Dollarization
The Cuban economy plummeted as communism in Eastern Europe came to an
abrupt end. From Castro’s perspective, dollarizing the Cuban economy was the
only viable solution to the economic crisis in the Special Period. Rather than
completely overturn the socialist system he had spent his whole life building, he
reasoned he could sacrifice ideological credibility to save his regime. The Soviet
Union fell in 1990, and dragged the heavily dependent Cuban economy down with
it. The Soviet bloc made up roughly 85 percent of Cuba’s trade in 1989, and by
1993, accounted for only 20 percent—a drop that fomented a 34 percent decline in
Cuba’s GDP.
xiv After thirty years of subsidies from the USSR, Cuba then had
virtually no active import or export economy, and therefore, no source of hard
currency.
xv In August 1993, Fidel Castro legalized the US dollar in Cuba. Though
the peso had been the national currency under Castro, it stood fairly worthless in
comparison to the dollar, with an exchange rate of 1:130.
xvi
The government unintentionally encouraged capitalist thought among
Cuba’s people in this policy by its catering to dollar holders and opening up the
door to foreign investment and tourism. The legalization of the dollar created an
economic situation for most Cubans that favored free market activity despite the
consequences. Naturally, Cubans began to pursue the acquisition of dollars, and
did so in any way possible. During a recent interview, Dr. Juan Del Aguila
explained the effects of Castro’s dollarization policy on the economic and
occupational decisions made by the Cuban people, concluding that in order to
persevere in society during the Special Period, Cubans had to access dollars in
some way.
xvii “If you had access to dollars, you had access to services that were not
always rationed…certain foods and medicines in the dollar economy were
unavailable to those with pesos only,” he clarified, highlighting a strong
incentive for Cubans to find dollars. The divisions created in the bifurcation of
the economy between pesos and dollars generated a system in which those with
state jobs quit in pursuit of greater profit and stability. The tourist sector was the
largest provider of dollars to Cubans, and evidence suggests that large amounts of
people left their government positions to pursue less prestigious careers driving
taxis and waiting tables to collect tips from tourists.
xviii Crucial to the
development of the tourist sector was Castro’s 1993 decision to legalize selfemployment.