The Cuban peso (ISO 4217 code: CUP) is one of two official currencies in use in Cuba. It has no official value outside the country, and is used almost exclusively by residents; for many years, the United States dollar (USD) has been used by tourists and for more 'luxury' items, but this is now being replaced with the Cuban convertible peso (CUC). As of October 2004, there were 26 Cuban pesos to 1 Cuban convertible peso, which is equivalent to 1 US dollar. Coins in circulation are 1, 2, 5, 20 centavo; 1 and 3 peso. Banknotes in circulation are 1, 5, 10, 20, 50, 100 pesos.

Two parallel currencies

The communist economy of Cuba, in combination with US sanctions and other factors, has led to a confusing system of two official currencies, each of which is used under different circumstances. The main currency for local citizens, used mainly for buying essential food-stuffs, remains the Cuban peso. But this currency has no official international value, so to encourage hard currency to enter the economy after the collapse of the Soviet Union, and the subsequent contraction of the Cuban economy, the US dollar was made legal tender in 1993. As it is internationally traded, tourists could buy dollars in their own countries, and Cuban exiles could send them directly to their relatives.

The dollar thus became the currency associated with more "luxury" goods and services, such as cosmetics, and even non-essential food and drink. Shops selling basics, like fruit and vegetables, generally only accept the Cuban peso, while "dollar shops" sell the rest. Confusingly, dollars are sometimes referred to colloquially as "pesos", with which currency is meant being understood from the context.

Government efforts to lower subsidies to unprofitable enterprises and to shrink the money supply caused the value of the peso to rise from 120 to the US dollar in the summer of 1994 to 21 to the dollar by the end of 1999.

Banning the dollar

On October 25, 2004, Cuban president Fidel Castro announced that the US dollar would be removed from circulation in Cuba, in response to renewed sanctions enacted by the US government. In its place, the Cuban convertible peso – familiarly known as the chavito – would be used, and Cubans had until November 8, 2004 to exchange existing US currency; this deadline was later extended to November 14. After that date, it remains legal to hold and exchange US dollars, but there is a 10% commission, or surcharge, imposed during the exchange; there is no surcharge for converting any other foreign currency to the convertible pesos.

This is part of a wider move to encourage currency from other parts of the world, particularly Europe, into Cuba, as well as granting more "financial independence" from the US. The surcharge on US dollars means tourists are encouraged to bring European currencies instead, and the main tourist areas now also accept euros in exchange for goods. One problem that the Cuban government is keen to play down, is that Cuban exiles in the US will now find it harder to send money to their relatives who are still in Cuba; the government hopes that they will simply send these remittances in an alternative currency, such as Canadian dollars,

External links

• Banco Central de Cuba http://www.bc.gov.cu/English