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A SYNOPSIS OF THE DUAL CURRENCY SYSTEM IN CUBA
Abstract
In wake of Cuba's severe economic recession following the dissolution of the Soviet Union, the Castro government implemented a series of reforms to counteract hyperinflation of its Cuban peso (CUP) and regain monetary stability. The legalisation of the US dollar and subsequent creation of the Cuban Convertible peso (CUC) ultimately achieved those goals, but the prolonged simultaneous circulation of two different currencies for two different sectors has hindered potential economic growth and produced unfavourable economic effects and incentives. The resulting 'inverted social pyramid' implies that highly skilled state-salaried professionals such as physicians or university professors often earn far less than taxi drivers and tour guides paid while working in the tourist sector; the negative implications of such a structure are clear. If these issues are to be eliminated, the Convertible peso must gradually be phased out through further monetary policy initiatives on behalf of the current administration.
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References
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