Cuba's elimination of the dollar was primarily political and would reap few economic gains on the island, where the average Cuban makes less than $20 a month while also receiving basic foodstuffs and subsidized housing and services.
"I don't really see much benefit to Cuba from this move," he said. "It removes valuable commodities from private hands to government hands, putting resources in the least economically competent sector in society, which is the political bureaucrats."
The new measure was a bit confusing for tourist Marc Aupers of the Netherlands, who believed that, despite the changes, American dollars were still accepted on the island. Arriving Saturday, he was told otherwise and on Sunday he lined up to get rid of his dollars.
"It's not inconvenient — in any country you need to change your money into the local currency," Aupers said.