Dollarization of Cuba
[1] The main aspect of these reforms was to legalize the then illegal United States dollar and regulate its usage in the island's economy.
This was to be achieved through a reduction in fiscal deficit, and through structural changes such as the enactment of the Free Farmer's Market agreement, the legalization of self-employment, and the decriminalization of the United States dollar.
[3] The economic reforms resulted in a decrease in inflation, appreciation of the peso, increase in output and productivity, and an improvement in the fiscal deficit.
[4] With the implementation of the 2018 Cuban constitution came free-market rights, the recognition of private property and the acceptance of foreign direct investment, officially making Cuba a mixed economy similar to the Chinese and Vietnamese models, and similar to the Soviet Union under Lenin with the New Economic Policy.
[5][6][7][8][9][10] The Cuban economy faced its lowest recessions during the War of Independence (1890s), Great Depression (1930s), the Socialist revolution (1960s), and the dissolution of the Soviet Union (1990s).
[4] Mikhail Gorbachev, the former General Secretary of the Soviet Union, who later went on to become president,[15] ended the Cuban–Soviet exchange of sugar for oil, and demanded the immediate repayment of the debt.
[16] President Fidel Castro declared that as of 30 August 1990, the period would be known as the Special Period in Time of Peace (Spanish: período especial en tiempos de paz),[3] which revolved around moving people from urban to rural areas to increase focus on the agricultural sector.
This law made it possible for Cubans to sell goods and services to foreigners who were visiting the island and resulted in an increase in capital.
[3] To combat the fiscal deficit in the country, the government raised the prices of selected goods such as cigarettes, alcoholic beverages and gasoline in 1995.
The government also announced that as of 1995, taxes will be imposed on real estate, on services such as advertising, on self-employed workers, and on Cuban's whose source of income stems from foreign businesses.
[3] This allowed farmers to once again legally sell the surplus from their yield (except for meat, milk and potatoes) and make profits.
Moreover, the conversion of Soviet-style farms into basic cooperative production units freed up 42% of Cuba's usable land.
[19] In 1993, the BNC created a private company, New Banking Group (Grupo Nueva Banca, S.A., GNB), to expand financial services available to foreign investors such as credit card operations, provision of the free convertible peso and exchange of bills.
[20] In 1995, two more foreign banks were granted a similar license, namely the Société Genéralé de France and Banco Sabadell from Spain.
[20] Moreover, by September 1995, it was possible to deposit hard currency with interest in the Cuban National Bank; by October of that same year, the government had created foreign currency exchange houses (Casas de Cambio, CADECA) with 23 branches throughout the island[19] where Cubans could exchange USD for pesos at a rate similar to that of the black market.
[20] In 1995, the Cuban government signed a trade and investment promotion, and protection agreement with more than 12 countries including Russia, Canada and China.
According to an official statement made by Vice President Carlos Lage in November 1994, investments in that year totalled $1.5 billion.
[20] In August 1995, the Cuban Ambassador to the United Nations, Bruno Rodriguez, reported that 100 American companies had showed interest in state-owned businesses in Cuba.
