The Dual Currency System
Cuba's former two-currency system divided wages from hard-currency consumption, distorted state accounting, and deepened inequality before its troubled 2021 reform.
For nearly three decades, Cuba operated with two national currencies: the Cuban peso, or CUP, and the Cuban convertible peso, or CUC. The system emerged during the Special Period after the Soviet Union collapsed and Cuba legalized possession of U.S. dollars in 1993. The CUC later circulated as a dollar substitute in tourism and hard-currency commerce, while most state salaries and pensions were paid in CUP. Official exchange arrangements varied by sector, creating a maze of prices that concealed costs and distorted economic performance.
The system divided Cubans according to access to hard currency. Tourism workers, private renters, artists, and families receiving remittances could obtain CUCs or foreign currency, while doctors, teachers, pensioners, and other state-paid workers often could not. A highly trained professional might earn less purchasing power than a worker receiving tips. State enterprises also benefited from unrealistic accounting rates that made inefficient operations appear viable. Inequality was therefore shaped not only by income, but by access to relatives abroad and privileged sectors.
On January 1, 2021, the government began the “Ordering Task,” eliminating the CUC and establishing the CUP as the sole national currency, initially at an official rate of 24 pesos per U.S. dollar. Salaries and pensions were raised, subsidies were reduced, and many prices increased. The reform was intended to expose inefficient enterprises and simplify accounting, but it occurred during the pandemic, falling tourism, shortages, sanctions, low production, and a severe shortage of foreign exchange.
Currency unification did not produce monetary stability. Prices surged, the peso lost value on the informal market, and stores selling goods through foreign-currency-linked accounts preserved a new form of monetary division. By late 2021, the informal dollar rate had already risen far above the official 24-to-one rate, eroding salaries and savings. Later partial dollarization and multiple effective exchange rates recreated many old inequalities. The reform removed the CUC, but not the deeper problems of low production, fiscal deficits, state control, and public mistrust.