The Cuban Convertible Peso

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A Redefinitionof Dependence

MARK PIPER

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sunivalist economic program? Such qtlestions about Cuba have formed a heated debate shadowed by Cold War politics, imperialism and nationalisnt It is the claim of this reviewthat, contrary to what an historical examination of the Cuban peso seems to implyat first, the creation of the Ctiban convertible peso does not reflect a history of economic dependence on the U.S. but instead reflects the insurgent philosophy of the Cuban Revolution, which calls for taking advantage ofwhatever circumstance is at hand in order to benefit the revolution and promote economic independence with an economic philosophy termed here as ‘suevivaleconomics.’ The philosophy for a suo’ivalist economy can be found in Che Guevara’s1960 Guerrilla lVa,faie, his manual for successful revolution.4 This typeof economic plan falls outside traditional Keynesian, command or free market economic paradigms and instead exploits any and all of these systems with its own agenda for regime sttn’ival and prosperity.

Part One — ‘l’he Command Economy in Cuba

WTesaid the guerrilla is a crusader for the people’s freedom ts’ho.exhausting peaceful means, resorts to armed rebellion. lie aims directly at destroying an tinjust social order and indirectly at replacing it with something new.’ Chc Giievara. Guerrilla ilufare, 1960.

When Fidel Castro came to power in 1959. Ctiha was heavily linked to the post tVWII American economy. l3yvirtue of the 1943 Brctton Woods Agreement, the U.S. became the dominant global economic model and its cttrtency was designated as the global post.war economic standard. The U.S. came out of WWI I as a clear victor and after the war enjoyed an economic surge as its undamaged factories replaced European concerns destroyed in the war. By 1959, America was the predominant global economic power with an economic program of capitalist free trade. success inwhich its neo-colonial state of Cuba also shared. Cuba was the American producer of choice for sugar. exported to the U.S. under favorable import customs rates known as the sugar quota. In the U.S.. the island of Cuba was also marketed as the ideal vacation destination while Cuban culture was promoted as exotica by the American mass media,5ilie American military base at Guantanamo

‘[his review argues that the guerrilla philosophy of Ernesto CIsc Guevara was applied by Guevara and others since 1959 in determining alternative strategies for the Cuban economy. ‘I’heopening citations for each chapter arc from Emesto Che Gu,evara, Che Gueiara on Guerrilla IVailiire(Ncw York: Frederick A. Praeger. i962). 8. 16-17.30. 5The American mass media promotion of Cuba was a concerted marketing effort made by American

companieswith investments on the island exemplified by‘Cuba — American Sugar Bowl,’ by Melville Befi Grosvenor, the fi)unclcrof the National Geographic Society in the January 1947 issue of Narional Geonlphic illag.zzine.For Cuba. the approval value of the NGSpromotion was imnseasurable: Bell Grosvenor was an heir to the fortune of telephone inventor Alexander Graham Bell and the NGSwas one of his family’sphilanthropic purstuts. The NGS journal was a widely- read and respected monthly magazine. American historian Douglas Little used the work of anthropologists Catherine Lutz and Jane Collins suggesting that Orientalism in the U.S. (a series of negative cultural stereotypes applied to the Middle East by early nventieth-ccntury Americans) was introduced in popular culture also using the widely read A’sdonal Geogmphic ]Tlagazine. See Douglas Little, American Orientalism (Chapel I Till:University of North Carolina Press. aooz), 10- ii. Another exaniple is the C US television show I Loi e Locic with Cuban pmtagonist Ricky Ricardo, a show’,which by November1951 had a siewcrship of nearly 14 million people and later became the top-rated show with aviewership of million. See Kathleen Brady. Lticille: ‘ihe Life of Lucille Ball(Ncw York: Billboard Books, 2001), 193. 213.

Ex PosT FACTO The Cuban Convertible Peso 143

Bay controlled the main point of entry to the American-controlled Caribbean basin and Panama Canal, the continental passage between the Atlantic and Pacific Oceans. The Caribbean basin nations and colonies were all also allied with the U.S. and its economy.6 The U.S., however, was not the only empire in the global neighborhood after W’Wll. Joseph Stalins Soviet Russia aftm 1924 was ruthless in its implementation ofan industrialization program and a centralized command economy to replace the largely rural, agricultural and archaic Czarist economic model. The Sovietcommand economydid not allow for individuality or alternatives. Controlled division of labor, collectivity and team w’orkwas the order of the day, and those who did not conform were eradicated. fstueh like the American spirit oLlianifesrDcsrinv, the Soviet philosophy held that if terror and chaos were necessary to impose a better world, then so be it. The USSR imposed a harsh program of atheist Russificadon upon its incorporated colonies - made up of formerlyindependent states (such as the Ukraine, Georgia and Armenia) that had been absorbed into the Soviet territorial empire after l9I8. Both the American and Soviet empires used mutually ineompatitle economic models: the Soviet centralized command model called for direct government control of the economy; while the American free market model called for the invisible hand of commerce of minimalgovernment intervention allowing market activity to set prices. Vith the development of the Soviet nuclear program, the American empire understood that the nascent Smietempire was an entity itwotild have to contend with. Mistrust caused by the expansion of the American and Soviet empires escalated into hostility after 1949. laying the foundation for the post var Cold War and the iron Curtain” that would fallbenveen the Soviet and American empires.6 Soviet ideology saw Marxist communism as its core philosophy and tinderstood itselfas the economic model that would come to dominate the world because, in the Soviet view, itwas simply better and more equitable than the free market economic model pronmted by the U.S. Soviet ideologues understood their Soviet system to be a step t)nvard in the movement away from the archaic capitalist individualistic free market toward the perfection, collectivity and modernity of communism. Soviet Russia made gains as a result of WWII. Though it sutkred severe losses, Stalin acquired substantial territory as a participant in the greatAmerican-British-Soviet alliance that had defeated the kxis powers. In the 1945 Yalta Agreement among the three victors, the Soviet Union was awarded control of a buffer zone of the stirrounding nation-states of eastern and central Europe. Meant to protect the USSR from future attacks from Germany, the btiffer states eventually became Soviet nco-colonial nation-states with command economies tinder not-so-indirect Soviet imperial rule. The victory of communist Mao Ze Dong over American-supported Chinese nationalists and the creation of the Peoples Republic of China in October1949 made the communist world the largest empire in terms of territory and population though not in terms of economicstrength. The Soviets repressive and imposing control of their neo-colonial states caused resentment, flight and revolt in both Poland and I lungart. By 1961 Berlin was closed oftto prevent the collapse of East

6The Somozas governed Nicaragua after its 1912-1934 American invasion and occupation; the U.S. invaded I laiti in 1915 and occupied it tintil 1934. having intermittent presence on the island fromthat moment until the present time. The nation of Panama was created in 1903 in order to circumvent Colombian interests when the U.S. decided to build the Panama Canal. Cuba itsclfwas governed by flatista directly and indirectly since 1933 when he took power in a coup that had the stipport of the American government. Such interventions continued after WWI I: an American-inspired coup in Guatemala in 1954; American-inspired exile invasion in Ctiha in 1961, and military interventions in Dominicana in 1965,Grenada in i983 and Panama in 1989. 7Alcksandr I. Solzhenirsyn, The GuIagAichipeIago i9th’-i9.6: An Experiment in Lireraiy Invcsdgadon (New York: I larper Row, 1973), 26-43. 2nd Jerald A. Combs, 7heilisroiyofArnedcan Foreiv Policy, ed. (NewYork: The McGraw I lill Companies, 1997)313-314.

EX POST FACTO Mark Piper

Germany that threatened due to the flood of refugees fleeing west.9 In January1961 the USSR introdticed the netv ruble meant to replace the war-worn ruble as the nations monetary unit and adjusted exchange rates for the currencies of its satellite states’just as American president McKinley had done in Ctiba way back in 1899. Once in prover, Fidel Castro quicklyfound that the Americanempire did not agree with his nationalistic vision of agrarian land reform, industrialization and economic self-reliance for Cuba. An April 1959meeting betsveen Castro and American Vice President Richard M. Nixon did not go welh Nixon termed Castro as either a commtlnist or “incredibly naive”in regards to the use of communist models in his government. Dtiring the Cold War, this was a very dangerous assessment. i’he Soviet Union, watching closely. qtuetly sent one of its top negotiators. Mcxandr Mexicv, to Cuba to offer an alternative to Cuban dependence on America. Che Guevara, one of Castro’s closest collaborators, went on a global tour to examine the economic and political alternatives that Ctiba had. ilie initial Castro nationalizations brocight great pressure upon the U.S. Congress from affected American concerns and the American-linked Cuban elite. The American government felt great pressure to do ‘something’ about Cuba. Defiantly. Castro used a heavy hand to eliminate contenders and figures of opposition like I tcibert Matos who denounced the communistic slant that the 1959 revolution took once it had achieved power. At first. Castro brought back respected economist Felipe Pazos as head of the Cuban National Bank. Pazos had resigned after the 1952 Batistaa)up —hissignature marked 1959 Cuban hank notes as it did on the 949/1950 series - and he made plans 6w the construction of a modern thirty-tsvo-storey building to serve as the headquarters for the Cuban National Bank. By 1959. in contrast, the state of the Ctiban treasurywas appalling: a million or so dollars in reserves, a ptihlic debt of i.z billion and a budget deficit of 8oo million dollars. In I lavana, Guevara himself tindermok a crash course with Mexican economist Jtian Novola. a major academic proponent of government intenenflon. In defiance of Anierican pressures. the nationalization movement in Cuba contintied. Many of the dispossessed Cuban elite departed for exile in southem Florida and the protection of the Americanempire. In October1960. Pa7DShimself resigned after Matos was arrested. In October 1960. Law $91 nationalized the Cuban National I3ank. Presidential Decree 2261of 26 November 1960 placed Guevara. an avowed communist who advocated the abolition of money. in charge. Gucvara quickly cancelled the construction of the new Ctiban National Bzok headquarters. Cuban bank notes now bore Gucvara’s nom-de-goerre Che.’3 According to biographer Jon Lee Anderson, Ernesto Guevara de Ia Serna was not an economist, something Guevara himself admitted. As a seasoned revoltitionan who had stirsived a bloody insurgency in the jungles of the Cuban Sierra Maestra. Guevara understood the valueof self- reliance and sought a noble dream: an economically independent and industrialized Cciba. But by October 1960. Guesara svasconvinced that the Soviet economic model in practice was little different from capitalism, and instead aspired to a ptirer fonii of comrntinist economic theon. I lowever. his plans to industrialize Cuba were soon dead in the water, as the Soviets did not see the benefit of creating an infrastructure of indttstrialization in a nation, which possessed no naturally occurring coal or iron. As a revolutionary commander and driven by a militaristic revolutionary ‘to the death if necessary’zeal. Guevara also demanded complete obedience from the Cuban citizenry which he

Combs, 305-306,337-338,379. I larry Schwarea. New Rtiblc Rates Create Mysteries,” New York Times,8 January1961. 20. Jon Lee Anderson, Ghe:A Ret vluüonanLife(New York:Grove Press. 1997). 412-415,416.430. 444-446,460. Anderson, Ghe:A Retolutionart Life, 251, 437,452-453.456,468. Alexis Schlachter. Circulara ntlevo billctc ctibano dc tres pesos,” Granma [9 October 2004]: 2 Anderson. 409,453-455.

EX POST fAcTo The Cuban Convertible Peso 145 assumed could he commanded like soldier cogs in the military machine. According to Guevara, individualism as such, as the isolated action of a person alone in a social environment, must disappear in Cuba.” On his 1960global tour, Guevara had visited China and DPR korea. lie was impressed with the volunteer labor brigades, hackyard industrialization and barefoot doctors of Maoist China; as well as with the principle of the self-reliant North Korean juche’. Guevara considered these models of the communistic scIfreliant ‘new man’,which he wanted to incorporate into the Cuban economy.4 What Guevara found at the Cuban National Bank. however, was the exact opposite: complete dependency on the U.S. in capitalist free market economic theory, practices and currency. i’he first Ctiban banknotes of 1934 were issued over thirty )cars after independence: Cuban Decree 3 of 22 March 1934 called for the new eurrenc notes to be printed “with the same requirements and fi)rmalines of the American banknote.” In fact, the new silver certificate notes were designed and printed by the American BankNow (7onipanvof New York in denominations cifi, 5,10,20,50, and ba pesos. 500 and tooo peso notes were added in 1944. The notes were issued by the government of Cuba, were matched to equivalent silver on deposit and were redeemable in silver. Reflecting growing nationalism on the island, the Cuban government used the notes to honor national patriots denied in the American imperial history of Cuba. Law I3 of 23 December 194$established the Ctiban National l3ank as the issuer of currency for Cuba. A seric’sof banknotes issued in 1949,also printed by A BN(7, were no longer backed with silver on deposit6 hut with gold and gold-hacked ctirrcneies like the American dollar. A io.ooo pesos banknote was issued - unnecessary for the state of the Cuban economy - directed at the high-stakes American casino business.7 Ctiban coinage was equally dependent on the American empire: it was designed by Charles E. BarIer at the U.S. Mint at Philadelphia. The first Cuban coins were issued in 19I5with 1, 2 and 5centavos coins made from nickel and lo, 20. 40 centavos and i peso coins made from silver. The coins were identical in content to American models: the Ctiban centavo coin weighed the same as the 5 grams of the U.S. nickel; the one- and two-cent Cuban coins arc of corresponding fractions of the 5-gram U.S. nickel. Similarly, the 10 eenmvo coin with 2.5grams of ninety percent silver is identical to the American dime, and the twenty and forty centavo coins ‘ere in proportion to the American standard of 25 grams of silver per dollar. Thus, the Cuban twenty centavo coin had grams of silver, twenty percent less than the American 25-centqtlarter with 6.25grams; and the forty

4Anderson. 453-455.469,478,488-489,490,604-605. The new Cuban bank notes showed the portraits of Cuban nationalist heroes José Marti. Máximo GOmez, Carlos Manuel de Céspedes, Antonio laeeo, Calixto Garcia. Francisco \‘iecnte Aguilera, Salvador Cisneros l3ctancourt, TOrnas Estrada Palma and Ignaeio Agramonte. l’hc Cuban patriots were denied their place at the surrender of the Spanish forces in 1898in what Cuban nationalism termed the Ctihan War of Independence vs. the American description as the Spanish American \Var, which excluded any credit to Cubans. The notes also bore the Ctiban national seal, adopted at the 1869Assembly at Guaimaro, understood in Ctihan history as the moment when the Republic of Cuba was founded. Sec Edtiardo Torres-Cuevas & Oscar Loyola Vega, ilism,-ia de Cuba .a 1898: Fnrmaeidn v Liheraeidn deja Nacidn (I iavana: Editorial Puiebloy Educaeibn, 2001), 201. This same nationalism strengthened the call for an independent Ctiban monetary note and the emergence of nationalist heroes and icons in recognition of nationalist efforts. Grow’ing nationalism flirced a reconsideration of the original Cttban compact w’iththe American empire: in I934 the Cuban government retired the PUtt Amendment with its provision of permitting American interi’ention in Ctiban aflàirs. 6 The Ctiban silver certificates were demonetized by Decree 734of 6 March 1953. U Gttha: En;isiones dc inoncdas vbillctes 1915-1980 (Museo Numisrnático, ilaneo Nacional de Cuba, 1984)47-48,58-59.

EX POST FACTO Mark Piper

centavo coin had to grams silver, twenty percent lessthan the American 50 cent half dollar coin with 12.5 fivegrams.’5The new coins also sought to establish a new national identity: they bore the inscription PATRIA YLIBERTAD[Nation and Liberty]. The issuance of national currencyis usually considered a defining and exclusivecondition of nation-building;in contrast, however. Cuba’s currency between 1915 and 1958was in compliance with and ttnder direct control of the American empire. Ctiban Law963 014 Augtisri9ói demonetized all previotis circulating paper currency. stating that it was imperative to eliminate the insecurity and risks resultant from the fact that Cuban paper currency actually in circitlation was printed by foreign firms otitside to control the revolutionary government.” Redemption of old currency was limited — this was intended to deprive the ‘counter-revolution’ abroad of the economic power residing in accumulated wealth of the republicanera. At the same time, possession and circulation of the U.S. dollar was criminalized. Fhe new Cuban bank notes were printed in Czechoslovakia in denominations oft. 5.10.20. and rarely used 5o and too peso bank nodes,drawn on the nationalized Banco Nacional dc Cuba. The new notes displa ed the heroes of the reptiblican era: Marti, Macco. Gomez. Garcia & Céspedes. Only the twenty peso note bore the image of revoltitionan’ Camilo Cienftiegos. who had died in 1960. ‘lhc reverse side of each note bore distinctly nationalistic revoltiriona’ themes, such as the entn of the Revolution to I lavana in ‘959.The new bank notes also bore a new legend: PATRL4 O11IUERTE [Nation or Death], the war cryof the Revolution. Fidel c’asov firsrdeclared Patha 0 1Iucrreon 5 March 1960. considered a seminal moment in Cuban socialist identity-fomastion and history.5 A new Ctihan nationalism with socialist thcologyw’asbeing forged and was documented on the bank notes of the new Cuba: the backgrotind of each note bore the texts”Cuba Teirirorio Libre de Anrerk-a” [Cuba, i’erriton Free of America]and “Patria 0 ,llucire.” The last Cuban coin was minted at Philadelphia in 1960; however, thereafter. Cuban coinage also changed: the nickel coins of the past were firstminted at Kremnica, the Czechoslovakian mint, and later in Leningrad tising lighter and cheaper aluminum alloy. Cuban silver coinage was demonetized on 13 March 1962 and gathered tip for resale abroad lbr its silver content. New ctipro-nickel coins bearing the images of José Marti and Camilo Cienftiegos. on twenty and forn’centavocoins respectively, were isstied in 1962to replace silver coinage. Tellingly, the new coins also bore the war cryfor revoltition: Pania 0 Mue,re. Guevaras tenure as President of the Cuban National Bank was brief: on 24 February 1961 he moved on. accepting a post as Minister of Indtistries. I lowm’er. in realspeak;the Ctrban government had finalized the implementation of a command economy on the island. In Cuba in the 19705: Pragmatism and Institutionalization, economist Carmelo Mesa Lago sets presents the post-1959Cuban economic program. lie distinguishes between fivescopcs for the Soviet-authored economic program for a Cuban centralized command economy from 1959 to 1975: 1959-1960 as the phase of liquidation of the capitalist-free market systemin Ctiba with nationalizations; 1961-1963 as exernplif,’ingthe introduction of socialist institutions such as INRA, the CDRs and MtNfAR” 1963 to 1965as a period of discussion and experimentation; 1966-1970 as

‘ The weight standards for coinage discussed here were drawn fromthe 2002 Standard Catalog of 11orld Coins h’ Chester L. Kratise & Clifford Mishlcr and are considered the standard reference of choice according to the numismatic [coin] trade. Comparisons were made to information provided in Citha: Emlsionec de monedas ubillerec. 14-28. ‘ Centro de Doctimentación del Central Comité Central del Partido Comunista de Cuba, CivnologIa: 2;aAosde Rervlueidn (1lavana: Editorial Politiea. 1987).13. ‘° Cmnolog60 2.adosde Reivlucld,r. 29-33. 75.493. ‘ IN RA is the Instituro A’aeionalde Refomia Agiada which oversawthe nationalization of the large agricultural estates; the CDR are the Goirrirésporla Defensa de Ia Revolucián. a neighborhood

EX POST FACTO

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Bretton \Voods Agreement. Currencies of the command economy outside the free market economy. such as the Soviet rut,le, the Chinese renminbi yuan, and post 1960 Cuban peso were termed non- convertible hecatise they were officiallyexchanged at rates that were far above their real value as measured by standard ratios of demand, market prices, imports and eXpOrts. Officially,the Cuban peso was on parwith the U.S. dollar and had in fact increased in value when the U.S. w’entoff the gold standard in 1971 — the official exchange rate was sctat8r Cuban cenravos foronedollar. In contrast, in 1973 the unofficial exchange rate dropped to a low of nine pesos per U.S. dollar, reflecting the dcficit.laden and impacted socialist Ctiban economy.’9 ‘flic Soviet Union had invented a ntinther of tactics to accumulate free market currencies in order to purchase ;‘hat it needed from the free market: some, like the sale of gold and oil, were based on clear comparative advantage. Other more innovative tactics incltidcd capitalizing on aectimulated wealth with the sale abroad of Czarist artifacts and jewels dtiring the I9zos, raising qtuck cash to purchase foreign technologies such as agricultural machinery and locomotives.’9 These strategies were very successful and were subsequently expanded. Between 1930 and 1935, the Soviet Union established special stores called TORGSIN, [an acronym in Russian for the term ‘trading with foreigners’]which at first were established to sell Russian antiqtles and objects d’art to foreign visitors who paid in foreign currency. By the summer of 1931, these stores also redeemed precious metals and jewelry from Soviet citizens in payment. These items were rated by their content of precious metals and gems at international exchange rates and converted in value to TORGSIN coupons to be used as foreign currency when purchasing items at the TORC3SIN stores. i’hc 7ORGSI N coupons, commonly called ions, came to have an unofficial exchange rate of 25 Soviet paper nibles for one ion. ‘iX)RGSI N ‘as soon offering consulmer goods, aimed at the Russian citizenry. made available not by the Soviet command economy but by virnie of the accumulated wealth or remittances from abroad. Tf)RGSIN representative I. I. Gordccffeitcd 3 million dollars worth of sales in Moscow alone in 1933.In 1935. Soviet Commissar of Foreign Trade A. P. Rosengol cited 270 million rubles worth of sales in four years. ‘I’hcsales statistics are even more impressive ;‘hcn contrasted to the economic depression in force in the free market world of that time. Though tremendously popular, the TORGSIN stores were ordered closed in late 1935 when toreign exchange transactions were largely abolished. This effort wa an attempt to end a speculative unofficial market in foreign euirrencyand TORGSIN ions, which competed with and thereby devalued the Soviet command economy.’ After \VWI I, the Soviet Union again found that it needed to raise free market capital in order to buy technology not available domestically. An economic tactic that allowed the Soviet command economy to purchase from the free market using foreign etirreneics was once again necessary. l’o achieve this tactic, the Soviet Union promoted foreign tourism and re-established dollar stores in 1961. These stores, genetically known as ‘bez*ska’, were geared towards generating foreign revenuic. In the Soviet empire, ‘dollar stores’ were meant to soak tip foreign currencies from travelers and diplomats who purchased the domestic goods the Soviets controlled. This strategy also meant to absorb foreign currency remittances its citizens possessed - oflèring domestic and foreign goods unavailable from the command economy at substantial markups. By 9Th these stores were

a Gttha: A (7ot,nnySnidi cd. (Washington: The American University, 1976), 382-383. ‘9 “Soviet to Sell Gems for American Plows,” Neo’ YorkTimes, i February 1926, I. 3°Walter l)uranty, “Soviet in New l3id for Foreign Money,” Ne;e ) ‘ork-Times, zo August 1931,7; “Soviet Pushes Bid for Foreign Money,” New York’J’imes, 13 December1931, 123;“Soviet Valura Shops Spreading Rapidly. New York Times, 25 December1932, E4; “Soviet Stores Set Up’Five and Ten’ Chain,” New YorkTimes, io April 1934,4; “Soviet Orders End of RuibleTraffic,” New York Thnes, 15 November 1935, 18; “Shoppers in Russia Flock to Torgsins,” New Yorklimes, 20 November 1935, 18.

EX POST FACTO Mark Piper

such a success that they were established in most Sovietsatellite nation-states as well. According to a 1977 Radio Free Europe report. ‘dollar stores’ were known as GORECOM in Bulgaria, TUZEK in Czechoslovakia, Inte,rou:&in I lungary, PE1UFXin Poland, COMTURISTin Romania and Jnteishop in DDR East Germany. This practice was also taken up in 1980 in China with friendship Srores, as well as in North Korea. These stores accepted only foreign currencies and the special in- house currencies,which were equivalent to foreign currency.3 ‘t’hein-house currency replaced, and thuisdrew down, the amocint of circttlating foreign currency. The in-house currency was also a securitymeasure, as casinosoperate with chips and chits to avoid in-hotisc theft. The period of 1975-1985, with Soviet direction and implementation of the Ctiban command economy, can be considered a boom period for Ctiba. ‘ilie secret of this boom was massive Soviet subsidies, which allowed the Cuban command economy to thrive. According to economist Jorge F. Lopez-Perez. “the contract price in 1985for Cuban sugar sales to the Soviet Union was around 45 cents per potind, compared to world market price of just above 4 cents per pound.” This represents a direct annual infusion of 200 million dollars as a direct Soviet subsidy. A reviewof prices for 1975-1985 shows a consistent and increasing subsidy as the world price for sugar plummeted on the world market.3 ‘lie boom is also visible in Cuban currency: In 1983.a one peso coin was introduced bearing a star design drawn from the 1915coin series. In 1983,Cuba also introduced a three peso bank note with the iconic Mberto Korda image of the heroic Chc Guevara. The 1983bank note is etlrious since monetary units in threes are not common and had never been used in Cuba before. In the twentieth century, the Soviet Union was one of the few countries that used a three denominated currency in coinage and hank notes. The Soviet economic boom in Cuba can also be used to explain how Cciba was able to undertake a stibstantial long temi niilitary mission in Angola in 1975 and in Ethiopia in 197$. The internationalist program also benefited the Cuban boom: according to an official 1996 Cuban report, ‘The prestige that Cuban revolutionary medicine has acquired in the world has eontribtited to states with sufficient economic resotirees to pay for these services from developed nations, instead requesting these from our nation. In this manner traq since 1978,Libya since 1979 and Kuwait since 1985requested and obtained this service from Cuba; Angola and Algeria since 1978havecontinued to receive this service with economic payment.”5 Unfortunately for Cttba. the boom would not last forever. What brought about the decision to establish Soviet-style dollar stores in Cuba was a response to an economic downturn that had severely limited access to free market goods it needed. From a price in 1980 of over 28 cents per pound of stigar on the international market, by 1984 the price had dipped to fivecents per pound. Despite a socialistcommand economyand Soviet subsidies, Cuba had not been able to circuinwent the free market economy. Instead, the American embargo had caused Ctiha to resort to complex multi-national barters to circuinwent the closed Americanfreetrade market. In one transaction cited in a 1985report from the Cuban National Bank, Cuba botight 115million dollars worth of sugar to fulfilla contract with the USSR that yielded tih billion worth of oil, of which Cuba re-exported two thirds for a saleof 440 million. Ctiba had accumulated a large trade deficitwith the Soviet Union and the COM ECON nations since it had not fulfilledthe sugar exports it had been contracted to supply — exports, which were to compensate for imports it had received. The committed exports to the Soviet world were instead sold in the free

‘ J. L. Kerr, “Ilard Currency Shops in Eastern Europe,” Radio Free Europe Research; available from htcp://files.osa.ceu.hu’11oldings/3oo/8/texz/tr6-2-87.shtrnl; accessed on September 2007. Jorge G. Perez-Lopez, “Ctiban-Soviet Scigar Trade: Price and Subsidy Issues,” J3ullednofLadn American Resesjvli.Vol. 7 No. i [1988]. 123, 12$. Ministerio de Saltid [Cuba], “La salud pñblica en Cuba en el periodo revolucionaria socialista,” Guzdemo tie Ilisroi-iaNo. 8i [l996] available from http://bvs.sld.ccVrevistaWhis/vol_196/l1is13196.htm; aec-essed3 June 2004.

EX POST FACTO The Cuban Convertible Peso 151 market economyto provide needed foreigncurrenciesto purchase goods the Soviet world did not provide. The ‘Economic Report, February 1985 was a Cuban narrative ofscnous economic woes it hoped would holster its reqtiest for rescheduling the 750 million dollars of Cuban debt owed to foreign banks this substantial sum was in addition to the Soiet debt. On 28 July1986, Cuba suspended payrners on its foreign debt, effectivelycanceling further credit from the free market banks and creditors. A January 1988report from the Cuban National Bank indicated a reduction of Cuban imports from i.z billion to $40 million in 1987,a reduction of thirty perccnt. There was a more serious problem that Cttha, despite socialism, cotild not get away from: a seriously devalued non-convertible currency and dependence on imports purehased from the U.S. dollar based free market economies. It was to be expected that Cuba w’ouldpromote Sovietized foreign tourism as a mode of gaining free-market cctrrencies to finance Cuban purchases outside the COMECON cartel. In 1976, the National Institute of Tourism [INTUR] was established in Cuba, and soon efforts were underway to revitalize Cuba’s neglected tourist industry. In 1985,as in other COMECON nations, diploriendas[diplomatie stores] and IN’I’UR shops at hotels transacting cxcltisivclyin foreign currency were established in Ctiba. The Cuban dollar stores and the currency they used came to be referred in common parlance as INTUR stores and money. The fomiat for the Cuban INi’UR shops replicated the 1930 Soviet TORGSI N model, with similar economic goals. Because possession of foreign currencies was penalized in Cuba. the dollarizcd INTUR stores were first dedicated to travelers and to the foreign and diplomatic population in Cuba. While it can be reasoned that the IN1UR were established as a regime stinival revenue generator mechanism, the INTUR model also crested the beginnings of an economic apartheid in Cuba between the portion of the Cuban population with access to US dollars and those withotit. ‘the creation of a patallel Cuban currency, the U.S. dollar-based GerritkudosdeDitisa [(Foreign) Exchange Certificates] and Cetritieados dc Compta [Certificates of Purchase] in 1985by the Banco Nacional de Cttba marked the implementation of the ‘fORGSI N-style IN’fUR dollar stores and the Soviet stratagem to extract foreign reserves from foreign travelers, as well as accumulating wealth and remittances. Four series of Cuban Gertifleadoswere issued for use in the new dollar stores, reflecting four different revenue sotirces. ilic first type of certificates with a large letter ‘A’.w’ithorange red backgrotind denominated in 1,3, 5, to and 20 pesos were dedicated to currency exchanges from Soviet and COM ECON travelers; those with a large letter ‘13’,with green backgrottnds and denominated in i, 5,10,20 and o pesos were dedicated to travelers from the non- Soviet world with free market currencies. Like the SovietTORGSIN, a facet of the Cttban program included the purchase of precious metals and items from the domestic population. Cubans redeemed Cuban Cerdfic’ados de compta for precious metals and items at IN1’UR stores marked with a large letter’C’, printed in light blue and denominated in t, , 5. 10, 20,50, ioo, and 5oo pesos, the Gerrilieados were in the format of traveler’s checks, containing signature and counter-signature areas and an expiration date of fiveyears. Under Cuban law’,possession of foreign currency by Ctiban nationals, even if received as gratuities, was penalized and had to be turned in within ten days to the Cuban National Bank and redeemed for the equivalent in Cuban ‘D’series certificates at officialexchange rates. i’hesc certificates were marked with a large letrcr’D’, printed in orange and denominated in 1,3,5, to and 20 pesos and bad the same check format as the ‘C’series: The ‘D’series ‘as reisstied later with tan color printing, evidencing demand and an increasing levelof travelers and gratuities. A 1986Cuban totirist handbook explained that fractional IN1’UR coins denominated in5, 10,25,50 eentavos and i peso

Clyde Ii. Farnsworth, “Report by Cuba is Candid on Economic Burdens,’ Nett’ York Times, June 1985, D2; ‘Payment I lalt Ily Cuba Cited,’ Nett’ York 7 Ymes,29 July1986, D9; ‘Cuban Economy Shrank in 1987,”Nett’ York Times, io March 198$,Di7.

EX POST FACTO 152 Mark Piper

were issued because sufficient stipplies of foreign [Le.American] fractional currency were not always available. Travelers to Cuba were encouraged upon arrival to exchange their currencies for INTUR Certifleados. There w’aslittle reason to exchange money for Cuban pesos other than for small tips and purchase.ssince stores for locals rarely had much to offer the traveler; stores that did cater to travelers onlyaccepted U.S. dollars and INTUR notes. Domestic goods at cut-rate prices sttch as liquor and cigars produced by the command economy and the better antiqties and jewelry items turned in by Cubans for Cerdfirados de Compia were offered to INTUR consumers. As an additional incentive, INTUR notes were exchangeable upon departure while Cctban pesos were not. Until 1989,Cuban pesos tvere subject to confiscation upon departure because Cuban customs prohibited the export of Cuban pesos. For INTUR. redemption of precious metals was very profitable: Ctibans selling preciolts metals were paid 4.75 cents per gram [about 135 an ounce] and silver at to cents a gram [about 2.85$U.S. an ounce] w’hichwas considerably below international prices. Remittances from abroad were also paid out to Cuban nationals in INTUR notes at oflicial rates mcich below unofficial rates that further maximized revenue for INTUR. Food items, consumer goods. and electronics from abroad were available at INTUR stores to the dollar paying Cuban consumer at substantial markups, again maximizing profits. Because possession of foreign currency was penalized, the INTUR stores were largely off-limits to the Cuban population. Ministry of Interior guards ensured that onlyforeign passport holders and a limited ntimber of authorizeti Cubans could shop at the INTUR stores. Compliance with the INTUR stratagem was insured with stibstantial criminal penalties for unofficial trading both for foreigners and Cubans.6 The seeds of change had been sown. The economic downturn and cancellation of foreign debt payments after 1985left Cuban store shelves bare of constimer goods. Cuba had not been able to ignore the free market economy. The INTUR stores prosded an alternative to the Cuban command economy, which cottld not provide material goods to the Ctiban consumer market. Those who obtained consumer goods sold in dollar stores became the new elite in Cuba. The die-hard revolutionaries who existed solelyon Cuban peso salaries and who had no contact with either the Cuban exile community or tourism w’ereexeltided. Cubans operating on the Cuban peso economy were limited to goods as dispensed byofficial ration schemes and, because Cuba had little foreign credit or foreign cttrrency reserves, the rations were often minimal or delayed. In order to aeqtlire U.S. dollars or Cuban dollar-rated certificates to purchase what was not available in the Ctiban market, illicit small trade became more commonplace. Prostitution, which had been largely eliminated after 1968,is but one example of this phenomenon. Cubans also called on familial financial

support from the exile communities — communities that had been demonized in Cuba as traitors. The INTUR currency and dollar stores became the new Cuban financial instruments of value,and

51Theuse of the 1985Ctiban cerdfirados was drawn from my own personal observations as well as from the recent recollections of Cttban numismatic collector Daniel Casas Sanchez in Camagtiey, Ctiba. The information on penalization of foreign ctlrrencies is taken from Cuba:A Gounn;Swdy; 382-383.See also 2000 World CanUog of Workl Paper Monei’.Vol.3. eds. Cohn R. Bruce II and Neil Shafer, 7th ed., Krause Ptiblications. 228-230;Jose Antonio Tamargo & Alberto Riaza. Cuba &avcl Guide, I lavana: Ministry of Tourism, 1986).30; Medon, José Maria. La Moneda de Cuba (I lavana: Dobler I)ifusiones, 1999). 23-24 and Daniel Casas Sanchez. personal correspondence to the author. ii October 2007. 36 For this study I have largely draw from my recollections and notes from an October 1986trip to Cuba. Also see: Carlos t3ea.“Letter from I lavana, San Francisco C’hrnnicle[This IVorkIj,i April 1990. 13 U.S. Department of State. Tips for ‘fratrk,s to Cbba, [informational pamphlet Publication 9232], September 1987:8.

EX POST FACTO The Cuban Convertible Peso 153 were a clear economic tactic of accommodation by the Ctiban command economy to the free market economy, designed to accumulate desperately needed foreign currency reserves. It is undeniable that the Soviet empire understood Cuba as economically and politically dependent. and was quite willing to foster this as a nco-colonial dependent relationship in order to have an outpost one hundred miles offshore from its Amencan rival. It is also obsious that Cuba remained dependent on the American dollar during the socialist era as evidenced by the artificial parity CuIa maintained for the Cuban peso to the US dollar and the 1993establishment of the Cuban convertible peso. At the same time, it is undeniable thatCuba did acquire a national identity separate from the US or its neo-colonial republican era past. The American response to Ctiban defiance and agency has been an economic and political embargo that continues to the present day. In its socialist phase Cuba contintied to need goods from the free market and adapted and tindertook a number of accommodations such as the establishment of INTUR stores in 1985. Later rapprochement with exiles abroad after 1991 and the legalization of the US dollar in 1993 to acqtlirc funds to purchase these items, and many of these accommodations can he understood as explciitation of dependent survival economies. More precisely, Cuba remained economically dependcntw’ith socialism but developed and exercised economic agency in irs dealings with the American capitalist empire. and in an instlrgcnt manner took advantage and exploited every economic advantage, and even managed to turn negative circumstances to irs favor. The sun-ivalist Ctiban economy fallsotltside the economic models described by Erie I Iobsbawm in his 1968IndusrnandErnpiic: The Birrh of rhe Industhal Reivlt,don or Nigel I larris in his 1986 The End oldie Third lVorldor Joseph E. Stiglirz in his 2002 presentation II’itherReforni? Towards a Nell Agenda for Latin America. Instead, more correctly. Cuba learned to exploit a dependent relationship, vhether American, Soviet or transnational, to its benefit.

EX POST FACTO