The currency wars may be taking a new turn now that the Cuban central bank has devalued its convertible peso (CUC) by 8%,, according to Granma, the official newspaper of the communist party.The CUC is used mostly by tourists and foreign firms. In the statement, the President of the central bank explained this was to improve production, make its exports more competitive and boost the island nation’s balance of payments.
The country has a two-tier currency system and its convertible peso will still equal 24 standard pesos, the currency used by most Cubans. This is also expected to increase the value of allowances sent home by Cuban relatives living abroad, according to the BBC.
In 2004 the Cuban government has discontinued the circulation of the U.S. dollar and the bank has decided to keep in place the 10% tax on foreigners who wish to buy pesos from dollars and said this was:
“compensation for the costs and risks caused by the manipulation of the latter as a consequence of the irrational and unjust economic, financial and commercial blockade imposed on Cuba by the United States government for more than 50 years.”
These changes come as part of President Raul Castro’s overhaul of the economy. In 2010 Cuba cut 1 million public sector jobs and encouraged workers to look for work in the private sector or start their own businesses. These changes have been a part of Castro’s move to decentralize the economy since Cuba’s external credit line has run short according to the BBC.
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