Cuba's two-currency system adds up to a social divide

LA Times
COLUMN ONE
Cuba's two-currency system adds up to a social divide
Those who earn the old peso are seeing its purchasing power decline. To them, powdered milk and sweet potatoes are luxuries.
By Carol J. Williams
Los Angeles Times Staff Writer

May 8, 2008

HAVANA — Pushed to the fringes by a money-driven social divide, Rosa is what Cubans call a "marginal" person.

She's lived all of her 72 years in a shabby enclave of Marianao, a neighborhood where crude wooden cottages, their rotting boards held together with coats of paint, descend into a gully strewn with refuse and sewage.

Her two-room shack was an early gift of the revolution, back when the idealistic brigades of social levelers were at work lifting the poor and teaching the long-neglected how to read and write and care for their children. Rosa's sturdy metal-framed eyeglasses, a more recent state handout, magnify tired gray eyes that turn to Cuba's three state-run channels for diversion now, having lost the desire to read because of a dearth of books and practice.

Widowed 22 years and left with only a tethered mongrel named Mochito for company, Rosa is among the considerable ranks of Cubans in the country's population of 11.2 million who find themselves lost in poverty as the flow of money from trade, tourism and the black market has broken its once-egalitarian foundation.

The problems faced by Rosa and others like her, complicated by factors such as the country's loss of Soviet aid years ago, appear to be getting worse. Cuba's system of two currencies may be at least partly to blame.

Cuba uses the dominant convertible peso known as the CUC -- introduced four years ago to replace the U.S. dollar, which had been circulating for more than a decade -- and the Cuban peso known as moneda nacional.

Those with jobs in hotels, airlines and shops and on the thriving black market earn CUCs, referred to as "the dollar" and worth about 25 times the peso. The peso is the currency given to all state workers and pensioners, which must be converted to CUCs to purchase most goods. The Cuban government retains the peso because it lacks sufficient foreign reserves to back and circulate only CUCs.

The U.S. dollar, which circulated in Cuba from the mid-1990s to late 2004, was removed by then-President Fidel Castro and now is subject to a 10% tax whenever it is converted to CUCs -- in effect a devaluation by the state. The tax is felt most by tourists and the estimated 10% of Cuban households receiving money from relatives abroad.

Those like Rosa, who have neither foreign benefactors nor the vigor to run their own dollar-earning schemes, watch the buying power of their moneda nacional recede each month as more goods become available only for "dollars."

Rosa survives on her late husband's 164-peso monthly pension, about $7, and the ever-shrinking basket of staples issued by the state each month.

"The rice is gone in 10 days, and then only if I'm careful," laments the widow, stout from a diet of bread rolls and rice. "What I have after the electricity is paid I spend on food, nothing else."

Like many Cubans, Rosa won't tell a foreigner her full name for fear of official retribution, although it's difficult to imagine how her circumstances could worsen.

Dressed in a faded blue floral dress worn thin as a hankie, beige socks and flip-flops advertising Cuba, she spends her days washing the concrete-slab floor of her hovel and cooking rice for her two daily meals.

For the first four days of each month, she boils a single cup of coffee at midday from the quarter-pound packet that is her most treasured item in the ration basket. She quickly uses the two cups of beans, the small bottle of cooking oil and the single chicken leg.

Once the ration of rice runs out, she must convert her pesos to CUCs to buy food for the rest of the month. She subsists mostly on rice simmered in bouillon, along with the single white bread roll she can collect each morning from the state bakery at the top of her alley.

Her joy, she says, is having a few precious minutes with one of her eight grandchildren on the rare occasion when her daughter or one of her two sons can take time from their own daily scramble for sustenance to visit. Another reprieve is sweet potatoes, to break the monotony of her meals, an indulgence she affords herself once a week if nothing has come up to divert her meager funds.

She takes her rice from a chipped earthenware bowl as she sits on a lumpy, sheet-covered sofa, the black-and-white TV in the corner switched to one of the three state channels. She pays little attention to which one it is tuned to; often all carry the same official speech or cultural program.

A two-burner gas hot plate on the dented metal counter is the only appliance in the kitchen. A small fridge, dotted with plastic beer-bottle magnets, stands kitty-cornered in the sitting room, unplugged to save on the power bill as there is seldom anything perishable in it. A towel draped across the top displays a collection of white ceramic figurines and a candle. A scrawny calico cat she never bothered to name probes the scrubbed floor in fruitless pursuit of a dropped morsel.

Scavenging her sustenance is both an ordeal and an occupation for Rosa. For all but the few grains and tubers that can be bought with the old pesos, she must change her monthly pension for CUCs.

The nearest market is about a mile away, a trying journey for a woman with diabetes, hypertension and depression. Rice was only 12 cents a pound recently, but she goes through half that much a day after the ration runs out, and it costs her nearly a quarter of her monthly pension. Vegetables and fruits are only a few pesos a pound or apiece, but they consume most of the rest of her money.

Powdered milk is an unimaginable luxury at more than $7 for enough to make a gallon, and even the least desirable cuts of meat thick with flies on the butcher block cost nearly $2 a pound. The single serving of chicken and six eggs provided in the ration are usually her only protein.

The closest clinic that will treat her is three miles away, a difficult distance considering that public transportation does not reach her at the bottom of her steep, rutted road.

"The buses don't come down here," she says of the narrow, descending alley that drops off on one side into a culvert.

Medical care in Cuba is free, but Rosa pays with her time, waiting outside all day until the public service doctor can see her. The pills to combat depression cost about 50 cents each, and a vial of 15 would use up her entire monthly income. She rarely buys them, preferring to spend the money on food.

She walks to the market and the clinic when she needs to, saving the one-peso fare for the food budget.

With other wooden and stucco hovels like hers lining the alley, no vehicle wider than the Russian-made Lada owned by her neighbor's nephew can make it within 200 yards of her porch, which consists of a concrete slab surrounded by a rusted chain-link fence and is padlocked against nocturnal dangers.

Across from Rosa's house of whitewashed wooden slats and closed louvers, three men are perched on concrete stumps that once supported fencing. Each sips from his own bottle of cheap rum, warily watching the unaccustomed visit by two strangers with the Lada driver.

Unlike younger Cubans or those with marketable skills like hairdressers and seamstresses, Rosa has no means of boosting her income.

Her oldest son, Carlos, 51 and disabled, often spreads a few humble wares for sale on a tea towel on Rosa's porch: lollipops, bouillon cubes, gum balls and, from his mother's ration basket, cigarettes, which are given only to those older than 60. He sometimes takes in 25 or 30 pesos, which he can convert to a single CUC to buy his own family supper.

"He can't help me much. We all have the same conditions," says Rosa, explaining with a mother's protectiveness why Carlos keeps her cigarette proceeds.

The government of Raul Castro, the 76-year-old younger brother of the ailing Fidel Castro, has acknowledged since Raul was named president in February that the two-currency economy has produced social strains and a class divide. He has pledged to restore equality by reunifying Cuba's monetary system.

Many foreign economists, however, deem that impossible unless everyone is forced back to the dysfunctional system in which prices are arbitrarily fixed by the state and goods disappear from stores when their production cost exceeds what they can sell for.

Havana shops today are full of luxuries Cubans hardly knew about when Soviet subsidies and communist-bloc trade reliably provided the basic necessities. Microwave ovens, cellphones, Chinese-made appliances and European foods now perch alluringly on store shelves, albeit at prices only the minority of Cubans flush with CUCs can afford.

Rosa laughs at the absurdity of owning anything more than the few comforts already in her home: the TV, the refrigerator and a telephone. She prefers the old days, without the tease of goods she cannot afford.

"It was better before," Rosa says.