Cuban cars

If you've been with us on a mission to Cuba in the last couple of years, you'll have noticed the changes that are happening on the streets of Havana ... new cars are coming out, and there are signs of change. But the reality is complex and layered. The Economist took a look at some of the trends the other day - I thought this was a really well-written and thoughtful article ...

Seat belt, mirrors, brake

The road to capitalism does not run smooth

Jan 11th 2014 | Havana | From the print edition

WHEN the Cuban government said in December that it intended to let the population buy modern cars without requiring permits, many suspected there would be a catch. They were right.

The cars, which can only be bought through state-owned suppliers, cost a fortune. A 2013 Peugeot 508, marketed in Europe as an affordable saloon car costing around $30,000, has a price tag of more than a quarter of a million dollars at a rundown showroom in Havana. A Chinese Geely, with more than 80,000 kilometres (50,000 miles) on the clock, is on sale for around $30,000. The average salary in Cuba is less than $20 a month. “What do they think they are selling? Aeroplanes?” jokes Erik, a handyman, as he looks at the price-list. “They don’t want to sell any cars. It’s all a show,” agrees Ernesto, a mechanic.

The prices certainly seem designed to deter purchasers. Some even wondered whether there had been a clerical error and prices had been listed in Cuban pesos, Cuba’s local currency, which is worth 24 times less than the dollar-pegged convertible peso (CUC). Another theory is that the high prices are a preview of a widely predicted devaluation of the CUC as part of the government’s commitment to unify the island’s two currencies.

A further explanation may lie in the immediate effect of the reform: the elimination of a thriving black-market trade in the permits to buy new cars. For decades these have been awarded to valued individuals such as exceptional party workers, sports stars and artists. But they had more recently become a currency themselves, swapping hands for around $12,000 each. The government says that those with permits will be first in line to buy new cars—a dubious benefit given that many have quadrupled in price since the reform.

“There could hardly be a stronger signal that this remains a controlled economy,” says one Havana-based diplomat. Since taking over as president from his brother Fidel in 2008, Raúl Castro has taken some steps to reduce the state’s economic role. He has allowed small-scale self-employment, permitted Cubans to buy houses and given private farmers more autonomy to grow and sell their produce. But he has always insisted such reforms will be “without haste”. Now there are signs that he is deliberately slowing things down.

On January 1st, the 55th anniversary of the revolution, Mr Castro gave a speech in Santiago, Cuba’s second-largest city. He made no mention of further reform, instead castigating unnamed foreign groups for attempting to introduce “neoliberal” and “neocolonial” thinking.

That day the government also enacted a law banning the resale of clothes imported from abroad. The trade of “tailor and dressmaker” is one of around 200 private occupations that were officially permitted in 2010. Since then thousands of entrepreneurs have stretched its definition, setting up small clothing stores stocked with brands from Europe and the United States.

The clothes are often imported in suitcases by Cuban travellers taking advantage of another reform, which eliminated the requirement for a permit to travel. Eva, a 27-year-old from Havana, says that since 2011 she has been flying to Madrid every two months to stock up her fashion store in the back of her apartment. Now she says she will close her business. “Every time we start to breathe a little, we know the government’s grip will soon tighten.”

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