The Reason For Sky-High Prices
Only the reality is that the Cuban officials managing the island’s state-run economy may have a very good reason for listing brand-new Peugeots at Bentley prices: They can’t actually afford to sell them.
It’s the same fundamental problem that leads the government to place exorbitant markups on other costly imported goods, according to Cuban business executives who have worked inside large state firms.
When the Cuban government imports new cars, for instance, it must pay for them in hard currency — typically U.S. dollars or euros. But when it sells a new car on the retail market, it receives payment in Cuban convertible pesos (CUC), a currency that has no foreign exchange value at all.
In other words, the Cuban government is in the business of buying items in hard currency abroad and getting worthless money in return. Not a good business model.
This is true of televisions, refrigerators and just about any other imported item, whose retail sales are monopolized by the Cuban government.
This wasn’t such a problem when the government allowed U.S. dollars to circulate freely on the island between 1993 and 2004. But it’s a major liability now that the CUC is the only legal tender for such goods.
While the government must maintain a certain level of inventory at its stores in order to get Cubans and visitors to trade in hard currency for CUCs, it can’t afford to sell large volumes of imported items and constantly restock its supplies. That would drain the government’s scarce foreign reserves even further.