In efforts to dollarize the retail sector and its economy, Cuba’s government has begun selling used cars in tradable currencies for the first time. About a hundred prospective buyers showed interest in the sales held at a Havana outlet on February 25.
Only 1 in 20 Cubans own a car due to the high cost of purchasing a vehicle, especially in the Carribean nation where the average salary is below US$100 per month.
The sales will begin in the capital Havana and will later extend to other territories, according to the country’s largest commercial company, the Cuban Export-Import Corporation’s (CIMEX) first vice president, Iset Vazquez.
Liquidity crisis outlined
A liquidity crisis has struck the Cuban economy after its ally Venezuela’s economic collapse. Previously, Cuba had relative economic stability as a result of importing low-cost oil from Venezuela and receiving medical services from Brazil.
The Cuban government is attempting to convert portions of its retail sector to operate in tradable currencies other than the Cuban peso. Local stores will continue to sell food and basic household items in convertible pesos.
Tradable currencies have previously been considered illegal in purchase tenders in Cuba since 2004. According to economists, the authorization of businesses in retail markets to trade in tradable currencies such as the United States dollar will hasten the dollarization of the economy.
“Authorizing operations in foreign currency at some retail markets and industries is like opening up a Pandora’s box and paving the way for a speedy redollarization of the rest of the economy,” said economist Pavel Vidal.
US embargo on Cuba
The United States had long imposed a commercial, economic and financial embargo on Cuba, but Cuba has recently been facing a stricter embargo after President Donald Trump took office.
Trump reportedly waived the suspension of the so-called Helms-Burton Act on Cuba and has made it harder for foreign entrepreneurs to do business with the Caribbean island for fear of potentially being denied US visas.
Car sales legalized
In 2014, the Cuban government first legalized the sale and purchase of cars manufactured after the 1959 revolution. However, the purchases could only be made in convertible Cuban pesos, which is officially valued at US$1 – though worthless outside the country. Cuba’s new and used cars were previously sold for more than four times the factory price.
The Cuban government is now offering a 10% discount on the current market price of cars – old and new.