Cuban leaders eye new port as economic lifeline

Posted on Monday, 11.11.13

Cuban leaders eye new port as economic lifeline
BY ANDREA RODRIGUEZ
ASSOCIATED PRESS

MARIEL, Cuba -- Life still moves slowly in this small, dusty hamlet with
squat homes lining narrow streets, where some walk slowly with parasols
to ward off the pounding tropical sun.

Best known as the launch point of a mass maritime exodus to the U.S. in
1980, the 40,000-person town of Mariel has practically no traffic and
kids play freely in the streets without worrying their parents. But all
that's about to change with the rise of a huge, modern, $900 million
port and special commercial zone in and around the town's formerly
sleepy harbor.

The island nation's Communist authorities have high hopes that Mariel
could become a strategic economic center — especially if the U.S. lifts
its 51-year-old embargo and starts sending container ships south. Others
suspect the port's impact on Cuba may be more modest, reflecting the
country's long-stagnant economy.

Plans to overhaul the Port of Mariel began in 2009 when officials
determined the country's main harbor in Havana is too shallow for
bigger, deeper-draft "post-Panamax" vessels, which starting in 2015 will
begin crossing through an expanded Panama Canal and carry an increasing
share of regional cargo.

"The Port of Mariel could ... contribute to a revival of Cuban foreign
trade, more so if there are improvements in relations with the United
States," said Arturo Lopez-Levy, an economist and lecturer at the
University of Denver.

During a recent visit by The Associated Press, orange-clad, helmeted
workers in the port zone were building what looked like a large
warehouse while trucks arrived loaded with construction materials.
Hundreds of yards (meters) of docks appeared nearly completed, ahead of
the port's expected opening early next year.

The ability to take in deeper-draft ships would let Cuba keep pace with
global shipping innovations and accommodate more cargo. Hopes are
equally high for the adjacent, 180-square-mile (465-square-kilometer)
industrial park and special development zone, which officially launched
Nov. 1.

Simply swapping one port for another, however, won't be enough to right
Cuba's rickety economy, which relies heavily on food and other imports
while making most of its foreign income from tourism, nickel mining and
the export of services such as tens of thousands of medical professionals.

Authorities hope to attract foreign firms to invest and set up shop in
the development zone, with a priority on industries such as food,
biotech, renewable energy, packaging and telecommunications.

Foreign companies that answer the call will be exempted from paying
taxes on labor, profits and sales and services, at least at first. Tax
rates will rise to 12 percent on profits after a decade of operation and
1 percent on sales and services after 12 months.

"It will be a world-class special zone," said Ana Teresa Igarza,
director of the office overseeing the development zone during a
presentation about the port last week.

There are no available statistics on total foreign investment, although
other figures suggest such inflows may have waned over the past decade.
Earlier this year, the government said 190 mixed-ownership companies
were operating in the country, compared with 400 reported in the early
2000s.

At the port presentation at the Havana Trade Fair, some attendees
expressed skepticism about rules prohibiting foreign companies from
hiring employees directly, instead forcing them to contract with workers
through a state-run employment agency. Critics also bemoaned a lack of
existing office space and other infrastructure.

One diplomat who attended said the inability to choose employees
independently makes doing business harder and worried that the zone
could suffer from the same cumbersome bureaucracy that plagued previous,
smaller development zones in Cuba.

Some companies will no doubt be hesitant to set up shop knowing that
U.S. embargo rules would almost certainly prohibit them from selling
their products in the United States and that their Cuban operations
could complicate any trade they do with Uncle Sam. Embargo rules
prohibit ships from docking in the United States for six months after
calling in Cuban ports.

Cuban officials are betting Mariel will be attractive enough to overcome
those problems.

"To what extent (the embargo) may affect the development of the special
zone, we can't calculate," Foreign Trade Minister Rodrigo Malmierca
said. "We are of the opinion that despite the embargo, investors will
still come."

Malmierca also said Cuba is "going to support and protect the
businesses, the industrial projects. ... Foreign investments cannot be
expropriated."

Brazil, which is Cuba's No. 2 economic partner in Latin America after
oil benefactor Venezuela, is providing credit to pay two-thirds of the
project's costs.

Igarza said Brazilian, Chinese, German, Japanese, Mexican, Russian,
Spanish and Vietnamese investors have expressed interest.

"I think that (Mariel) will generate interest among all businesspeople,"
said Leo Parejas, an executive at LeoProex, a Barcelona, Spain-based
company that offers transportation and commerce services.

For the residents of Mariel, the port means an unknown number of new
jobs, a window into the global economy and perhaps a few more cars on
the streets.

"Before, this was a small fishing town with a dock where the boats would
come in," said Jose Ramon Reyes, an 85-year-old barber who cuts his
customers' hair on the front porch of his modest home. "Now it seems
this is going to be a second Havana."

Andrea Rodriguez on Twitter: www.twitter.com/ARodriguezAP

Source: "MARIEL, Cuba: Cuban leaders eye new port as economic lifeline -
Business Wires - MiamiHerald.com" -
http://www.miamiherald.com/2013/11/11/v-fullstory/3745386/cuban-leaders-eye-new-port-as.html