MercoPress. South Atlantic News Agency

Cuba bans US dollar transactions.

Cuban President Fidel Castro announced Monday that he was stopping circulation of the dollar as legal tender as of Nov. 8 and will substitute it with a convertible Cuban peso valid only on the island.

"As of November 8, the convertible peso will be in circulation in substitution of the U.S. dollar within the country," said a Castro communique read Monday on Cuban television.

"The population can keep in its possession, without any restrictions, U.S. dollars or any other exchangeable currency in any amount," Castro said.

Nonetheless, from Nov. 8 the dollar "will not be accepted in stores - only Cuban pesos will be accepted," he said.

Castro ended sanctions on the use of dollars on the island in 1993 following the crisis brought on by the demise of the Soviet bloc.

Cubans can still keep dollar accounts in banks without penalty, but will not be able to use the dollar for commercial transactions on the island.

Until Nov. 8, the dollar can be exchanged without penalty for the convertible peso, whose value will be pegged to the dollar, but thereafter any exchange transactions will be subject to a 10 percent tax in compensation "for the costs and risks that handling dollars generates for the national economy." The measure, he said, is a response to tougher U.S. policies toward the island and pressure brought to bear on foreign banks to stop accepting Cuban deposits in dollars earned on the island.

He spoke about a multimillion dollar fine the United States slapped on Swiss banks for allegedly laundering Cuban money, and also about a recent measure by the Bush administration to cut the amount of remittances Cuban-Americans can send to the island.

As part of that policy, the U.S. assistant secretary of state for Western Hemisphere affairs announced "the creation of a group to locate Cuban assets ... to interfere with and detain the flow of currencies to and from Cuba," Castro said.

This "constitutes a new aggression without precedent in the history of international financial relations," he added.

In substituting the dollar for the peso, "we have sought formulas to keep anyone from being hurt by this measure, because we are allowing sufficient time so that there is no need to pay an exchange tax," the Cuban leader said.

The new regulation affects not only Cubans, but also foreigners residing on the island such as diplomats and employees of foreign corporations and those in joint ventures with the government.

In the communique Castro gave assurances that contracts between Cuban and foreign entities will not be affected.

There will be no tax on other foreign currencies accepted in the country, including euros, Canadian dollars and pounds sterling.