HAVANA, Cuba — Cuba is well known for its leader’s insular policies and the long U.S. embargo against it. Raul Castro’s recent ascension to power, due to his brother Fidel’s poor health, has created some buzz about reforms and a possible opening of the country’s economy.
A few changes have been initiated to mixed reviews. Travel restrictions were significantly eased and small businesses are reportedly being allowed. The latest reform, however, is causing some backlash.
The newest item in the line of recently accepted practices in Cuba is the purchase of foreign cars.
Between 1959 and 2011, cars could only be bought and sold if they were built before the 1959 Revolution. After 2011, the restrictions remained, only regarding new car sales. Individuals were required to obtain a government-issued permit to purchase a new car. The permits were difficult for anyone to obtain, though a few athletes, doctors and artists who had worked overseas were allowed them.
Now, Raul Castro has expanded new car sales to the public, but with a catch: the state has a monopoly on sales and has marked-up prices exponentially — not to mention the tax on new cars at 100%.
Peugeot, the French car brand, is sold in the United Kingdom for the equivalent of about $29,000. With the Cuban authorities’ mark-up, the same Peugeot 508 is listed at $262,000, an increase of nine times. The price hike by itself is an understandable point of contention.
Yet the act is even more problematic when it is taken into account that the average state salary is $20 per month.
According to UNICEF and the World Bank, Cuba’s gross national income is about $5,500. By either of these wage standards, the Peugeot 508 is unattainable. Using the GNI, an individual would have to save their entire income for over 47 years in order to pay $262,000. At the average state salary according to the BBC, it would take almost 1,100 years.
What seems to also be important is the fact that in 2000, over three quarters of the entire population was still employed by the state. Though private ventures have certainly gained momentum in the recent years, the largest employment sector continues to be the state.
Authorities argue that one reason behind the cost jump involves the gathered income going towards enhancing the public transportation system. Currently, poor planning, financial woes and, basically, bad judgment bog down the system. For example, the Ministry of Transportation purchases its buses from China, but, due to a bizarre administrative decision, the buses must be outfitted with U.S. engines. Since there is an embargo in place, the engines must be shipped to a third country before being reshipped to Cuba, a process that sends costs through the roof.
Even used cars typically cost a small fortune.
Fernando Ravsberg wrote in the Havana Times that while a 10-year old French car might sell in the U.S. for $3,000 it would fetch about $18,000 in Cuba. To illustrate this, soon after the reform was authorized, an employee at a used shop sold a used car for $50,000.
Both the government and environmental advocates are encouraging the use of bicycles, but this push is complicated by the fact that the government removed the bicycle lanes in Havana.
Cuba, however, is not a stereotypical economically poor country.
The island boasts 100% literacy rates, some of the best healthcare in the world and a respectable standard of living. However, access to resources and developments is highly limited by both the U.S. embargo and Cuban government restrictions. Milk costs about $3.50 and bread about $1.70, similar prices to the U.S. but a significantly higher percentage of income, given the average salary, is $5,500. Furthermore, Internet access is still tightly controlled and costs about $70 per month. The inflated prices of both new and used cars in the country reflect the struggle to adapt to the modern economic model that Cuba has been isolated from for so long.
– Katey Baker-Smith