Cuba cuts hard currency peso to par with dollar

HAVANA, Mar 15 (AP): Cuba's central bank is devaluing the country's two types of peso by about 8 per cent in relation to the dollar and other foreign currencies, hoping the move will spur exports and local production as the government seeks to overhaul a moribund economy. The announcement published in state newspapers on Monday says the hard-currency peso used mostly by tourists and foreign companies on the island will now be worth $1, down from $1.08. Each hard-currency peso is still worth 24 of the standard pesos with which most Cubans are paid in an unusual two-tiered currency system. It was the first time the government has revalued the currency in six years, when it increased the nominal value of its currency in relation to the dollar. Monday's shift puts the exchange rate back to where it was before. Economists have been arguing for just such a change. They say it will be a boon for the island's crucial tourism industry, because it will make trips to Cuba more affordable. It will also increase the peso value of remittances sent from abroad, a key lifeline for many cash-strapped Cubans working for salaries of about $20 a month. Arturo Lopez-Levy, an economist who left Cuba in 2001 and is now a lecturer at the University of Denver, said the devaluation was a step in the right direction, but did not go far enough. "The new rate is still too high," he said. "The Cuban economy needs something more dramatic." Lopez-Levy said Cuban competitiveness was not strong enough to warrant a one-to-one exchange rate with the U.S. dollar, and countries with an overvalued currency face impediments to growth. He added, however, that the revaluation was a politically bold move from President Raul Castro, who has been struggling to lift the island out of its chronic economic malaise since taking over from his brother in 2006. The devaluation "is the clearest sign yet of Raul Castro's will to put economic growth and structural adjustment ahead of political niceties," Lopez-Levy said. In Havana, Cubans reacted with a mix of approval and indifference. "It's good for someone who has family abroad," said Jorge Kuri, 49, who works as a security guard at a state-owned company. "But for a normal worker, everything is going to be the same. This won't resolve anything."