Wednesday, February 27, 2008

Peso speculation

Ever since the early 1990’s when the Cuban peso’s value dropped to about 150 to the dollar, Cuba’s central bank has kept its value stable, about 20-25 to the dollar. Yesterday, the Washington Post reports, the talk of ending the dual-currency system led Cubans to unload their convertible pesos and buy the old currency, anticipating that its value would soon increase. Apparently the “frenzy” subsided when the government reiterated that no sudden change is being contemplated.

Meantime, a Cuban economist speculates in this Reuters report that there might be a different solution to the purchasing power problem: Cuba could cut the mark-up on goods sold in hard currency stores. I’m told that the mark-up is now 140 percent, so that an item that costs a dollar to import wholesale is sold at retail for $2.40.

4 comments:

Agustin Farinas said...

For being a socialist economy, they sure know how to play the capitalist game real well. They comdemn capitalism, but they sure know how to markup the items to make a very juicy profit. So an item cost a dollar and they sell it at $2.40. Lenin and Marx would be turning in their graves ( well if Lenin had one, that is).

Laz said...

I agree with Agustin, they already know what's is going on but wait, we need time to know.

nick said...

Ha, a 140% mark-up is not capitalism, it is statist monopoly taxing the better-off. Capitalism would provide more for less, at least in material terms.

Phil Peters said...

Nick, you're right. Life is simple when you control all retail, and decide everyone's markup. Whether they are maximizing profits is another matter. You could make a case that lower prices would increase sales volume and profits. Not to mention consumer welfare.