Will Cuba Be Allowed to Use Dollars Again?

The Cuba dollar tax reveals the complexity of the U.S. trade embargo

ByABC News
May 15, 2009, 9:11 AM

HAVANA, Cuba, May 18, 2009 — -- If you stand lookout from the housing projects along the back highway to Havana's Jose Marti International Airport, you will eventually witness a motorcade of Transval (Cuba's Brinks) armored vehicles speeding toward the airport, surrounded by the flashing lights of police cars and motorcycle cops.

Cuba's government is moving cash, mainly U.S. dollars, to somewhere on the planet where a bank has agreed to process the bills for a few percentage points above normal exchange rates.

Americans, unlike tourists from other countries, cannot use credit cards drawn from U.S. banks in Cuba. Americans must use cash, because Cuban banks are prohibited from any banking relations with their U.S. counterparts. The catch 22: Under the U.S. trade embargo, it is also illegal for Cuba to use dollars or for anyone anywhere to do business with the country in U.S. currency.

"The U.S. embargo prohibits Cuba from using dollars for any reason. Therefore, remittances come here, American travelers come here, it doesn't matter who it is with dollars, they change them into Cuban money," said Kirby Jones, president of the Washington-based Alamar Associates, which consults on doing business with Cuba and the embargo.

"Cuba can't use these dollars, they have to change the dollars somehow into other currencies, and that costs money."

The White House has expressed concern about a 10 percent tax on U.S. dollars entering Cuba ever since President Barack Obama last month lifted restrictions on Cuban-Americans visiting the island and sending funds to relatives. If legislation in Congress allowing all Americans to travel to Cuba becomes law, the dollar tax no doubt will become even more of an issue.

"They could reduce charges on remittances to match up with the policies that we have put in place to allow Cuban-American families to send remittances. It turns out that Cuba charges an awful lot, they take a lot off the top," Obama said at the close of the Summit of the Americas last month in Trinidad and Tobago.

"That would be an example of cooperation where both governments are working to help Cuban families and raise standards of living in Cuba," he said.