Car prices in Cuba have repercussions for Latin America

Patricio Navia

Buenos Aires Herald, January 7, 2014


The biggest news coming out of Cuba on the 55th anniversary of the Revolution that brought Fidel Castro to power was the exorbitant prices of automobiles. People elsewhere in Latin America have already confirmed that market-friendly reforms foster competitive markets and make many goods more accessible to middle class families. Many Cubans are hoping for the same.


Although the celebrations of a new anniversary of the Revolution were greeted with a lack of enthusiasm among ordinary Cubans, reports on the skyrocketing prices in the newly partially liberated automobile market in Cuba caught the attention of the public elsewhere in Latin America. Since ideological warfare historically contaminated information about Cuba presented in the news, the perceptions Latin Americans have about the lives of ordinary Cubans often responds to ideological predispositions more than to verifiable facts. Those who opposed rightwing authoritarian governments in the region will often suspect that US propaganda is behind the news about the plights of Cubans. Those who reject communism will readily embrace all negative news about the island and will systematically ignore reports about progress or innovations made by the Cuban revolutionary government. For that reason, news reports that showed ordinary Cubans talking about the skyrocketing prices of automobiles probably continued to shape the views many Latin Americans have about living conditions on the island.


In Cuba although a law that allows ordinary Cubans to purchase automobiles was already in effect since 2011 the recent decision to drop the need to formally apply for a government permit to buy cars has had a more important effect. Though the government retains a monopoly to import cars and heavily regulates the market, the move is an important step toward market liberalization. In that sense, the Cuban government is taking the path that many other Latin American countries undertook years ago.


Since the mid-1990s, Latin Americans have grown accustomed to a highly competitive and diverse market for automobiles. If the 1960s and 1970s were characterized by highly-controlled automobile markets in most countries with one or two dominant car companies in each country the liberalization of the economy transformed car ownership from a luxury to a good that was accessible to millions of middle-class families.


In fact, the rapid growth of the automobile market has resulted in new problems for Latin American countries. Overpopulated cities face huge traffic challenges. Overcrowded streets have transformed car ownership into a headache for millions of people who often do not have access to good public transportation alternatives. Though the quality of automobiles is getting better, cars continue to add to urban pollution problems.



In the past, cars were associated with middle-class status in Latin America. Today, driving in the overcrowded streets is a growing nightmare for families that have recently joined the middle-class and have bought cars to fulfill their long delayed dreams.


Still, Latin Americans know the value of an automobile. The news about prohibitive prices for cars in Cuba has made the contrasting realities of their daily lives apparent to middle-class families in Latin America. Life is not easy elsewhere in Latin America, but middle-class families in Cuba have much more limited access to consumption goods than elsewhere in the region.


Unlike the rest of Latin America, where the growth of the middle-class came about after a period of rapid population growth that started in the late 1950s, Cuba did not experience a similar rapid expansion of its population under the revolution. In 1960, Cuba had a population of seven million. In 2011, it was of 11.2 million, a 60 percent increase. Neighbouring Dominican Republic more than tripled its population, going from 3.3 million to 10.1 million in the same period of time. Chile went from 7.6 to 17.3 million, a 125 percent increase.


After decades of rapid population growth, populations in many Latin American countries are now stabilizing. Under revolutionary rule, Cuba never had rapid population growth. Access to family planning first, out-migration later and, since the early 1990s, economic difficulties have depressed population growth in the island. Thus, the growing and increasingly vocal middle-class present elsewhere in Latin America is almost non-existent in Cuba. The perception that the island remains stuck in the 1960s is also applicable to its demographic characteristics.


Though the timid political liberalization reforms will prove insufficient to excite a population that has little hope for the near future, gradual and limited reforms toward a market-friendly economy will probably help revive the economy and will reduce social pressure on the ageing government. Liberalizing the economy will help foster more competitive markets and will expand opportunities for middle-class families. Though the growth of the middle class will generate new problems as many Latin American countries have recently experienced the benefits outweigh the costs.


In the short run, Cubans will be able to choose automobiles and, hopefully, sooner rather than later, they will also be able to choose their own government.