Cuba halts most sales in U.S. dollars

By Vanessa Bauza and Rafael Lorente
South Florida Sun-Sentinel

CRISTOBAL HERRERA / AP A woman peeks into a dollar store in Havana, Cuba, yesterday next to a sign reading "Closed for Inventory." The Cuban government said new U.S. sanctions will force prices to rise for fuel and other commodities.

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The Cuban government announced a new era of belt-tightening, saying the Bush administration's "brutal" sanctions enacted last week will require prices to be raised on fuel and other commodities.

In response to the new U.S. sanctions, Cuban officials Monday ordered a freeze on sales at government-controlled "dollar stores," which sell a variety of essentials that are not stocked in stores where pesos, the Cuban currency, are used.

Most Cubans shop primarily at peso stores, where products are highly subsidized but in scant supply. In contrast, dollar stores are expensive but have an abundant selection.

Many Cubans who survived the drastic economic collapse of the early 1990s felt trapped in the long-standing U.S.-Cuba feud.

While some Cubans resented their government's announcement, saying higher prices would make it harder for them to scrape by, others blamed the White House for clamping down on their economy, which is slowly inching back from a recession.

"The ones who will hurt the most are the poorest," Ana Rodriguez said as she hauled sacks of detergent into her car yesterday.

At the La Puntilla shopping mall in Havana's Miramar neighborhood, customers packed a grocery, buying powdered milk, chicken, toilet paper, toothpaste and other goods. But an escalator leading to boutiques, a furniture shop and a hardware store was roped off as part of the decree, which stopped all sales in dollars, except for fuel, food and personal-hygiene products.

Cuba's economic crisis dates back more than a decade, to when the fall of the Soviet Union ended several billion dollars a year in subsidies.

Since then, Cuban officials have partially revived the economy through tourism and limited private enterprise, along with allowing foreign investment in some sectors.

The economic opening has given thousands of Cubans access to dollars. Many benefit from the hundreds of millions of dollars in remittances sent to them each year by relatives in the United States.
 
John Kavulich, president of the U.S.-Cuba Trade and Economic Council, said Cuban officials opened the dollar stores to capture remittances and other hard currency. He said Cuban officials reported about $950 million in gross revenue last year.

According to a government statement on the front page of the Communist Party newspaper, the current exchange rate will remain at 26 pesos to the dollar, and limited food items available through ration booklets will remain at the same price.

Last week, President Bush announced new measures to limit the flow of dollars to Cuba by reducing the number of trips Cuban Americans can take to the island, slashing the amount of money they can spend here and prohibiting cash transfers to Communist Party members.

Bush, calling Cuba a "tyranny," said he would step up support for Cuban dissidents and allow Cuban Americans to send $1,200 per year in remittances only to immediate relatives. Cubans now send back an estimated $800 million a year.

Cuba watchers questioned the impact and timing of Bush's measures, saying they appeared to be tailored to curry favor with hard-line Cuban-American voters in Florida, an important state in November's presidential election.

Fewer dollars from travel and remittances mean a tighter economy for all in Cuba, said Miguel Antonio Cedeno, who supplements his $10 monthly state salary by repairing air conditioners and refrigerators.

"It's a chain reaction — if the first link breaks, everything suffers," said Cedeno, 44, who dug into his savings to stock up on groceries. "More than 90 percent of my clients are people who receive money from abroad or who rent rooms to tourists. If they have less money, that leaves less business for me."

While many Cubans have come to depend on dollar stores, which sell items ranging from big-ticket electrical appliances to underwear and shoes, the stores reflect growing inequalities between those who have access to hard currency and those who do not. The dual economy fuels resentment among many Cubans who are paid in pesos but have to buy goods in dollars at prices that are often inflated.

Information from the Chicago Tribune and Reuters is included in this report.