The Cuban economy is paradoxical and difficult to understand initially. There are essentially two economies in Cuba which run parallel to each other – Castro's "revolutionary" economy based on pesos and a newer economy based on dollars.
Can you imagine a situation in which you could only buy some things with American dollars but would have to acquire some a different currency to purchase other items?
Let's first take a look at the peso economy.
A table in a peso store, showing what is available.
Cuban workers are paid in pesos with the exception of some workers in export trades or tourism. A professor of history, for example, might earn 300 pesos a month which would correspond to a little less than $12. This figure is naturally absurdly low and prompts the question of how one can possibly live on such a ridiculous sum. Converting the currency to dollars is, however, somewhat deceptive because as we have read before, many goods and services are very heavily subsidized, that is to say, the state keeps the prices artificially low.
Certain foods are considerably less expensive compared to those in the United States . For example, beans and rice. As we have seen, rents are extremely low, as are utilities. An average electric bill might be between 5-7 pesos a month (20-28¢ U.S. ) and water is similar. The cost of public transportation is also extremely low - a bus ride might be as low as 20 centavos.
One peso (about 4 ¢ U.S. ) will buy you a few things on the peso economy - two or three bus rides, several newspapers, or a snack from a street vendor.
One negative aspect of shopping with pesos cubanos is the fact that there are frequent shortages of goods and there is rationing. The purpose of the rationing is to help keep prices low on basic foodstuffs so that one does not need a lot of money to get by in Cuba . Unfortunately the ration book does not allow one to buy such "luxury" items as beef or fish. Nor can you buy as much of a food as you want at the low subsidized price.
To give a few examples -
With the libreta (ration book) an individual is allotted 6 pounds of rice a month at the subsidized price of 25 centavos a pound (about 1¢ U.S.).
If one eats more than six pounds of rice a month, one can buy more rice "Venta libre" ("free sale" or without the ration book) for 3.50 pesos per pound or (14x more!) as seen in the picture.
With the libreta a family of three receives 18 eggs a month for 15 centavos each (less than 1¢ U.S. ). Without the ration book (venta libre) an egg costs 2 pesos each (over 10x more!)
One is allotted ½ pound of oil a month at 25 centavos (1¢ U.S. ). If you need more, you'll probably be out of luck unless you have dollars, in which case you can buy as much as you want at market prices in the dollar store.
A dairy store in Habana Vieja.
Certain foods can be bought for pesos but are not subsidized, e.g. a pound of pork can cost 20 pesos cubanos. When one earns only 200-300 pesos a month, this is obviously a sizeable part of one's income. One can buy milk with pesos (mostly available only in powdered form) only if you have a child or are sick. With dollars powered milk can be bought in whatever quantity one wants. It costs about US$ 5 for 1 kilogram. You can buy other foods only for dollars and some only illegally on the black market (such as steak or lobster). Consumer goods such as television sets are also paid for in dollars.
While one can survive minimally on the peso economy, the desire to supplement one's income with dollars is enormous.