Relenting On Car Sales, Cuba Turns Clunkers Into Gold

Relenting On Car Sales, Cuba Turns Clunkers Into Gold
Government loosens vehicle marketplace rules.
BY VICTORIA BURNETT : NOVEMBER 5, 2011


HAVANA — Until a few weeks ago, Erik Gonzalez's decrepit car did little
more than devour his tiny income. He spent hundreds of dollars fixing
the car, a 30-year-old Moskvich that his grandfather passed down to him
in 2000. Even when it worked, Gonzalez could rarely afford to buy gas.

Then, overnight, the Soviet-made rattletrap became his nest egg.

Gonzalez put the car up for sale last month when the government
published rules allowing Cubans to buy and sell used vehicles freely for
the first time in half a century.

The axle might be wonky, the carburetor shot, the battery on its last
legs and the headlights inoperable, but he believes his royal-blue
Moskvich will fetch at least $5,500, a small killing for a waiter whose
state salary — before tips and extras — is just $15 a month.

"This car has been bleeding me dry," Gonzalez said. "Now it's an asset
that I can sell, and do something else with the money."

Like the new law permitting home sales going into effect this week, the
changes headline President Raul Castro's efforts to remodel Cuba's
hobbled economy and spur the private sector. After decades in which
ownership of such big-ticket items was frozen, the efforts promise to
flush money into the market at a time when Cuban officials are trying to
stimulate private enterprise and move hundreds of thousands of workers
off the public payroll.

"The state has no business getting involved in a matter between two
individuals," Castro told the National Assembly last December,
criticizing complicated regulations and "irrational prohibitions" that
he said bred corruption.

"If I have a little car," he added, "I have the right to sell it to
whomever I want."

But like several of Castro's other changes, the new law created a pocket
of economic liberty in a market that remains tightly controlled. Cubans
can purchase and own more than one used vehicle, and they will no longer
lose their car if they emigrate.

However, the right to buy a new car is still limited to a narrow group
of Cubans who earn some foreign currency, including doctors, artists,
musicians, members of airline flight crews and the handful of Cubans who
work at the U.S. naval base at Guantanamo Bay.

"There's no logic to these rules," said Leopoldo, a taxi driver who
works the road between Havana and Guira de Melena, about 20 miles away,
in a shiny 1985 Tatra. He asked that his full name not be used because
he feared angering the authorities.

"But there's no logic to anything in this country," Leopoldo added.
"They have kept so many restrictions in place for so many years, you
wouldn't expect them to lift them all in one go."

Still, the new rules have created a buzz on an island where owning a car
is a rare privilege and the number of vehicles per capita is among the
lowest in the hemisphere.

Emilio Morales, president of the Miami-based Havana Consulting Group,
said the new rules — like earlier decisions to let Cubans own cellphones
and computers or work in the private sector — simply legalized what many
Cubans were already doing illicitly and would neither increase Cuba's
antiquated stock of vehicles nor alleviate the country's crushing
transportation problem. The move was intended to placate people, not
stimulate the economy, Morales said.

"This is one of their political pressure valves," he said.

While Morales, a senior executive at the huge Cuban state-owned company
Cimex until 2006, acknowledged that the government did not yet have the
infrastructure to organize a full-scale car market, he argued that it
was most likely also reluctant to unsettle a longstanding system of
privilege that rewarded workers in certain sectors.

Despite decades of communist prohibitions, the capitalist instincts of
those playing the car market seem to be thriving.

The state charges $28,000 for a new Hyundai Accent. But a Cuban lucky
enough to get a permit to buy one can then resell it for about $10,000
more on the used-car market, according to one broker. The permit alone
can sell on the black market for $4,000 to $10,000, according to car
owners, mechanics and brokers.

Source: "Relenting On Car Sales, Cuba Turns Clunkers Into Gold - San
Antonio Express-News" -
http://www.mysanantonio.com/news/article/Relenting-On-Car-Sales-Cuba-Turns-Clunkers-Into-2254153.php