Cuba currency: is the country’s economy ready for a global market?

World Finance speaks to Steve Hanke, Professor of Applied Economics at Johns Hopkins University, about whether a single currency can help Cuba's economic situation

January 20, 2015
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Transcript

World Finance: Cuba’s plan for a single currency was disclosed in 2013, and comes as the 11.1 million nation, where most of the economy is under state control, slowly opens to foreign nations and more privatisation.

Cuban central bank president Ernesto Medina told the country’s state news agency last year that the elimination of the dual system is a critical step in preparing the economy for the global market.

Steve: you’ve promoted dollarisation throughout your career. What are your thoughts on the Cuban currency situation?
Steve Hanke: I wrote a book in 1992 about establishing a currency board in Cuba. And a currency board is just one where you’d have the Cuban peso, but the peso would really be a clone of the US dollar. So it would be like the Hong Kong dollar, it’s a clone of the US dollar. That’s one approach.

And maybe politically the most viable one, where there is a domestic Cuban peso, but the peso’s as good as the US dollar.

The other approach would be to just abandon the peso completely, like we did in 2001 in Ecuador. They abandoned the sucre and replaced it with the US dollar. They could do that.

I think politically that would be a much more difficult thing to implement right now.