Cablegate: Cuba Ends Scheme to Trade in Clunkers

VZCZCXRO2163
PP RUEHIK
DE RUEHUB #0761/01 3552031
ZNR UUUUU ZZH
P 212031Z DEC 09
FM USINT HAVANA
TO RUEHC/SECSTATE WASHDC PRIORITY 5032
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS PRIORITY
RUEHMO/AMEMBASSY MOSCOW PRIORITY 0035
RUEHBS/USEU BRUSSELS PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUCOGCA/COMNAVBASE GUANTANAMO BAY CU PRIORITY
RHMFISS/HQ USSOUTHCOM MIAMI FL PRIORITY
RUCOWCV/CCGDSEVEN MIAMI FL PRIORITY
RUEKJCE/JOINT STAFF WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 HAVANA 000761

SIPDIS

STATE FOR WHA/CCA

E.O. 12958: N/A
TAGS: ECON PHUM CU
SUBJECT: CUBA ENDS SCHEME TO TRADE IN CLUNKERS

HAVANA 00000761 001.3 OF 002

1. SUMMARY: The Government of Cuba (GOC) reportedly froze a
scheme this month in which certain Cubans could obtain
authorization to import a personal vehicle. This luxury was
only available to Cubans who already owned a vehicle and had
permission to travel abroad for business-related purposes.
Like regulations on other highly valued items (houses, exit
permits, etc.), the car scheme had created an unusual
informal market for fake marriages and permission slips.
Frustrated Cubans shopping for a personal vehicle are now
forced to return their attention to the rapidly decaying
supply of 1950s American cars and 1980s Russian Ladas.
Simple economic freedoms are hard to come by in Cuba and,
more often than not, too fleeting to make a difference.

THE REQUIREMENTS
----------------

2. An eligible Cuban who already owns a car and travels
abroad for work would first need permission from his/her
government minister or organization head, and then from the
chief of Cuban Customs. Once all permissions were granted,
the eligible Cuban would deliver his/her old car to the GOC
in exchange for nothing more than a piece of paper confirming
the car specifications (i.e. the GOC gets the old car for
free). The eligible Cuban could then purchase and arrange to
import a vehicle of a similar type (car for car, motorcycle
for motorcycle, truck for truck, etc.) and engine size as the
one traded in.

GETTING AROUND THE REQUIREMENTS
-------------------------------

3. Despite stringent requirements, several Cubans took
advantage of the scheme and several more created inventive
ways to become eligible. Cubans without a car but with
access to foreign currency (through remittances, work for a
foreign mission or company, or black market activity)
actively looked for an old clunker to purchase that they
would then deliver to the GOC. The Craig's List-style
website Revolico.com is full of Cubans looking for cheap cars
to trade in. Online and informal markets were created by
people looking for and selling the permission slips required
to import a car. We have also heard examples of Cubans with
an old car and enough money to buy a new one, but who are not
eligible for this scheme because their job does not require
foreign travel, arranging to marry another Cuban who does
travel for work. For a fee, the eligible Cuban marries the
ineligible Cuban, trades in the now jointly-owned old car,
buys and imports the new car, and then quietly arranges for a
divorce.

THE END OF A SCHEME
-------------------

4. The car importing regulation was first issued in 2007,
but was not widely used until the GOC issued a clarifying
regulation earlier this year. As mysteriously as it sprang
up, the GOC suspended the scheme in early December without
explanation or clarification as to what would happen to
transactions already in process. Some Cubans are left in
limbo. One Cuban artist, for example, traded in his car and
bought a $10,000 car that is currently in Canada. The artist
does not know if the GOC will still permit the import.

5. The GOC has not published or publicized the end of this
scheme, but Cubans we talk with are aware of its demise. The
reasons for its termination are less clear. Some contacts
believe the GOC was starting to lose control of the scheme
(through some of the creative activities noted in paragraph
3) and may try to start it again under more strict
guidelines. Another feasible explanation is that the GOC
wanted to stop the flow of foreign currency outside of the
country at a time of internal financial crisis.

REMAINING ALTERNATIVES
----------------------

6. Only a small percentage of Cubans own personal vehicles.
Cubans who owned cars before the first years of the
revolution were able to keep one. These cars can be legally

HAVANA 00000761 002.3 OF 002

sold, or, more specifically, "transferred" to another Cuban.
The GOC has since offered a few schemes to purchase newer,
mostly European vehicles. For example, the GOC offered a
scheme in the 1980s in which Cubans could sell their gold and
silver possessions to the GOC for hard currency, which could
then be used to buy a new car (typically a Russian Lada). In
some cases, Cubans can buy their work vehicle from a
ministry, state company or other government organization.
The GOC does not permit the resale of these "newer" cars,
however there is a large informal market to buy and sell cars
"without papers". The few foreign car dealerships within
Cuba only sell to state companies and foreigners.

A SMALL OPENING CLOSED
----------------------

7. Many Cubans are frustrated by the end of a scheme that
offered the only feasible path to buy a new (or newer) car.
Even though few Cubans were eligible for the program under
the strict regulations, ineligible Cubans created ways to
take advantage of this small economic opening much in the
same way Cubans (with money) have turned the burdensome rules
permitting the trading of houses into a viable real estate
market (septel). Cubans also complain that, as in the daily
hunt for food and other consumer goods, unnecessarily
restrictive regulations such as the car scheme and trading of
houses force otherwise law-abiding citizens to turn to the
black market and, sometimes, commit fraud.
FARRAR

© Scoop Media