Amazing how currency at such a poor country can be worth so much more than ours…. That point seems to puzzle a lot of people. As I explained in a previous thread: Basically, the convertible peso is a US dollar. The use of the US dollar and the introduction of the convertible peso was intended to provide Cuba with hard currency to purchase imported goods. From 1993 until 2004, Cuban currency was split between the Cuban peso and the U.S. dollar, in combination with the convertible peso. In 2004, the US dollar was withdrawn from circulation and fully replaced with convertible peso notes. You could think of the convertible peso as a unit of currency that is worth 25 Cuban pesos, which in turn are worth about 4 cents.Some countries use the US dollar as their currency, for example, El Salvador and Turks and Caicos Islands.In fact, any country can define their own currency in terms of another currency. There are some advantages and some disadvantages to this. For example, Canada chooses to have a "flexible exchange rate system." To quote from a page from the Bank of Canada:———————————————————————————–Because we have a target for inflation that aims to preserve the domestic value of the Canadian dollar, we cannot also have a target for its external value. So, there is no set (fixed) value for our currency in terms of any other currency. The exchange rate for the Canadian dollar against the U.S. dollar, and indeed against any other currency, floats and is determined by the demand for and supply of Canadian dollars in the foreign exchange market.———————————————————————————–Cuba just happens not to do it this way. They define their currency in terms of a US dollar, and internal prices are a function of that definition. Hope that helps.
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Amazing how currency at such a poor country can be worth so much more than ours…. That point seems to puzzle a lot of people. As I explained in a previous thread: ![]("http://images.yuku.com/image/png/428261b470cebc3ac127b86d3abad8f04fb0cf43_t.JPG")
Basically, the convertible peso is a US dollar. The use of the US dollar and the introduction of the convertible peso was intended to provide Cuba with hard currency to purchase imported goods. From 1993 until 2004, Cuban currency was split between the Cuban peso and the U.S. dollar, in combination with the convertible peso. In 2004, the US dollar was withdrawn from circulation and fully replaced with convertible peso notes. You could think of the convertible peso as a unit of currency that is worth 25 Cuban pesos, which in turn are worth about 4 cents.Some countries use the US dollar as their currency, for example, El Salvador and Turks and Caicos Islands.In fact, any country can define their own currency in terms of another currency. There are some advantages and some disadvantages to this. For example, Canada chooses to have a "flexible exchange rate system." To quote from a page from the Bank of Canada:———————————————————————————–Because we have a target for inflation that aims to preserve the domestic value of the Canadian dollar, we cannot also have a target for its external value. So, there is no set (fixed) value for our currency in terms of any other currency. The exchange rate for the Canadian dollar against the U.S. dollar, and indeed against any other currency, floats and is determined by the demand for and supply of Canadian dollars in the foreign exchange market.———————————————————————————–Cuba just happens not to do it this way. They define their currency in terms of a US dollar, and internal prices are a function of that definition. Hope that helps.