12/29/13 - VOXXI - Cuba opens market for new cars but who's buying?
Cuba recently announced it will open unrestricted imports of brand new cars
for all residents in the island. The measure will rescind a domestic ban
that constrained trading in new vehicles since the 1950s for the majority
of the people in Cuba. Surely, there were always some exceptions.
The privilege required potential purchasers to prove that funding to pay
for imported vehicles had been obtained by legal means -for instance,
temporary work abroad.
So who can really afford a new car in the island and why is this measure
coming along at this time?
The official Cuban newspaper Granma announced the decision made by the
regime's Council of Ministers in an effort to slowly open to some ways of
The measure aims at ending the privilege of some government officials and
professionals who, through special permission from the ministry of
transport, were allowed to import newer cars for their personal use. This
practice increasingly created, according to the newspaper, opportunity for
"enrichment and speculation."
Cubans are getting the taste of it
Since the government of Raul Castro announced in 2010 that half a
million workers would be laid off from the state's payroll and opened the
door for private entrepreneurship, thousands of Cubans had started their
own small businesses.
The further liberalization of the private economic activity -there were a
few professions already allowed- was a continuation of former measures
opening the possibility for Cubans to work by themselves.
In 2008, Castro's government also distributed small pieces of state-held
land -from 33 to 99 acres each- to thousands of potential or established
owners or farm workers, who could hold them under 10-year renewable
contracts for private agricultural exploitation.
With the announcement of the new measures -and for the first time in almost
50 years-, Cubans were allowed to regain their entrepreneurial spirit in
private activities that included opening small carpentry and repair
workshops, food and entertainment establishments, and small farm kiosks to
sell their own produce at the curb of roads and major highways, among
Under the new laws, Cubans can also obtain a license to open their houses
to tourists who can save a good penny from staying at traditional hotels.
Most travelers might spend an average of $100 a night for a three to four
star hotel in Havana while they might find a spacious and clean room
with a family for $25 to $50 in the city, according to travel sites.
Travelers from around the world go to Cuba for vacationing as well as
health tourism -an activity that generates over $40 million a year.
Canadians seem to have preference to travel to the island in search of warm
waters and sunny beaches, but Europeans as well as Americans -despite the
U.S. travel ban- arrive every year traveling via Canada or Mexico.
These new commercial and agricultural activities have generated some
residual income for Cubans with a vocation to be independent contractors,
and now have little savings with which they can afford some luxuries. Would
those luxuries be cars? And would American car manufacturers seize the
Cubans are hopeful that the ability to purchase a new vehicle from the
government, although strictly regulated, will allow them to improve their
opportunities for economic independence and liberate them from the black
market that had placed used cars at unattainable prices.
United States lifting the embargo for good
In 2011, the Obama administration partially lifted the travel ban allowing
limited visits for religious and academic groups. It also allowed U.S.
Cuban residents to send up to $2000 yearly to their relatives and friends
in the island to start new businesses.
The United States has been the largest provider of food and agricultural
products to Cuba despite the embargo, according to Forbes. Since 2001,
when some trade was restored, the U.S. has grown to export around $2.5
billion to the island yearly.
However, this relationship has deteriorated recently as Cuba searches for
new partners. They have maintained trade activity with Venezuela, Ecuador
and Canada in the Americas. Mexico has recently patched up commercial
relations with the socialist country.
Other LATAM countries have formed special trading relationships with Cuba
-for instance, Cuban doctors have been sent to practice and teach
socialized medicine to both Brazil and Guatemala-, while Spain and the
Netherlands continue to exchange products with the island. In Asia,
Vietnam, Japan and China also have strong trade agreements with Cuba.
For sure, those countries in active trading with the Caribbean republic
that are in the car manufacturing business will be better positioned to
jump at the opportunity of introducing new vehicles -but the announcement
already caught the attention of The Detroit News.
"The cost of the embargo to the United States is high in both dollar and
moral terms, but it is higher for the Cuban people, who are cut off from
the supposed champion of liberty in their hemisphere because of an
antiquated Cold War dispute," say Forbes experts.
Politicians, however, are divided on the matter. While Libertarian Ron Paul
had advocated against the embargo, Democrat Robert Menendez has sided with
Tea Party Ted Cruz tenaciously sustaining that lifting would only reward
the Cuban regime.
Visible links 1. http://www.granma.cu/ingles/ 2.
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