Cuba Government Running Out of Funds, Directly Earning Dollars by Selling Used Cars

Exclusive Rights to Sell Used and New Cars

First Time Selling Used Cars in Dollars

US Influence Including Venezuela Sanctions

Oil Price Surge and Group Tourism Blocked

▲On the 25th (local time), Cubans are inspecting vehicles at a used car dealership in Havana, the capital of Cuba. [Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jaehee] The Cuban government, facing financial difficulties, has directly started earning dollars. The Cuban government, which holds exclusive rights to import and sell used and new cars, has begun selling them in dollars for the first time. This is interpreted as an extraordinary measure taken as both Venezuela and the tourism industry, the two pillars supporting the Cuban economy, have dried up due to sanctions from the US Trump administration.

On the 25th (local time), the AP news agency reported that the Cuban government began selling used cars in dollars only in the capital Havana from that day. About 100 people reportedly visited the used car dealership to buy cars that day. Cuba's currency unit is the peso, and basic daily necessities including food are traded in pesos. It is considered unusual for a communist country’s government to directly sell goods in dollars.

The Cuban government’s direct dollar-earning move is due to liquidity crisis caused by the economic collapse of its ally Venezuela and years of US sanctions.

In June last year, the Trump administration announced, "Nicolas Maduro, President of Venezuela, has caused a humanitarian disaster in Venezuela with support from Cuba," and "the Cuban regime will also be held responsible for this situation." Accordingly, it banned group tourism to Cuba for its citizens. The reason is that Cuba's tourism revenue flows to the Cuban military, which in turn funds the Maduro regime in Venezuela.

In January this year, the US further tightened pressure on the Cuban regime by restricting flights to Cuba. It stopped charter flights from the US to Cuban regions other than Havana Jose Marti International Airport and reduced the number of flights. As a result, last year, the number of tourists to Cuba declined for the first time in 10 years. Additionally, under US pressure, countries repatriated Cuban doctors who were responsible for earning foreign currency, making the Cuban government’s finances even more difficult.

Venezuela’s economic crisis is also a direct blow to Cuba. With the cheap oil previously imported from Venezuela blocked, Cuba is experiencing a severe fuel shortage. Given these circumstances, debt repayment and payments to foreign companies are not being properly made.

Cuba is facing a default crisis. Last year, it reportedly failed to repay about 32 to 33 million dollars (approximately 40.1 billion KRW) to six countries including Austria, Belgium, the UK, France, Japan, and Spain. Ricardo Cabrisas, Cuban Deputy Prime Minister, sent a letter to the 'Paris Club,' a group of 14 creditor countries including these nations, promising to repay the overdue debt by May this year, but creditors remain skeptical. AFP quoted a European diplomat saying, "They say they will repay, but trust is lacking." Cuba previously declared default in 1986.

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