Two Currencies? CUCs and CUPs
Cuba works in 2 currencies, the CUP (moneda nacional, or cuban peso) and the CUC (convertible peso). Locals receive their salaries predominantly in CUPs, and use this currency to buy day-to-day goods. CUCs are used by tourists, and are 25x the value of a CUP. Like most stuff in Cuba, there is a rationale behind this, which made sense at the time, and maybe now, not so much.
OK, so back in the 1900s, after Cuba won independence from the Spanish with the help of the US, the Cuban peso was pegged to the U.S. dollar, 1:1. Then in 1960, after the Cuban Revolution and with Castro in power, in light of everything else going on at the time – oooh, suspension of sugar trade, US embargo etc Cuba decided to peg their currency to the Soviet ruble instead. When the Soviet Union fell in 1991, the Cuban peso lost most of its value and dropped to around 125 pesos to US$1.
In 1993, the US dollar was made legal tender on the island to encourage hard currency to enter the Cuban economy. An offshoot of this was that it made it a lot easier for expats living in Miami and elsewhere to send money home to their families, something that a lot of families in Cuba (still) rely on each month.
So that lasted about a year and then in 1994 Cuba was accused by the United States of counterfeiting US dollars. Castro cracked it at that in this international game of tit for tat, and decided Cuba would no longer allow the US dollar on the island, and instead created the CUC – Cuban-only money fixed against the greenback 1:1.
Today if you bring US dollars to Cuba to exchange, you will be charged a flat 10% exchange rate, whilst other currencies such as Canadian dollars and Euros only attract a 3% exchange fee. I used an Australian issued Visa card in Cuba and got cash advances from bank ATMs with no issues at all. The machine will only spit out a maximum of 40 notes, so try to factor that into your money equation. Like in Mexico, smaller notes are best. No one has any change so if the ATM spits out $20s, head to the bank counter to get them changed into smaller denominations.
Cuba isn’t a particularly cheap country to travel in, certainly not when compared to places like Mexico. With the peso pegged to the US dollar it meant my money needed to go further as my hard saved dollars aren’t trading that high.
Cuba has a big of a problem with highly skilled people such as doctors and dentists dropping their professions in order to drive taxis. With 2 currencies in effect, and one 25x higher than the other, it makes sense to try to earn in that currency, right? And who has that currency to spend but tourists.. So it makes sense that people try to get a job that would allow them to interact with tourists and possibly receive tips in CUC to supplement the $20/month (or less depending on your contract) the government pays you.
Probably more than any other country I have travelled in, Cubans work for tips. Musicians will pass a hat around after their sets, and they always have a CD you can purchase. Local guides, waiters, and taxi drivers, in fact most Cubans you come into contact with as a traveller would look for a tip for a job well done. If travelling to Cuba, make sure you factor this into your budget. It’s easy to think “agh another tip!” as the musician’s hat comes towards your table, but for less than the cost of a coffee at home (which you buy without thinking of the price), you actually do make a big difference to someone and their family.
This post is part of a series on Cuba