HAVANA (Reuters) - Cuba has devalued its convertible peso by 8 percent in a move aimed at attracting more foreign exchange and stimulating exports, according to a central bank resolution published on Monday in the official daily Granma.
The convertible peso (CUC) had been valued at $1.08 since 2005, but will now be valued one-to-one.
“This decision is a discrete step toward an improved balance of foreign exchange ... and will help improve conditions in our foreign financial relations,” the resolution stated.
Foreign and local economists welcomed the devaluation.
“This is a very important measure that Cuban economists and foreign experts on Cuba have been recommending for years,” said Cuban-American economist Carmelo Mesa-Lago, a professor emeritus at the University of Pittsburgh.
“It should reduce the significant overestimation of the CUC that causes all kinds of distortions, make cheaper tourism for Cuban Americans, Americans and Latin American countries in the dollar area, and stimulate sending of remittances,” he said.
Cuba is just now emerging from a grave liquidity crisis that began at the close of 2008 and saw it freeze hundreds of millions of dollars in foreign company bank accounts on the grounds that it did not have the foreign exchange to meet the CUC deposits.
The bank said hurricanes in 2008, the international economic crisis and “volatility in monetary markets” led to the decision “to establish parity between the convertible peso and U.S. dollar.”
Though most of the money has since been paid out or payment agreements signed, the freezing of foreign accounts destroyed confidence in the CUC and state banks. Most companies now do their business offshore.
Foreign companies that do business with the island have long complained the CUC was overvalued.
Cuba has a dual monetary system which pegs the peso at 24 pesos sell, and 25 pesos buy, to the convertible peso.
The resolution said the domestic exchange rate remained unchanged, as did the one-to-one exchange rate used for business accounting purposes.
Neither the CUC nor peso are recognized currencies outside of Cuba.
The resolution said another reason for the decision was “restrictions on the accounts that we were obliged to impose at the end of 2008 continue to be lifted.”
Cuban President Raul Castro drastically reduced imports in 2009 and 2010, while promoting exports and import substitution, to deal with the financial crisis.
Cuba’s trade balance, including services, was $3.9 billion in 2010, according to the government, compared with $2 billion in 2009 and a deficit of $2.3 billion in 2008.
The measure will be welcomed by foreign tourists and Cubans who receive remittances from abroad. A 10 percent tax on dollars remains in effect, however, due to the U.S. embargo that makes it difficult for the government to use the greenbacks.
“There is no doubt the measure will benefit tourists and Cubans who receive remittances from abroad,” an employee at the headquarters of the state-run Cuban exchange company, CADECA, said, asking that her name not be used.
“The amount taken when money is exchanged is less now. Before, for every $100 you gave a client 80 CUC, and now for every $100 you give the client 87.10 CUC,” she said.
Additional reporting by Nelson Acosta; Editing by Jeff Franks and Leslie Adler