It is pegged 1:1 to the dollar but exchanged with the public at a rate of 24 to buy and 25 to sell. The CUC has historically been used for state business and buying goods from abroad, but it can’t be taken out of the country. The use of US dollars had previously been banned in 2004 when the government created the CUC.
That, in turn, let the government snap up those dollars to help deal with its liquidity crisis, Reuters news agency reported. Earlier this year, Cuba reallowed “dollar stores”, which let people buy goods like food, toiletries and electronics with bank cards loaded with US dollars or other foreign currency. That is what Cuba elected to do after the collapse of the Soviet Union, when Havana legalised the use of the US dollar alongside the Cuban peso in 1993. Cuba’s tourism industry has been hit hard by coronavirus-related travel restrictions and the Trump administration’s tightening of the embargo OK, so does that mean they use only a foreign currency instead of their own?Ĭountries can opt to fully adopt the US dollar or another foreign currency as their own, but though it may provide stability, it gives governments far less control over their monetary policy.Ĭountries can also choose to use both a domestic currency and a foreign one at the same time. Sometimes, countries officially turn to the US dollar in what’s known as “dollarisation”, or the euro. If people use another currency unofficially, it can create a thriving black market and exert extreme pressure on the national economy. When a country’s domestic currency is unstable, subject to high rates of inflation or generally not trusted to hold its value, people may start to use a second currency they think will fare better - especially when it comes to buying imported goods.
The Cuban peso, known as the CUP, was created as the island’s currency by the first president of the country’s post-revolution Central Bank, Ernesto “Che” Guevara.īut thanks to an embargo by the United States and some of the island’s state-run economic policies, the value of Cuba’s currency evolved to become a tricky issue.
So what does that mean for Cubans and visitors to the island? Here’s what you need to know. The government has set the exchange rate at 24 Cuban pesos to $1, and the convertible Cuban peso, known as the CUC, will be phased out completely by June, leaving the island with one currency for the first time in more than 20 years. The Cuban government formally ended its dual currency system on Friday, devaluing its peso for the first time since the 1959 revolution that swept the late Fidel Castro to power.
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