HAVANA (AP) -- Cuba's central bank is devaluing the country's two types of peso by about 8 percent 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."
Neither Cuba's dollar-pegged peso or its normal peso are traded on international markets, so when the island's government purchases items for import, it must do so in dollars, euros or other hard currency. Monday's decision will make such imports more expensive, but the bank said the government hoped to ease the effect by boosting productivity at home.
Cuba has cut its food and other imports by more than 30 percent in recent years.
The statement said that the country's economic woes, exacerbated by the effects of three monster hurricanes that struck in 2008 and the global financial crisis, had forced the bank to maintain an exchange rate that "did not correspond to the country's current economic conditions."
The bank said that despite Cuba's economic woes, the government had managed to resume payments to foreign companies that had seen their payments blocked and accounts frozen the year before.
It also said the country had managed to renegotiate its foreign debt, though it gave no details. Cuba does not release statistics on foreign debt.
Cuba is in the midst of a major overhaul of its economy.
The communist government has made it easier for tens of thousands of Cubans to work for themselves in the private sector, albeit in a limited number of jobs. It has also said it wants to eliminate half a million public sector jobs, though Castro acknowledged recently that the plan had been beset with problems and would be delayed indefinitely.
One of the long-term goals is to eliminate the two-tiered currency system.
© 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.