Reports from Cuba: CUC vs. the Dollar: A perpetual tax?

Jeovany Jimenez Vega in Translating Cuba:

CUC vs. the Dollar: A Perpetual Tax?

Jeovany Jimenez Vega, 31 May 2015 — On Thursday, May 29 Cuba was removed from the list of state sponsors of terrorism. It had been on the list since 1982 because of what Washington saw as the Cuban government’s decades-long history of harboring members of the Basque terrorist group ETA, Colombian FARC guerrillas and more than one fugitive from American justice. It had negative implications for Cuba’s dictators in regards to international banking operations and financial transactions in Cuba. It had also led to expansion of the U.S. embargo, which even today prevents Cuba from utilizing dollars in commercial transactions. Those who carry out such transactions risk confiscation of their assets and/or hefty fines.

Actually, Cuba’s inclusion on the list always struck me as being neither here nor there. It seemed inconsequential compared to the reality surrounding us, with the multiple and eloquent examples of what can only be described — without fear of overstatement — as a policy of domestic state terrorism: an absolute, blatant and always apparent hostility, mercilessly perpetrated by Havana’s gerontocracy against anything which might suggest personal well-being or family prosperity in Cuba.

I believe the Castro government has instituted a long string of unpopular measures in order to keep the population in a perpetual state of economic insolvency bordering on destitution. The constant pressure to put food on table leaves people neither the time nor the inclination for “dangerous” expressions of civic involvement.

This absurd policy, along with our insulting salaries, means we are subjected to exorbitant gasoline prices at the pump despite the collapse of oil on the world market. Be even slightly careless and you are hit with an electricity tariff. Then there is the outrageous increase in the price of liquefied gas.

Still in place are the arbitrary exchange rates set by CADECA, the government currency exchange, the detestable extortions at gunpoint at airport customs, the constant obstacles with which the private sector must deal and the obscene exploitation of medical personnel working overseas by a government acting as pimp. All these measures, decreed from Havana, make almost any other list of villainies pale in comparison.

This time-honored policy of subjugation has been specifically linked to this arbitrary tax since 1994 when, from his reverberating loins, Fidel Castro decided to tie the U.S. dollar to the sacrosanct convertible Cuban peso, the CUC.

It was a measure which overnight reduced by 20% the purchasing power of everyone who had for decades been receiving remittances from emigré family members scattered across all corners of the globe. It has unquestionably been a lucrative source of income for the island’s economy for years.

On November 8, 1994 the Central Bank of Cuba issued Resolution 80, which stipulated that a 10% tax would be applied whenever U.S. dollars are exchanged for CUCs. Later, in April of 2005, the Committee on Monetary Policy instituted a further 8% currency exchange fee on the U.S. dollar and other foreign currencies.

This means that, when changing U.S. dollars in Cuba, there are three factors to keep in mind: there are the 10% tax stipulated by Resolution 80, the 8% surcharge outlined in Accord no. 15 by the Committee on Monetary Policy, and the approximately 3.5% commercial fee charged by CADECA for such transactions. Based on these considerations, you can calculate that, for every $100 USD you receive, CADECA will give you 80.42 CUC.

But, in a boomerang effect, these decrees carried a hidden cost. In addition to completely distorting the domestic economic system, they inevitably had an extremely negative impact on tourism to this particular spot in the middle of the exotic Caribbean, a region full of beautiful beaches and better deals which attracted millions of vacationers disinclined to pay such excessive taxes and fees.

There could be many possible consequences once Cuba is removed from the blacklist. These days there is one that especially concerns me because of the immediate and direct impact it could have on families in Cuba. I ask myself, given the likelihood that Cuba could will be able to conduct international business transactions in U.S. dollars, which was the argument used to justify the aforementioned tax, will the Cuban government now repeal this onerous levy on exchanges involving this currency and the CUC? Will the military leadership be so shameless as to retain this blatant method of mass extortion, no matter what, in light of this fundamental change?

Repeal of this tax is today inextricably linked to the often announced and often postponed currency unification. Now Cuba’s dictators will have to weigh two factors. On the one hand there is their undisputed and regressive commitment to exploiting the Cuban people by any means possible while promoting anything that leads to financial ruin and insolvency. On the other hand there is the need, as recommended by experts on the subject, to rationally coordinate the mechanisms of Cuba’s economic system in a way that at least appears credible to international organizations, banks and future investors.

Not doing so would increase the already heightened perception of risk on the part of more than one businessman, whose sense of intuition prevents him from relying entirely of the good intentions of Raul Castro. There have been too many stories of swindles and scams for them to think otherwise.

But ultimately, if the Cuban government had one iota of shame, it would immediately repeal this abominable and unpopular tax which has had such a negative impact on the well-being of the Cuban people. It would stop treating our poverty like its principal asset, like a disgraceful pedestal which for more than fifty-six years has served as the foundation for the longest and most refined dictatorship the Americas have ever known.

1 thought on “Reports from Cuba: CUC vs. the Dollar: A perpetual tax?”

  1. Right. Because it’s so appropriate to plaster the face of an arrogant, deluded, incompetent, sadistically perverse and malignant alien jackass on Cuba’s currency–and it’s not even genuine admiration or respect on the part of the ruling power, who always knew the Argentine asshole was a pretentious failure in real terms, but merely an opportunistic and cynical propaganda ploy. How low, how very low Cuba was sunk by the “revolution.”

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