May 5, 1999
By Andrew Cawthorne
HAVANA, May 4 (Reuters) - It may not be as frenzied or important as the official launch of the euro.
But the Caribbean island of Cuba is experiencing its own mini-version of ``euro fever'' as it counts down to a partial adoption of the European Union's single currency on July 1.
Fidel Castro's communist government has embraced the euro as a balance to the ``imperialist hegemony'' of the dollar, which Havana is largely prohibited from using in foreign transactions due to Washington's 37-year economic embargo.
``A promising adversary has emerged to the privileged U.S. currency,'' Castro, a long-time foe of the United States, said in a Jan. 1 speech celebrating the 40th anniversary of his 1959 Cuban Revolution, which was the same day the euro was launched in Europe.
Central Bank President Francisco Soberon enthused: ``The birth of a strong new currency will undermine the dollar's hegemony, for the good of humanity.''
THE DOLLAR STILL RULES
The Central Bank is leading a drive to prepare Cuba's state financial and business sectors for a July 1 switch to the euro in commercial transactions with the 11 EU nations who adopted the currency.
Ironically, inside Cuba the dollar increasingly rules. The government authorised dollar possession and use in 1993, parallel to the country's peso currency, bringing black market dollar use out into the open and enabling the state to tap into dollars in circulation.
Cuba also hopes to use the euro as much as possible as a trading currency with other nations beyond the 11-member euro bloc. And it is negotiating with communist allies North Korea, China and Vietnam to do business exclusively in the euro after 2000.
``The more we can use the euro, the better for us,'' Central Bank director Ana Mari Nieto, who heads Cuba's euro planning team, told Reuters in an interview. ``It doesn't affect anyone in Latin America as much as us.''
Cuba is the only nation in the Americas under communist rule and the only one subject to U.S. economic sanctions.
Cut off from its former aid and trade lifeline to the old Soviet bloc, and struggling with inefficiencies in its socialist economic model, the embargo or ``blockade'' as Havana calls it, is a further burden for Cuba's fragile economy.
EMBARGO LIMITS CUBA'S CHOICES
The embargo blocks Cuba from the huge market and potential investment sources on its doorstep in the United States. It also prevents Cuba from using the dollar abroad, and from gaining financing at international loan bodies where Washington has a controlling vote.
In figures that cannot be independently verified, Cuba claims the embargo has cost it more than $60 billion since the revolution, and $800 million in 1998 alone -- $130 million in shipping costs, $155 million in tougher credit conditions, $200 million in higher import prices, $55 million in lower export revenues, and $260 million in currency losses.
Against that backdrop, Havana views the emergence of the euro as a minor financial lifeline.
Beyond the political gains of a strong international rival to the dollar, Havana sees tangible benefits in savings from fewer currency changes and bank operations in foreign trade.
It also hopes the euro will enable Cuba to gain desperately-needed access to lower interest rates for loans. And it expects greater price transparency and simplicity.
``For us, the euro is extremely important,'' Nieto added.
She and other officials stress how Europe has now become by far Cuba's most important trade zone.
According to Central Bank figures, the EU nations account for more than 40 percent of Cuba's commerce, with the 11 euro zone countries accounting for at least three-quarters of that.
Two of Cuba's top three investors are EU members: Italy and Spain. And those two, together with France and Germany, are among the top five sources of foreign visitors to the island.
TANGIBLE BENEFITS
``The decision to back the euro comes because our main commercial and economic relations now are with Europe,'' Nieto said. ``It would be logical for us to use the dollar in foreign transactions, but we can't, because of the aggressive policy of the United States.''
The government wants to oblige Cuban state companies to use the euro wherever they can after July 1. The firms will be unable to avoid conversions in and out of the dollar in goods quoted in that currency. But they will save when they can deal in euros throughout, and avoid jumping in and out of other currencies.
U.S. officials are sceptical of the benefits of the euro to Cuba's economy, saying matters won't improve significantly without reforms to the state-planned model.
But European diplomats and businessmen recognise that the euro might bring some tangible benefits.
``It's not going to cure all Cuba's economic ills, but it's not going to do any harm either. In fact, it should do some good and, as you know, every little helps here,'' said one Havana-based businessmen from an EU nation.
Havana's official support for the euro will not permeate the streets, however, where the search for dollars has become an increasing obsession for many Cubans.
More than half the country's 11 million population have access to dollars either through family remittances, incentive bonuses by foreign and Cuban firms, or the ``trickle-down'' effect of tips and other sources related to the tourism and business sectors.
``We read all this about the euro, and how wonderful it is and what a great challenge to the dollar it is,'' said housewife Roberta Linares, outside a dollar-only shop in old Havana. ``But that's all for the politicians. Here on the street, no one survives without dollars.''
22:03 05-04-99
Copyright 1999 Reuters Limited
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