The Problem with Cuban Transport is the State

Cuban ‘ingenuity’ can only go so far to solve the nation’s transport problems, like this ‘makeshift bus’ — a cart pulled by a tractor in Pinar del Rio (2008). (MJ Porter)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 24 February 2023 — There was some expectation on Cuban State TV’s Roundtable program for what the Minister of Transport, Eduardo Rodríguez, would say about the situation of the sector and the prospects for 2023. Not surprisingly, this January the price of transport had skyrocketed at a year-on-year rate of 15.18%, three times more than in the same month of January 2022, when it increased by 5.58%. This is worrying. Transport prices are of outstanding importance in any economy, because they are usually transferred to other prices, which causes the consolidation of inflation processes.

And, surprisingly, the minister talked about almost everything except transport prices. It seems that this matter does not interest him, nor does he consider it within his competence (maybe Meisi Bolaños [the Minister of Finances and Prices] does). The transport minister came to the program with a planned script and began by assessing the current situation of passenger transport in the country and the projections for 2023, and he ended with a report on the decisions taken by the regime in this sector.

The minister gave a lamentable description of the general transport situation, which has been characterized by a progressive deterioration of passenger transport capacity and infrastructure during the last three years. The reduced levels of services has caused “a great dissatisfaction among our people and an impact on the discipline and quality of services.” This was caused, first of all, by the “insufficient availability of freely convertible currency [hard currency] for the acquisition of spare parts, add-ons and components for the maintenance and repair of the means of transport.”

More than 40 million dollars are needed each year for maintenance, not to mention investments, as a result of the aging of the fleets, more or less the same drama as with the power plants and the blackouts. Second, there are the difficulties in the availability of fuel. Third, the infrastructure requires investments (including the National Highway and the Central Highway, and especially, the roads of the Turquino Plan*), and fourth, the “difficult financial situation of companies based on the prices of public services, which do not cover the direct expenses of the activity, accumulating significant losses” (consequences of the Ordering Task**).

In this regard, the minister limited himself to denouncing a certain lack of control of the public price of transport, and said that “state companies charge affordable prices to the population, but they are at a loss and receive support from the state budget, while non-state management forms charge prices that are only affordable to a part of the population. We must also confront those who charge abusive prices and don’t receive support from the State budget.” In other words, the minister blames the private transport sector for the lack of price controls and inflation. Bad business.

And he is wrong, because the origin of the problem lies in the supply deficit of state transport that, despite receiving support from the budget, has demanded a greater non-state participation, which it doesn’t have. The inefficiency of the state in the provision of services explains the greater demand for the superior private transport services, which the regime does not allow to grow and consolidate freely.

All of the above is the fault of the blockade/embargo. The argument is hilarious. Trump banned the entry of cruise ships into Cuba and that is why the income in hard currency that served to finance the maintenance of transport was reduced. In addition, licenses were withdrawn from Cubana de Aviación to lease planes (the company does not have its own), and limited international flights reduced income in hard currency, as did “the crackdown on fuel transports, preventing the planned operations from being carried out.”

The blockade/embargo always appears in the analyses of the problems, to which is added the global crisis (provoked by Cuba’s ally, Putin) that also affects hard currency income. At the same time, the prices of maritime freight transport increased. The combined effect of the reduction in income in hard currency, together with the increase in expenses in these currencies, forced the regime to define food, fuel and medicines as priorities. Despite this, it was not possible to attend to transport and its infrastructure from the financial point of view.

The problem, in the end, is that transport is a service that is charged in national currency but that requires hard currency for its acquisition and maintenance. This is a serious problem of the Cuban economy, which in other countries of the world is non-existent and is solved. The Cuban transport sector is another victim of the exchange system designed by the Ordering Task.

From this presentation of the general situation, the minister addressed the analysis of the problems that characterize transport today, and the focus returned to the internal situation and the economic model.

He cited the deficient regulation of the prices charged by the different state and non-state economic actors, the violations of the parameters of regular services, such as route diversions, breaches of schedules, mistreatment of passengers, transport of cargo and of more passengers than allowed, illicit purchases of tickets, speeding, deficient work of the inspectors and indisciplines and violations.

He mentioned the long-term paralysis of vehicles, whose parts are used to keep others working, with effects of theft and embezzlement, and the indolence and lack of sensitivity of drivers of state vehicles who avoid stops and don’t obey the instructions of the inspectors.

He painted a really devastating picture in which the regime is concerned about procedures and resources but not the results. Thus, he cited activities such as the process of approval and legalization of armoured vehicles in all provinces, the implementation of regulations that regulate the leasing of state transport and eliminate the obstacles that prevent the provision of services by all entities; the management of bus donations from Japan or Belgium; the implementation of electric tricycles and bicycles of the United Nations Development Program Neomobility Project and the minibuses removed from tourism and incorporated into service in the capital. Leftovers for the population.

He also mentioned the contracting of a ferry for the Island of Youth that has not yet begun its activity, the maintenance of the national train service and services in various provinces. And other decisions, such as the adaptation of class schedules at the Technological University of Havana and the University of Havana to guarantee a differentiated transport of students and teachers with Transmetro and Escolares. He referred to the launch of the Beta application of Urban MW to offer information, in real time, about the services provided by the public transport routes of the Havana Transport Company and announced the completion of the Sustainable Urban Mobility Plan of Havana. In short, all actions on the means of transport, but nothing about the results.

The minister offered the ministry’s projections for 2023:

    • Continue to improve work with the cadres at all levels of the system and advance in training, strengthening work links with universities and scientific research projects based on sustainable mobility.
    • Strengthen organizational measures to optimize the limited resources of the sector and advance in the computerization of all services and procedures; for example, automate. Implement the new administrative structure of transport activity in the provinces, which will provide a better organization and control of passenger transport in the country, including non-state transport.
    • Develop and promote mobility projects with external financing, including the generalization of electric and hybrid buses in public transport and the use of electric tricycles on short routes in all provinces of the country, and promote actions to reduce the demand for transportation at peak times through the adjustment of schedules, remote work and teleworking.
    • Continue to work on the adjustment of prices, fares and subsidies for all passenger transportation services provided by state entities and non-state forms of management. Increase the use of state vehicles and extend the experience of using tricycles in the capital to other provinces.
    • Continue actions that are already underway, such as concluding the dredging of the Port of Batabanó and putting into service the ferry between Batabanó and Nueva Gerona; continue to work on the restoration and improvement of the infrastructure in airports, terminals, stations, transport stops and route maps; conclude the process of legalization of armoured vehicle parts; perfect the mode of leasing state vehicles; continue the incorporation of low-tourist minibuses in the capital to pay for the Rutero service [shared taxis] and continue with the railway bus manufacturing program for rural areas.
    • Authorize the urgent import of tires, batteries, engine parts, spare parts and other components that are needed for the restoration of those means of transport that can be quickly implemented.

At this point in the program, the minister reported on the publication in the Extraordinary Official Gazette 16, of Decree 83, which updates the legislation on the transmission of ownership of motor vehicles, trailers and semi-trailers, in addition to their import and marketing. He said “it serves to empower economic actors, eliminate obstacles that hinder the performance of state and non-state entities as well as favor foreign investment.”

First, the wholesale sale in hard currency of new and second-hand motor vehicles was authorized to all Cuban and foreign legal entities (state companies, foreign firms, cooperatives, small and medium-sized companies, etc.). The sale price of the vehicles will not exceed the acquisition cost with a 30% commercial margin. Once again, the Cuban peso is left out of economic transactions.

Second, tax measures were incorporated. Natural persons must pay a special tax when they buy more than two vehicles (only for motorcycles and light vehicles including vans). The State collects more and more.

Third, retail sales of new and second-hand motor vehicles in hard currency were maintained, for all Cuban and foreign naturals living in Cuba, at the reference prices of the Cuban market, which will be adjusted every six months.

Fourth, the current power restriction (up to 1,000 watts) on electric motorcycles was eliminated, and the possibility of directly importing a sidecar by natural persons and motorcycles with the sidecar was authorized.

Fifth, the fund for the development of public transport was maintained as a destination for the income from the application of the special tax, both from retail sales and the new one on wholesale sales.

And sixth, the acquisition of electric vehicles, both retail and wholesale, was favored by price.

The minister spoke about the creation of infrastructure for charging from renewable energies and the recovery of vehicles discharged from tourism for commercialization as an alternative to their disappearance. He also explained that the change of chassis of compatible brands and models will be allowed and that there will be new technical requirements for imports.

The scope of the measures of this decree is so great that some analysts have wondered if the regime is not encouraging the birth of an automobile market in Cuba, but in hard currency, not in pesos, to increase the country’s level of motorized vehicles, now one of the lowest in the world.

It doesn’t seem like toasts are happening, because the minister ended by saying, about the complexity of his ministry, “We constantly have to face moving all the milk and flour in the country from the west to the east. And bring the salt from Guantánamo to the west.” If this is complex for the communist state, a piece of advice. The solution is very easy: let that activity be done exclusively by the private sector.

Translator’s notes:

*The 1987 Turquino Plan was implemented to link Cubans living in the remote, mountainous areas and to develop these regions economically. Pico Turqino is the highest point in Cuba, at 6,476 feet.

**The Ordering Task is a collection of measures that include eliminating the Cuban Convertible Peso (CUC), leaving the Cuban peso as the only national currency, raising prices, raising salaries (but not as much as prices), opening stores that take payment only in hard currency, which must be in the form of specially issued pre-paid debit cards, and a broad range of other measures targeted to different elements of the Cuban economy.

Translated by Regina Anavy


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