Reports from Havana (Cuba) say that the Caribbean island's new convertible currency is being dubbed the "Chavito” in honor of Venezuela's President Hugo Chavez Frias.

Officially it is known as the 'Cuban Convertible Peso' or CUC but “chavitos” have become effective as legal tender throughout Cuba from Monday replacing the US$ which had been unofficially allowed to function as a parallel currency since 1993.

In the move, which is seen as a direct snub to George W. Bush's failing unilateral attempts to isolate Cuba, the Cuban Central Bank says that it is underlining Cuban sovereignty and gaining control over circulation of its national money and liquidity.

Central Bank vice president Rene Lazo says that the US dollar was hampering assessment and regulation of liquidity ... "the bank can now play a greater role in maintaining an appropriate balance between currency in circulation and the supply of goods and services, an essential ingredient to ensure that the Cuban currency holds its value."

The new Cuban Convertible Peso or Chavitos is equivalent in value to one US$ (the regular Cuban peso is currently worth 26 to the US$) ... "from the point of view of the country's sovereignty, this step has far-reaching implications," says Lazo, "it is one of the Revolution's most complex financial transactions."

• In 1993 Havana accepted the private possession and circulation of US dollars next to the Cuban peso, which is currently worth 26 to the dollar at official exchange houses.

The Chavito is now the only money accepted in commercial establishments in Cuba that operate with foreign currencies including special stores, hotels, restaurants and taxis although a 10% tax on US$/CUC exchange transactions will now take effect on November 14 and there is already strong demand for the new currency before the tax -- which only applies to USA currency -- takes full effect on November 15.  It also applies to cash transfers from USA-based Cubans who will have to send funds in other currencies -- Euros, Canadian $, UKŁ etc -- or punge out the 10% surcharge.

Unofficial estimates are that exile Cubans remit between US$800 million and $1 billion a year while Cuba's thriving tourism industry brings in about $2 billion a year

Cuban exchange houses will now only accept Euros, Swiss francs, UKŁ and Canadian $ which are exempt from the 10% fee while the Central Bank estimates that more than 700,000 Cubans have opened new Chavito accounts or exchanged their hot US$ for Cuban pesos with less than a week to go before the US$ becomes illegal tender.

Entrance to the Paraguan                                  Photography: Santiago Padilla