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Straw and Morantinos agree to revisit EU policy on Cuba

MADRID, 28 (AFP) - Spain and Britain agreed to look at revisiting European policy on Cuba "so it can be more effective," Spanish Foreign Minister Miguel Angel Moratinos said following talks with British counterpart Jack Straw.

"The United Kingdom agrees with the Spanish position to revise some measures so they may be more effective," Moratinos said after some three hours of talks with Straw.

Moratinos said that following his discussions on a variety of issues, including Gibraltar, with Straw, he believed both countries "share the same philosophy regarding reinforcing democracy, respect for human rights and public freedoms."

Last week Spain called on the European Union (news - web sites) to help Cuba negotiate entry into the Cotonou Agreement, an EU trade and development aid pact with African, Caribbean and Pacific (ACP) developing countries, which a Spanish foreign ministry spokesman said could facilitate monitoring of the respect of human rights in Cuba.

Spain's new Socialist government has dropped its conservative predecessor's hardline stance towards Castro and is "looking for a new type of relationship" with Cuba, an EU diplomat said last week, notably by dropping sanctions adopted by the EU in June 2003.

The EU adopted the sanctions after 75 dissidents were arrested and given heavy jail terms, as well as in protest against the execution of three Cubans who were trying to flee the country.

Cuba Studying Extending Use of Euro

By Andrea Rodriguez, Associated Press Writer. Wed Oct 27.

HAVANA - Communist officials are thinking about extending the use of the euro beyond a few resorts for vacationing Europeans as the country moves to halt widespread use of the dollar, Cuba's tourism minister said Wednesday.

Since Fidel Castro's government decided to replace the dollar with the local Cuban convertible peso, authorities have been studying coordinating with Cuba's Central Bank to extend the acceptance of the euro in other areas of the country, Tourism Minister Manuel Marrero said.

The euro now is accepted at several coastal resorts on this Caribbean island, including Varadero east of Havana and Jardines del Rey, located in a string of keys along the main island's northern central coast.

The European currency is also accepted at hotels, restaurants, shops and other businesses in the eastern beach resorts of Santa Lucia, Covarrubias and Holguin, and Cayo Largo del Sur, off the main island's southwestern coast.

Cuba, which hopes to receive 2 million visitors this year, is a popular vacation spot for Europeans.

President Fidel Castro announced Monday night that his government was launching a two-week process Tuesday to eliminate the U.S. currency from circulation in its stores and businesses in response to stepped-up American sanctions.

Adopted as a temporary measure in 1993, the widespread use of the dollar had been seen as a necessary evil to survive after the loss of Soviet assistance. It soon became the primary currency used by foreigners and Cubans alike at stores and other businesses across the island.

But starting Nov. 8, dollars will no longer be used for local trade and a national currency known as the convertible Cuban peso will be the only money accepted at most businesses across the island of 11.2 million people.

In a move aimed at discouraging people on the island from using dollars, banks and exchange houses will now levy a 10 percent charge to change dollars for the convertible pesos. There will be no such charge to change euros and other convertible foreign currencies including British pounds, Swiss francs and Canadian dollars.

US says embargo on Cuba is working as Castro banishes dollar

WASHINGTON, 26 (AFP) - Cuba's plans to take the US dollar out of circulation show that the US embargo is a success and has a stranglehold on the government of communist President Fidel Castro, the US State Department said.

"We think that this move is yet another indicator that Castro is refusing to do what's best for his own people. It shows that he's cynically trying to preserve a bankrupt regime at his people's expense," spokesman Adam Ereli said.

"We see it as a confiscatory measure that demonstrates that President (George W.) Bush's policy is working. It's squeezing the regime and causing them to take extreme measures that underscore its own inherent weaknesses," the spokesman added.

Castro, 78, announced late Monday that transactions in US dollars would be banned from November 8 as a response to "mafia-like" US moves on restricting remittances destined for Cuba. Greenbacks would be replaced in transactions with the local "convertible peso," worth one dollar locally though it has no value on international markets, he said in Havana.

In 1993, in the midst of economic free-fall on the heels of the collapse of the communist bloc, Cuba legalized free circulation of the dollar. Havana then in 1995 created the "convertible peso" to fill the gap between supply and demand for greenbacks on the island, a mechanism that until now funneled some -- but not all -- local greenbacks into government hands.

Assistant Treasury Secretary Juan Carlos Zarate called the Cuban move "an act of economic desperation" and a clear signal that President Bush's strengthened policies towards Cuba have hurt the Castro regime.

"In typical Castro fashion, his solution to this problem is to implement a measure that will directly benefit and bring profit to his regime, while hurting the Cuban people," Zarate said.

He said Cubans depended on dollar-based remittances from relatives in the United States to survive, and Castro will not only attempt to pool these US dollars for his own profit, but also shake down the Cuban people with a 10-percent penalty for the currency exchange.

In Miami, Cuban-Americans expressed anger at the measure, but vowed to continue to send cash to needy relatives in Cuba.

In a popular restaurant in the city's Cuban sector, Julissa Garcia, a Miami resident since the 1960s, said she was about to send 400 dollars to her brother in Cuba to help care for his cancer-stricken wife, "But I'm afraid of what's going to happen" when the dollar stops circulating.

"Everything there must be bought with foreign currency," she said. "They cannot even buy food. This is just another evil of this Mr. Castro. What am I going to do? My sister-in-law is dying and she needs me."

Francisco Rodriguez, owner of A Little Havana Check Cash, told AFP he had seen no immediate change in business, "although people are walking in and asking for details of the measure."

Cuba nets short-term cash-flow taking dollar out of circulation, eyes US vote

WASHINGTON, 27 (AFP) - Communist Cuba's taking the US dollar out of circulation will net it some needed liquidity while the move's timing seeks to cash in on international political prime time: the looming US presidential vote, analysts said.

President Fidel Castro, 78, in his first public appearance since breaking an arm and a leg in a fall last week, announced late Monday transactions in US dollars would be banned from November 8 as a response to "mafia-like" US moves on restricting remittances destined for Cuba.

But he did not mention that ending the free circulation of the dollar on the island -- legal since 1993 -- could come as an economic band-aid for a cash-strapped and isolated government that buys its imported oil and food in hard currency on world markets.

"The explanation they give is neither convincing nor clear. It is an official excuse for an urgent need for dollars," said Uva de Aragon, Associate Director of the Cuban Research Institute at Florida International University in Miami.

"Ten years of dollarization had opened a little space for Cubans, as they say over there, to get by or do a little business. And this puts an end to all that," she said.

"In the short run it is going to help the Cuban government, but in the long run it is going to have negative effects for the people and possibly for the government."

The US dollar no longer will be able to be used as local currency in transactions and was to be substituted for by the local "convertible peso." It is worth one dollar inside Cuba, but has no value on world markets.

Cubans whose relatives send then a total of more than 800 million dollars every year, as well as tourists -- stars of Cuba's main hard-currency earning industry worth two billion-dollars -- will have to make purchases in Cuba in convertible pesos. Hard currencies go to the government.

For John Kavulich of the New York-based US Cuba Trade and Economic Council, a non-partisan information clearinghouse on Cuba and business, the currency rule changes "may gain them some short term liquidity. But the question than is what does the government do with it?"

"Commercial and economic models are only functioning because of the largesse of third parties ... China has given grants, substantial financing, payment terms, commercial economic and financial assistance. And of course (ally and oil supplier) Venezuela, that is well known. Their indebtedness to Venezuela may exceed one billion dollars," Kavulich said.

Cuba has "tied it to the US presidential election, which is unfortunate. Because commercially economically and politically, it does make sense for government to say we don't want a third country currency as the preferred medium for exchange in their country.

"It makes sense ... But in Cuba's case, their decisions always have this overt political context that relates to the United States. And to say that actions by the US government are THE reason for this decision is misleading at best," Kavulich said.

Cuban citizens will still be able to possess a certain amount of US dollars, but using them in commercial transactions or in retail will be banned, a Cuban central bank statement said.

If they want to shop at special stores that sell goods for foreign currencies, they will have to convert their dollars to convertible pesos at a rate of one for one. But there will be a 10-percent tax imposed on each transaction involving US dollars.

"Cubans are going to have a lot of reservations about exchanging their money. A lot of people are saving up to leave, or to do something, and the 10 percent tax is going to keep some people from exchanging all their dollars," said de Aragon.

"The black market will be back. Things are getting more and more complicated, more and more closed off."

Kavulich underscored the importance of the political timing of the Cuban announcement, just ahead of the November 2 US presidential vote, taking effect just after it. He said Cuba may hope for a Kerry win which might lead to reversal of restrictions imposed by US President George W. Bush (news - web sites) on Cuban-American travel, remittance and expenditure restrictions.

"We think that this move is yet another indicator that Castro is refusing to do what's best for his own people. It shows that he's cynically trying to preserve a bankrupt regime at his people's expense," State Department spokesman Adam Ereli said.

"We see it as a confiscatory measure that demonstrates that President (George W.) Bush's policy is working. It's squeezing the regime and causing them to take extreme measures that underscore its own inherent weaknesses," Ereli added.

In 1993, in the midst of economic free-fall on the heels of the collapse of the communist bloc, Cuba legalized free circulation of the dollar. Havana then in 1995 created the "convertible peso" to fill the gap between supply and demand for greenbacks on the island, a mechanism that until now funneled some -- but not all -- local greenbacks into government hands.

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