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Cuba, land of the $250,000 family sedan



How else to explain 2013 Peugeot sedans priced at more than $250,000 — seven or eight times their retail value in Europe? Or used vehicles like a 2010 Volkswagen Passat offered at $70,000? Even Chinese-made Geelys — some of the world’s cheapest cars — are listed at more than $30,000, somehow increasing in value after absorbing years of abuse as tourist rentals on Cuba’s pothole-rotted roads.


“A doctor! Someone call a doctor!” shouted one man, feigning a heart attack, as he read the list of used vehicle prices aloud to rounds of laughter at a government car lot in Havana’s Miramar neighborhood.

Because the communist government often neglects to explain the reasoning behind some of its more extreme measures, there’s been little else for Cubans to do but joke in public as they seethe in private.

Only the reality is that the Cuban officials managing the island’s state-run economy may have a very good reason for listing brand-new Peugeots at Bentley prices: They can’t actually afford to sell them.


When the Cuban government imports new cars, for instance, it must pay for them in hard currency — typically US dollars or euros. But when it sells a new car on the retail market, it receives payment in Cuban convertible pesos (CUC), a currency that has no foreign exchange value at all.


This is true of televisions, refrigerators and just about any other imported item, whose retail sales are monopolized by the Cuban government.

This wasn’t such a problem when the government allowed US dollars to circulate freely on the island between 1993 and 2004. But it’s a major liability now that the CUC is the only legal tender for such goods.

While the government must maintain a certain level of inventory at its stores in order to get Cubans and visitors to trade in hard currency for CUCs, it can’t afford to sell large volumes of imported items and constantly restock its supplies. That would drain the government’s scarce foreign reserves even further.


In other countries whose currencies have little or no exchange value on international markets, big-ticket import items like cars are often priced in US dollars or euros.

But since the communist government is the exclusive retailer and the sole banker on the island, there’s essentially only one pool of money to draw from.

If a would-be car buyer goes to a Cuban bank and trades in $250,000 in US dollars to get enough CUCs to buy a new Peugeot, that’s a great deal for the government.

But a more likely scenario is that the few Cubans who could pay sure prices pertain to the small class of business owners, artists and wealthy farmers who have stockpiled large amounts of Cuban currency and need somewhere to spend it.

According to Pavel Vidal, a Cuban economist and former monetary policy adviser at Cuba’s Central Bank, the reform process initiated by President Raul Castro will continue to expose some of the island’s most glaring “distortions.”

“These distortions originate from a closed economy that is monopolized by the state,” he said, “and dependent on state companies with very low productivity that survive by paying extremely low salaries and charging extremely high prices by taking advantage of their monopoly power.”


A tiny 2011 Kia Picanto? $43,000. A 2009 Hyundai Santa Fe SUV? $90,000.

For years, Cuba has been importing Korean Hyundais and Kias, or French Peugeots and Renaults, then turning a huge profit by renting them to tourists. The cars are always in high demand despite rental rates that are often double what they would be in the rest of the world. And by offering something tourists wanted, the rental cars have been key hard currency generators for the government.

Once the cars accumulate high miles and wear and tear, the government typically sold them to Cuban professionals at rates closer to the market value. But authorization to purchase such a vehicle was highly coveted and used as a reward for Cuban doctors, for instance, after completing years of service on a so-called international mission in Venezuela, Angola or one of the other countries where Cuba sends medical professionals.


Why the government would now price used vehicles at such exaggerated levels is beyond comprehension, said Cuban economist Juan Triana. “I can’t see the reasoning,” he said.

Others have surmised that the car prices are an early indicator of the government’s plans to devalue the CUC before its elimination this year in favor of the island’s other currency, the Cuban peso.


Employees at one state used car lot told the BBC Friday that six vehicles were sold on the first day, including one for $50,000.

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