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HAVANA, Cuba - Cubans flocking to Havana auto dealers now that anybody there can buy an imported vehicle after decades of government restrictions found prices light years beyond all but the most well-heeled islanders.
A new Kia Rio hatchback that starts at $13 600 in the US sells for $42 000; a fresh-off-the-lot Peugeot 508 family car, the most luxurious of which lists for the equivalent of about $53 000 in the UK, will cost a Cuban $262 000.
Multiply by 10 for the equivalent in South African rands (Jan 2014).
STATE MARK-UPS
Gilbert Losada, a 28-year-old musical director, said: "Between all my family here in Cuba and over in Miami, we couldn't come up with that kind of money. We're going to wait and see if they lower the prices - we're really disappointed."
Cuba's Communist government traditionally puts huge mark-ups on retail goods and services paid for with hard currency, a policy that amounts to a tax on people who can afford such goods. The practice applies to everything from dried pasta through household appliances to Internet access.
Philip Peters, a long-time Cuba analyst and president of the Virginia-based Cuba Research Centre in the US, said the astronomical prices would likely mean fewer sales and the state leaving money on the table.
"There's a lot more money to be made at lower price points," Peters said. "It's a short-sighted tax-man's mentality. Paradoxically, they mark it up so much that they're not going to make any money - but that's the mentality."
NO PERMIT - BUT NO SALES
Havana legalised the sale of used cars by private individuals in 2011 but long-standing rules remained in place requiring Cubans to obtain a Transportation Ministry permit to buy a new or used car from a state-run dealer – communist, remember? Permission took months or years, resulting in a black market in which car buyers would often quickly flip them for a big profit.
The new law eliminates the need for a permit but does not allow Cubans to import automobiles directly. The government retains its monopoly on that and it alone decides a vehicle's market value. Some exceptions will still exist for diplomatic missions and foreign entities to import vehicles.
The Ferrari-like prices for even a small hatchback are a signal that automotive scarcity and high demand will likely continue to reign in Cuba, famous for the 1950’s American cars that still rumble through the streets long after they became museum pieces elsewhere.
Because replacing a car is so difficult those lucky enough to own a finned Detroit classic or a boxy Russian import go to great lengths to keep them on the road, swopping makeshift parts and resorting to creative welding.
'WHO CAN BUY AT THESE PRICES?'
There were a few relatively affordable options on one dealer’s forecourt. A 1997 BMW (odo reading unknown) was the cheapest and the first to sell soon after the dealer opened at 8am. It went for $14 457 to a young man who declined to talk to reporters but even many of the used cars had eye-popping asking prices – how about a 2009 Hyundai minivan for $110 000.
"Let's see if a revolutionary worker who lives honourably on his salary can come and buy a car at these prices," said Guillermo Flores, a 27-year-old computer engineer. "This is a joke on the people."
Until now permit holders typically bought used vehicles, often former rentals with high odometer readings that went for $5000-$8000. New imports generally sold at about a 100% mark-up; there was no explanation for the sudden across-the-board spike in prices.
Most Cubans still earn government salaries that average around $20 a month, though some make significantly more as musicians, artists, employees of foreign companies and diplomats and doctors sent on foreign missions.
Many others get financial support from relatives overseas; some who had managed to scrape together some savings said they we're now priced out of the market.
AGHAST AND ANGRY
Alfredo Boue, a 25-year-old cook, said: "With these prices... those who will be able to buy are the privileged, or the bandits. I think the bandits are not the ones (stealing) in the streets, but the people who set these prices."
People were aghast and angry as they perused a list of prices posted by a dealer. Some said it felt like something out of science fiction. One woman asked sarcastically if there were any bicycles, surely all she would be able to afford.
Priority was given to people who had obtained a permit under the old system but Antonio Diaz, a 66-year-old retiree who came expecting to pay $5000, left empty-handed and disgusted.
"What am I going to do with this letter?" he said, brandishing his now useless permit. "I can't buy anything. I don't have the money. That was supposed to be the car for my old age, which I was going to buy after a lifetime of work.
"I'll have to resign myself to living without a car.”
A new Kia Rio hatchback that starts at $13 600 in the US sells for $42 000; a fresh-off-the-lot Peugeot 508 family car, the most luxurious of which lists for the equivalent of about $53 000 in the UK, will cost a Cuban $262 000.
Multiply by 10 for the equivalent in South African rands (Jan 2014).
STATE MARK-UPS
Gilbert Losada, a 28-year-old musical director, said: "Between all my family here in Cuba and over in Miami, we couldn't come up with that kind of money. We're going to wait and see if they lower the prices - we're really disappointed."
Cuba's Communist government traditionally puts huge mark-ups on retail goods and services paid for with hard currency, a policy that amounts to a tax on people who can afford such goods. The practice applies to everything from dried pasta through household appliances to Internet access.
Philip Peters, a long-time Cuba analyst and president of the Virginia-based Cuba Research Centre in the US, said the astronomical prices would likely mean fewer sales and the state leaving money on the table.
"There's a lot more money to be made at lower price points," Peters said. "It's a short-sighted tax-man's mentality. Paradoxically, they mark it up so much that they're not going to make any money - but that's the mentality."
NO PERMIT - BUT NO SALES
Havana legalised the sale of used cars by private individuals in 2011 but long-standing rules remained in place requiring Cubans to obtain a Transportation Ministry permit to buy a new or used car from a state-run dealer – communist, remember? Permission took months or years, resulting in a black market in which car buyers would often quickly flip them for a big profit.
The new law eliminates the need for a permit but does not allow Cubans to import automobiles directly. The government retains its monopoly on that and it alone decides a vehicle's market value. Some exceptions will still exist for diplomatic missions and foreign entities to import vehicles.
The Ferrari-like prices for even a small hatchback are a signal that automotive scarcity and high demand will likely continue to reign in Cuba, famous for the 1950’s American cars that still rumble through the streets long after they became museum pieces elsewhere.
Because replacing a car is so difficult those lucky enough to own a finned Detroit classic or a boxy Russian import go to great lengths to keep them on the road, swopping makeshift parts and resorting to creative welding.
'WHO CAN BUY AT THESE PRICES?'
There were a few relatively affordable options on one dealer’s forecourt. A 1997 BMW (odo reading unknown) was the cheapest and the first to sell soon after the dealer opened at 8am. It went for $14 457 to a young man who declined to talk to reporters but even many of the used cars had eye-popping asking prices – how about a 2009 Hyundai minivan for $110 000.
"Let's see if a revolutionary worker who lives honourably on his salary can come and buy a car at these prices," said Guillermo Flores, a 27-year-old computer engineer. "This is a joke on the people."
Until now permit holders typically bought used vehicles, often former rentals with high odometer readings that went for $5000-$8000. New imports generally sold at about a 100% mark-up; there was no explanation for the sudden across-the-board spike in prices.
Most Cubans still earn government salaries that average around $20 a month, though some make significantly more as musicians, artists, employees of foreign companies and diplomats and doctors sent on foreign missions.
Many others get financial support from relatives overseas; some who had managed to scrape together some savings said they we're now priced out of the market.
AGHAST AND ANGRY
Alfredo Boue, a 25-year-old cook, said: "With these prices... those who will be able to buy are the privileged, or the bandits. I think the bandits are not the ones (stealing) in the streets, but the people who set these prices."
People were aghast and angry as they perused a list of prices posted by a dealer. Some said it felt like something out of science fiction. One woman asked sarcastically if there were any bicycles, surely all she would be able to afford.
Priority was given to people who had obtained a permit under the old system but Antonio Diaz, a 66-year-old retiree who came expecting to pay $5000, left empty-handed and disgusted.
"What am I going to do with this letter?" he said, brandishing his now useless permit. "I can't buy anything. I don't have the money. That was supposed to be the car for my old age, which I was going to buy after a lifetime of work.
"I'll have to resign myself to living without a car.”
