February 24, 2008 / 10:26 PM / 11 years ago

UPDATE 1-Cuba's Raul Castro says studying peso revaluation

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HAVANA, Feb 24 (Reuters) - Cuba is studying a revaluation of its peso currency, which is pegged to the dollar, new President Raul Castro said on Sunday after being named successor to his ailing brother Fidel Castro.

Raul Castro is widely expected to bring in tentative economic reforms to ease poverty in Cuba, which has lived under communist rule for 49 years and suffers severe shortages due to a U.S. economic embargo against the Caribbean island.

“We are studying the implementation of Fidel’s ideas on the progressive, gradual and prudent revaluation of the Cuban peso,” Raul Castro said in his first speech as president.

In a series of open meetings last year, many Cubans named their negligible spending power as one of their biggest concerns and also called for an end to an unopopular two-currency system.

Cubans earn their wages — which average $15 a month — in local pesos but buy everything from toothpaste to gasoline in the official hard currency called convertible pesos or CUCs.

There are 24 national pesos to a CUC, which in turn is worth $1.08 at a rate set by the Cuban central bank in 2005.

Until then, the CUC was worth $1 and 26 Cuban pesos but the rates were changed to cut the purchasing power of people receiving remittances from the United States, which analysts estimate at more than $1 billion a year.

Cuba made the dollar illegal tender in 2004 and slapped a 10 percent commission on converting greenbacks into pesos.

The CUC was set up in 1994 when Cubans started receiving remittances from family members in Florida to help them through an economic crisis triggered by the collapse of the Soviet Union.

At that stage, Fidel Castro said the two-currency system would be temporary and the two pesos would be unified once the economy allowed. (Reporting by Anthony Boadle) (For special coverage from Reuters on Castro's retirement, see: here)

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