Wednesday, November 9, 2011

Time to sell

The New York Times looks at the new market for cars that is emerging since last month’s decrees, and finds a guy who is happy that he can unload his Moskovich and do something else with the money.

Purchase and sale of cars made before 1959 was already legal. The new action allows Cubans to sell cars made since then. These cars, Soviet-era Ladas and more recent Korean and other makes, are generally in the hands of Cubans who got the privilege of acquiring a car due to their position in government, their service in military or medical missions abroad, or other factors.

Purchase of new cars is opened up, but with odd restrictions. Certain state employees who earn hard currency qualify; so do artists and medical personnel who served on missions abroad, and a very select few who work for The Empire – Cuban workers and retirees at the Guantanamo naval base. The list (and the entire set of decrees) is at page 340, Chapter II, right-hand column here (pdf).

Excluded are others such as entrepreneurs, farmers, and foreign company employees, some of whose earnings could well permit them to buy a new car. Not to mention an average Cuban who receives money from a relative abroad. In this new policy, the intention is clearly not to attract as much capital as possible from abroad. People with money in all these categories will have to settle for the used car market where, as the Times notes, prices are through the roof.


Anonymous said...

Even though Raul Castro has expressed the need to move away from the old mentality and biases of the past, new legislation is still riddled with these principals. It's understandable that they don't want people earning money in the black market using illicit funds to buy cars, but if you can demonstrate wages from a foreign company or funds received from abroad why shouldn't you be able to buy a car?

With the level of transportation problems Cuba currently has, the State would still rather sacrifice progress and efficiency than let too many people display signs of wealth greater than their neighbors.

The State has always shot itself in the foot by spending more resources to prevent people from having (or displaying) higher levels of wealth than letting the economy grow.

Anonymous said...

The remaining restrictions for the purchase of a new car can be also seen as an extra incentive to those that are not restricted. I have heard about people who work abroad in a project of the Cuban Government and plans to sell his right to purchase a new car... for making enough money to buy a sorely needed house.


Anonymous said...

That is a good example how the prohibitions actually cause an increase in unwanted activities that they are trying to prevent. i.e. a black market with under the table payments between people with lots of money and people holding the rights to buy cars. It's economics 101 that restrictions in the market place usually cause greater inefficiencies than the benefits in which they are intended.