Friday, 30 March 2012

Cuba - Transport (or lack thereof)

“One man's trash is another man's treasure.”
- Popular idiom

One of the most striking things in Cuba is the age and lack of transportation. Many people have seen the classic images of 1950s Americana plying the streets of Havana and this is part of the reality. The other side of Cuban transport is exceptionally bad pollution, woeful overcrowding and a lot of waiting (at least for the Cubans).

We only saw a man riding an Ox for tourists.
The fastest form of transport in Cuba is probably a trip on one of Cubana's domestic flights aboard a Russian jet. The slowest form of transport in Cuba is probably the Ox drawn cart but vying with this for title of slowest transport would be walking or cycling depending on the level of activity. Ranking slightly higher than the Ox drawn cart is the horse drawn cart (a regular feature on the 6 lane Autopista Nacional) and above that a variety of Chinese two stroke motorbikes probably followed by aged trucks, local buses, old American cars, soviet cars, modern coaches and the fastest land transport; tourist rental cars (principally mediocre Hyundais and nasty Geely (Chinese) hatchbacks.)

There is a chronic shortage of vehicles in Cuba due to a lack of investment, the trade embargo and a lack of private and public capital to purchase cars. The scarcity value means all sorts of relics and decrepit vehicles still have a value when long ago these would have been scrapped in the West. Driving on the motorways under each bridge you encounter various groups of people and often a person dressed in yellow whose job it is to find them transport. The cheapest and most uncomfortable form seems to be the truck/bus which is basically a lorry with a big metal container on the back to carry people. Aside from this you regularly see American cars with more than 6 people on board, regional buses which are literally packed, people in the boots of cars, 4 people on a motorbike, people in tractor waggons etc.

Cuba has a relatively laid back populace as many of these people under the motorway bridges must wait for hours to get a ride as they stand pesos in hand by the side of the road. Such a laid back attitude and 30'c heat may also explain why I never saw a Cuban running until we got back to Havana. The only time I saw a throng of Cubans running I looked up in surprise to see the rarest of sights; an empty metropolitan bus was driving into the Havana Centro about to stop. Literally 50-100 people were running to the stop. Some young guys ran onto the moving bus before it got there through the open door.

One of the most puzzling sights in Cuba was the occasional spotting of a high end car. I saw the odd E class Mercedes but these had government official plates on them. More surprisingly I saw a brand new Camaro on the Malecon, a brand new 5 series BMW on the Autopista and a brand new Peugeot RCZ in Havana. The explanation we received from the Cubans we asked about this was that they are usually cars owned by either Cuban Americans or foreigners married to Cubans who are able to buy such cars as long as they register them in the name of a Cuban citizen.

Similarly we hired a driver for a day trip who had a nice new Hyundai car on tourist plates. He explained that the car was rented long term by an Italian friend living in Cuba at favourable tourist rates and sublet to our driver who paid all the costs but as a Cuban could not rent the car at such rates. To highlight the scarcity value of cars in Cuba he explained that after a tourist rental car has done 250,000km it can be bought by a Cuban from the government for a fixed price around CUC6,000. The value of a 5 year old Hyundai with with 150,000m on the clock in the UK must be only around £1,000.

Once again transport demonstrates to the tourist the vast gulf between them and the ordinary Cuban. The government owns a fleet of 'Transtur' air conditioned Chinese buses for bus tour tourists alongside the 'Viazul' intercity coach services. There are air conditioned tourist taxis that hang around outside the big hotels. The rental cars are generally cheap but new Asian vehicles although one can find some fairly fancy Audis.

In theory tourists cannot travel on Cuban buses and truck/buses but I think one could do if one could actually fight ones way on board. The most 'authentic' Cuban transport we took was a 'collectivo' taxi in Havana which cost only 0.5CUC each for the ride into town stopping periodically to pick up or deposit its various passengers. The old American cars run 'collectivo' routes due to the big seats being easily able to accommodate at least 6 people.We also rode a Lada taxi which was pretty tiny and a Coco taxi (Cuban version of a turistic tuktuk) which was pretty fun. My advice to any traveller would be to always haggle over the price of the route (nobody uses the meter) and if on your first attempt to negotiate the price down the driver simply shrugs his shoulders and says 'ok' you know you didn't haggle hard enough.

With so many old and poorly maintained vehicles the air pollution can be pretty awful in particular in Havana. The stink of auto fumes from an exhaust without a catalyst is something all but banished from the developed world these days but in Havana it is pungent.

The state of Cuban roads can be equally hazardous. In theory Cubans drive on the left but in reality they drive on whatever part of the road is not potholed whilst weaving between horse and carriages. Probably the greatest danger is the cattle that periodically roam over the Autopista. This is not too much of a problem during the day with next to no traffic and a kilometre of visibility. However as one of our taxi drivers attested the 'vacas' are something more of a fearsome hazard 'en la noche.'

One must be very careful with auto accidents in Cuba because if you have one you will be unable to leave the country until the case has been resolved. We saw surprisingly few accidents but did get stuck behind one when on the bus in Playa in western Havana. An old American car had hit the back of a pickup truck. The pickup had some paint on it and had lost the rear bumper. The cars were blocking the road on an intersection and there were a couple of policeman there on motorbikes. We waited probably ten minutes for them to clear the cars out of the way after this very minor accident. The Australian guy behind me said the accident was there earlier when he came past before. I joked that they will probably get some chalk out next and draw round the car. Would you believe the policeman did in fact pull out some chalk and start tracing the tyres of the American car...

Thursday, 29 March 2012

Cuba - A case study in money

After a lengthy hiatus I am back on the blog with some thoughts from my recent holiday in Cuba. The first piece in this tantalising multi part series will be my thoughts on the Cuban monetary system.

Cuba has a dual currency system with Convertible Cuban Pesos (CUC) for tourists and Moneda Nacional (CUP) for Cubans or at least that is the basic theory. The idea behind this seems to be to create a convertible currency (which appears to be tied to the US dollar) for tourists to purchase whilst not distorting the basic Cuban monetary system.

£1 buys around 1.5CUC so it is a good proxy for the dollar. However 1CUC buys around 25CUP and an ordinary Cuban earns only around 400CUP a month on a government wage. Most things tourists pay for are priced in CUC; Hotels, coaches, tours, food in Paladars etc. Most items denominated in CUP are essential basic foods such as fruits, street foods, Cuban buses etc. However some double pricing also exists for instance some beaches or parks might charge 5CUC for entry to a tourist but only 5CUP to a Cuban. In some ways this seems pretty fair given the disparity in income between Cubans and tourists. This system is also a pretty clever way of ensuring tourists pay a higher price than they otherwise would to travel in Cuba although its still cheap relative to travel in Europe or America.

As a medium of exchange CUCs provide a brilliant case study in currency dynamics. They should send economics graduates here to study the dynamics of a basic money system. When you arrive in the airport you need to exchange your ton of hard currency cash (don't bother with cards or travellers cheques as generally they aren't accepted in Cuba) for some CUCs. Much like Disneyland money you exchange your hard currency for CUC and then the process begins of Cuba divorcing you from your CUC through various means; Taxis, hotels, casa particulares, food, tips and scams. So you handover your money and spend your CUCs on the various attractions of Cuba. Tourism must be the number one source of foreign exchange into Cuba.

The existence of the CUC and the payment of government employees (including doctors) in CUP creates huge distortions in the economy. A street hustler (Jintero) who can make just 1CUC a day from tourists will earn more than a doctor earns in a month. Getting paid in CUP and buying your groceries from local producers doesn't leave you totally impoverished until you need a pair of shoes, or some clothes, or some fuel or anything else imported into Cuba because imports reflect international market prices in CUC.

This is particularly obvious in the 'tiendas' which are government run stores full of imports, cuban soft drinks and Rum. You can buy fresh fruit for next to nothing in Cuba but a tetrapack of imported tropical fruit juice costs about $2.50. This is the same price as a 35cl bottle of Havana Club Rum. I have never paid more for the mixer than the spirit!

Since the collapse of the Soviet Union the country has moved increasingly to rely on tourism. Many of its industries closed as tourism provided the needed foreign exchange to import food, medicine and machinery. However with many people still paid in practically worthless CUP they can barely afford the imports which are now required due to the hollowing out of any domestic manufacturing. A new pair of shoes costs a months wages in CUP. Therefore its not hard to see why there are tales of Cuban doctors turning to prostitution to make ends meet and why those working with tourists form the Cuban middle class.

A couple of examples on the differences between CUC and CUP;
  • In touristy towns like Trinidad we saw people offering bananas in the street for sale for 1-2CUC a hand! Doubtless you can buy a hand of bananas for say 5CUP so this represented a 5-10x markup on the price paid by the Cuban. Tourists being (a) stupid and (b) lazy would buy these netting these Cubans maybe a 10CUC for a hand of bananas. I cant blame the Cubans for trying it on but when you realise a guy can make 10x a doctors wage in a day arbitraging bananas you can see why the economy is such a mess.
  • Outside Trinidad we visited the Iznaga estate which was once an important sugar producing area (dont go there it was the worst tourist trap we visited.) Inside the ruins the guides would demonstrate to the busloads of tourists how the cane was crushed traditionally to extract the juice of the cane. For 1 CUC you could sample the juice (2CUC with a spot of Rum). However with the help of some friends we discovered that at the base of the short road up to the tower where all the buses park there was a stall selling the cane juice fresh from an electric press to ordinary Cubans. We paid 1CUP for a glass. That is 1/25th of the price up the hill.
So as you get wise to the Cuban system you find various ways to pay a lot less money but still accommodation and transport is primarily in the CUC. This is why you find that staying in Casa Particulars (Cuban private B&Bs) you meet relatively well off Cubans as they have access to CUC. However they must also pay a fixed monthly tax in CUC to the government regardless of vacancy rates so its not all easy.

I should mention that tourists can exchange CUCs for CUP in the Cadeca exchange bureaus so as a tourist you can access goods in CUP but in general most of your costs except food bought on the street must be settled in CUC (Casa Particulares etc wont accept the equivalent in CUP). You are best paying for streetfood in CUP also its good to carry some CUP for tipping toilet attendants (rent seekers - the toilets are generally broken) and you can use it on local buses and some 'collectivo' taxies.

You can see the benefits your hard currency CUC purchases are helping ordinary Cubans at the micro economic level by giving them money by staying and eating at private homes. However you can also see that those hard currency reserves the government is building is supporting their repressive regime. In addition you can see the destructive impact of tourism on the economy in terms of the vast disparity between those who live in touristic areas and have a business and rural workers you see see outside of the tourist hot spots. Therefore I have never felt more of a tourist and an outsider anywhere as I have in Cuba.

...In the Next Installment; Cuban transport


My advice if you do go to Cuba is don't stay in a resort and help line the governments pockets (the government owns at least 51% of all hotels) but stay with Cuban families in casas particulares as they are cheaper and have much better food. If you speak Spanish you can really start to understand what life is like in Cuba by talking with your families and their friends. In the resorts all you see is white sand and Cuban tokens; mojitos and cigars.

Monday, 5 March 2012

A simple fact on taxation.

“The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing.”
-Jean Baptiste Colbert

To some it may be a surprise that treasury sources state that the cut in child tax benefit for higher rate taxpayers is actually a very popular move.

"The source said only 15% of taxpayers would be hit, and polling suggested 77% of voters backed the move."

Now there are various issues with the proposed tax cut which are rather dull but worth a moment. The main issue (Labour have to argue against it somehow!) is that it penalises families with one income where the parent is just over the higher rate tax threshold vis-a-vis families with two incomes where both parents are just under the higher rate tax threshold. Now clearly any BBC researcher can find somebody who is negatively impacted by this.

The reason is not to be arbitrarily unfair it is just to cut the costs of administering the benefit by aligning the means testing element with easily obtained tax data. Britain already has a hugely complicated tax regime which is becoming more complex and costly to administer with every perfectly inclusionary exception, tapering and relief.

But how to account for the wild popularity of the new benefit cut (implicitly its the removal of a tax linked allowance)? I think this is very obvious;

Everybody universally believes that those who are just a bit richer than themselves should pay more tax.

This is supported by the figures. 77% support the tax. 85% of people are not HRB tax payers. Deduct a small % of the 85% for people whose partners are HRB tax payers (and stand to lose) plus some die hard fanatics and you arrive at 77% popular support.

Thursday, 1 March 2012

Tube unions save lives?

A rather bizarre incident on the tube has been seized upon by the most militant of unions; a tube union, to emphasize the need for drivers and staff manning the underground. Most people assume that robots or at best monkeys could be trained to drive the tube. Some trains such as the DLR already drive themselves. Its not a hard job but it is a great palce for rent seeking if you have a mate who can get you into the hallowed closed shop.

 However a recent incident reported by the BBC sheds doubt on this indictment of tube drivers;

"A five-year-old boy escaped unharmed after falling between a Tube train and a platform, it has emerged.

The driver spotted a small hand reaching up from the Finchley Road Station on Sunday evening, drivers' union Aslef said.

The child was rescued and his family were able to continue their journey.

Aslef said it highlighted the danger of plans for driverless trains but London Underground said it would handle all incidents "safely and efficiently"."

Now I may be alone in this conclusion but my first though was WTF? Surely in this situation the train alarm would have been pulled when the parents realised that their child had fallen between the tube and the platform. I cant imagine 5 year old kids go out and about on their own. I would have thought the first line of defence are screaming parents rather than conscientious tube drivers. Still this glaring anomaly remains bizarrely unexplained in the article.