Cuban hopes dashed as new and used cars go on sale

By Marc Frank

HAVANA (Reuters) - Cubans awoke on Friday for the first time in half a century with the right to buy new and used vehicles from the state without special permission, but markups of 400 percent or more quickly dashed most people's expectations.

At the state-run Peugeot dealership in Havana on Friday morning, where prices ranged from $91,000 for a 2013 model 206 to $262,000 for a 508, people walked away shaking their heads in disgust.

"I earn 600 Cuban pesos per month (approximately $30). That means in my whole life I can't buy one of these. I am going to die before I can buy a new car," Roberto Gonzales, a state driver, said, walking back to his 1950s Plymouth.

The average monthly wage in Cuba, where four out of five of the 5 million-strong labor force work for the state, is $20.

A European diplomat quipped, "I am slightly flabbergasted. With these prices, the old-time U.S. cars will not disappear fast from the streets."

Under a reform two years ago, Cubans can now buy and sell used cars from each other, but until Friday had to request authorization from the government to purchase a new vehicle or second-hand one, usually a rental car, from state retailers.

Before September 2011, only automobiles that were in Cuba before the 1959 revolution could be freely bought and sold, which is why there are so many 1950s or older cars, most of them American-made, rumbling through Cuban streets.

Along with Cuba's famous rolling museum of vintage U.S. cars, there are also many Soviet-made cars, dating from the era when the Soviet Union was the island's biggest ally and benefactor.

Newer models are largely in government hands and were sold used before Friday at a relatively low price to select individuals, for example, Cuban diplomats, doctors and teachers who served abroad.

Across town from the Peugeot dealership, where more than a hundred used rent-a-cars went on sale for prices ranging as a rule from $25,000 on up, disgust turned to anger on Friday.

"These prices show a lack of respect for all Cubans. What is here are wrecks. I now have no hope of getting a car for my family," artist Cesar Perez said, looking at a 2005 Renault on sale for the equivalent of $25,000 and available outside the country on the Internet for $3,000.

A teacher looked at the price list and yelled "Are there any bicycles?" as she stomped away without giving her name.

STATE MONOPOLY

The Cuban state maintains a monopoly on the retail sale of cars. There are 650,000 autos on the island, half of them owned by the government.

The decades-old ban on importing cars and need for state permission to purchase from the state has left nine out of 10 Cuban households without a car or other vehicle such as a motorcycle and dependent on the decrepit public transportation system.

The cost of new and used cars sold by Cubans to each other is similar to those that went on sale on Friday because of limited availability.

The government said all profits would go into a special fund to upgrade public transportation.

Diplomats, foreign businesses and select Cubans will still need government permission to import a new or used car without the huge markup.

The liberalizing of car sales was one of more than 300 reforms put forth by President Raul Castro, who took over for his ailing brother Fidel in 2008, and approved in 2011 at a congress of the Communist Party, Cuba's only legal political party.

The proposed changes put a greater emphasis on private initiative, which had been largely stifled under Cuba's Soviet-style system, and less government control over the sale and purchase of personal property such as homes and cars.

"These prices will clearly be outside the purchasing capability of the vast majority of Cubans, even with the support from relatives abroad. In essence, they represent a luxury tax imposed by the government on the nouveau riches of Cuba," John Kirk, one of Canada's leading academic experts on Latin America and author of a number of books on Cuba, said by email.

There are now tens of thousands of small private businesses in Cuba, and thousands of farm, construction, transportation and other types of cooperatives, all of which in theory should benefit from the opening up of car sales.

Bert Hoffmann, a Cuba expert at the German Institute of Global and Area Studies in Hamburg said in an email that many businesses needed vehicles, but such high prices would make it difficult for most and cut into other business activity, stalling their overall development.

(Additional reporting by Nelson Acosta; Editing by Jonathan Oatis)

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