By Gordon Bonin Of the NEWS Staff

In 1993, Fidel Castro announced that it would now be legal for Cubans to hold and use U.S. dollars within the country.

This announcement has led to a multitiered monetary system where only certain items can be bought using dollars and other items are available in both dollars and pesos. The peso trades on the streets of Havana at 20 to the dollar, and in the countryside at 22.

The Cuban government even mints two kinds of coins: One type is used to make change for dollars, the other for pesos.

The act of making U.S. currency legal tender in Cuba had a number of effects, according to Dr. Jorge Salazar Carrillo, a Cuban-born economics professor at Florida International University in Miami. One is that it greatly diminished the black market in dollars.

It also created a way for the Cuban government to get hold of the money being sent by the Cuban community in Miami to relatives on the island, he said. The government set up shops where goods could be purchased only with dollars.

Salazar estimates that Cuban-Americans send to the island more than $1 billion a year in cash, food, medicine, clothes and other goods.

So in one way, the Cuban government makes money when pesos are converted to dollars. And by sopping up excess pesos, the government has held inflation in check, Salazar said.

One Cuban mother of two young children reckoned that two-thirds of the goods needed for everyday life in her country had to be paid for in dollars.

But that is a problem. A culinary student said that food is expensive because most of it is now priced in dollars while salaries are in pesos.
For visitors spending dollars there is a kind of inflation: Almost everything costs at least $1. A soda costs the same in Havana as it does in Bangor.

For the most part, Cubans are honest about what costs dollars and what costs pesos. Only once did a visitor have to pay in dollars for an item—an ice cream cone—that should have only required pesos.

More typical was an experience while buying breakfast on the street. The woman running the coffee shop—little more than a closet and a counter—said the total for an empanada and a coffee was 4 pesos. Offered $4, she took just one of the bills and gave back 16 pesos change.
Another time, buying coffee away from the tourist areas, a seller’s eyebrows arched to her hairline when paid with a dollar. The second cup was free.

The two-currency system does create tension between those with ample access to dollars, such as those working in the tourist industry, and those without.

Kevin Sipe, a middle school history teacher in Presque Isle, said that with the multilevel monetary system, "the average Cuban seems to be caught between the tiers."

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