By JUAN O. TAMAYO
Herald Staff Writer
In a stunning twist, Havana residents are lining up to sell U.S. dollars -- once considered king in Cuba -- and buy pesos once laid low by the island's economic crisis.
Fueling the run on greenbacks are recent signs of economic recovery and an increase in cash sent by exiles to relatives on the island since President Clinton restricted travel to Cuba, economists say.
But there are also hints of risky government controls on the peso-dollar exchange rate, and apprehension about the rapid growth in Cuba's foreign trade deficit and domestic intercompany debts.
The run on dollars was sparked by the government-run Cajas de Cambio (CADECA) as it dropped the exchange rate from 22 pesos to the dollar to 21 in mid-August, to 20 early this month and then to 19, a rate holding through Wednesday. That's a whopping 13.6 percent increase in the peso's value, which had held steady at 22 through the summer.
Cubans waited in lines outside CADECA shops in Havana to exchange hundreds and even thousands of dollars they had stashed away as a stable form of savings, residents reported. Some CADECA shops even ran out of pesos last week, although there was some easing of the demand this week.
CADECA President Felix Rodriguez told Cuban reporters last week that he saw no sign of a let-up in the pressure to sell dollars, and company officials privately predicted the rate could dip as low as 18.
Dollars had been the preferred currency in Cuba since the government legalized holding them in 1993, in the darkest days of the island's post-Soviet economic crash. While the official rate remains one to one, the tolerated ``parallel'' or street market swung between 150 and 15 pesos to the dollar.
CADECA officials claim the peso is growing stronger because of Cuba's economic recovery and increased demand for pesos by consumers facing a growing array of goods and services for sale -- a classic market-economy argument.
Economic recovery?
Vice President Carlos Lage recently announced a 9.6 percent growth in Cuba's gross national product in the first half of 1996, compared to the same period in 1995, and predicted 5 percent growth for the entire year. Havana also tightened its economic belt, slashing subsidies and raising taxes until it reduced the number of pesos in circulation from 12 billion in 1993 to less than nine billion last year.
But since Cuba is far from being a classic market economy, Cuban and foreign economists are puzzling over what other factors may be fueling the rise of the once-disparaged peso.
``It's obvious the government is saying its policies continue to have success. But my educated guess is that there are other reasons,'' said Carmelo Mesa Lago, Pittsburgh University professor and expert on the Cuban economy.
Some level of government manipulation of the exchange rate is almost certain in a country as small and closely controlled as Cuba, Havana economists said in telephone interviews.
CADECA can easily drive up the peso by offering less and less for dollars until Cubans panic and begin taking out dollars stashed under mattresses and selling them to CADECA, out of fear the rate might go even lower.
The government did just that last year, when the dollar plunged from 35 pesos to 15 in one August week as officials were reported selling bags full of greenbacks on the illegal, but tolerated parallel market. But the parallel market, which more realistically reflects the supply and demand for dollars, climbed back within weeks to 25.
Contributing to the greenback's fall has been the increased flow of dollars sent by exiles to Cuba since Clinton blocked direct U.S.-Cuba flights in the wake of the Feb. 24 shootdown, forcing exiles who want to visit relatives in Cuba to go through third countries.
Because cash remittances were outlawed by Washington in 1994, there are no hard numbers on the money flow -- roughly estimated at $170 million a year in 1994. But no one who knows the ins and outs of U.S.-Cuba travel business doubts that they have increased in the past six months.,
When travel to Cuba is direct and therefore cheap, an exile who has saved $2,000, for example, might spend $500 on a trip to Cuba and give the rest to his family. When travel is more expensive, he is more likely to send the entire amount with friends or ``mules'' who charge a fee for delivering the cash.
``There are no facts, but I can guarantee you that the money reaching Cuba is increasing,'' said Francisco Aruca, owner of a travel agency that books U.S.-Cuba trips.
But Cuba's economic growth and rising remittance income may be offset in the longer run by the large and still growing deficit in Cuba's international trade, which must be paid with either dollars or loans.
Cuban officials say the trade deficit for the first half of this year was 15 percent higher than the same period last year, and much higher than planned. Cuba's $1.29 billion trade deficit in 1995 was double the 1994 deficit of $642 million.
Also troubling some Cuban economists is the growing domestic debt -- money owed by one unprofitable public firm to another for supplies, for example, or by a government-run farm cooperative to a government bank.
Unless the government shuts down unprofitable firms -- unlikely in socialist Cuba -- allowing such debts to pile up amounts to government subsidies that will eventually weaken the peso, said one Cuban economist familiar with the issue.
Unmoved by all the CADECA rate changes has been what many Cubans consider the real measure of the dollar's value -- the price of pork, a staple of the Cuban diet.
Pork, which generally sold at the equivalent of one dollar per pound throughout 1995, is today stubbornly holding at 28 pesos per pound -- $1.47.
© 1996 The Miami Herald.