Created: Thursday, 17 April 2014 15:29
Written by Andrew George
Fight Racism! Fight Imperialism! 238 April/May 2014
On 27 January, Cuban President Raul Castro and Brazilian President Dilma Rousseff inaugurated the first 700 metre section of a container terminal at the port of Mariel, Cuba, in a ceremony attended by the Presidents of Haiti, Bolivia, Venezuela and Guyana and the Prime Minister of Jamaica. Raul Castro declared: ‘This container terminal, and the powerful infrastructure accompanying it, are a concrete example of the optimism and confidence with which we Cubans see a socialist and prosperous future.’ The heads of state were in Havana for a summit of the Community of Latin American and Caribbean States (see FRFI 237).
The Mariel Special Economic Development Zone is a 465km2 deepwater sea port and industrial park area in Artemisa Province, 45km west of Havana. The $950m development is intended to ‘increase exports, the effective substitution of imports, [promote] high-technology and local development projects, as well as contributing to the creation of new jobs’, and to stimulate foreign investment in Cuba. Mariel is the nearest port to the US. The Zone will benefit from the expansion of the Panama Canal, to be completed in 2015, and the creation of the transoceanic Nicaragua Canal by the HKND Group, expected to be completed by 2019. With world-leading technology and sufficient depth, Mariel will be able to accommodate huge post-Panamax vessels and act as a transhipment hub for the region.
Investments have already been proposed by companies in China, Brazil, Venezuela, Mexico, Argentina, Chile and the Dominican Republic, among others. Among the first projects will be a Brazilian-funded biopharmaceutical joint venture with a Cuban state company, to produce monoclonal antibodies for a cancer vaccine. The port was built by the Brazilian engineering group Odebrecht in partnership with the Cuban state and subsidised by $682m from the Brazilian government’s Development Bank (BNDES). In 2012 Odebrecht USA sued the State of Florida over a state law banning trade with companies which have business ties to Cuba. Brazil is Cuba’s second largest trading partner in Latin America, after Venezuela. About 400 Brazilian companies were involved in the project, generating some 156,000 jobs in Brazil and earning $802m for construction businesses. In Cuba, more than 2,000 workers from nearby towns were employed on the construction, and the Zone is expected to generate 3,000 direct jobs and 5,000 indirect ones.
The terminal will replace Havana Port as the main harbour of Cuba. It will have an initial 700 metre berth, a 2,400 metre dock and an annual capacity of up to one million containers. New roads and railway infrastructure will be built to link up with existing highways. The port will be operated by Singapore’s PSA International, which runs several of the world’s largest ports.
Foreign companies operating in the Zone can retain up to 100% ownership (as opposed to the standard joint venture agreement in which the Cuban state retains 51% ownership), are exempt from customs duties and labour taxes, get a one-year holiday on sales and services taxes and a 10-year reprieve for taxes on profits (after which they will pay 12% tax on profits). Contracts will be extended from 25 to up to 50 years.
However, unlike in similarly named ‘free-trade zones’, Cuban workers will be protected. 99% of the workers at the port will be Cubans and foreign investors applications will be scrutinised by the regulatory Office of the Mariel Special Economic Development Zone, which will report directly to the Council of Ministers of the Cuban government. All companies will have to pay a 14% social security tax and 0.5% of their income into a Zone maintenance and development fund, and a 1% sales or service tax for local transactions. Cuban workers must be recruited via a state-run employment agency. The Cuban state receives payment for their labour in hard currency and converts a proportion of this into (convertible or national) pesos for the payment of salaries. Foreign workers in the Zone will also have to pay the normal Cuban income tax rate.
The creation of new employment bolsters measures to streamline the state sector, as non-state sector employment has risen to 27% of Cubans (including cooperatives), up from 16% in 2010. This is part of a wider push for sustained economic growth, based on greater efficiency and productivity. The need to update and improve the Cuban economy was addressed in the Economic and Social Policy Guidelines of the Party and the Revolution published in November 2010. The Guidelines were approved in April 2011 at the 6th Congress of the Communist Party of Cuba, following debate among the Cuban population who made more than three million suggestions, resulting in changes to more than half the original draft (see FRFI 221). However, the Zone also emerges from long-standing plans to improve Mariel Port and follows visits by Cuban officials to similar zones in China, Vietnam and the Caribbean. Mariel is the largest and the first in a series of planned Special Economic Development Zones in Cuba.
Mariel could prove to be the greatest challenge yet to the illegal US blockade, which prohibits ships that dock in Cuba from entering US territorial waters for six months. The measure is a punishment and deterrent for third countries to prevent trade with Cuba. Several countries are moving to improve trade relations with Cuba, especially attracted by the new megaport and by Cuban deepwater gas and oil reserves. Mexico recently cancelled 70% of Cuba’s almost $478m debt. Russia cancelled Cuba’s disputed $29bn of Soviet-era ‘debt’. The Russian company Zarubezhneft plans to resume near-shore oil-drilling in Cuban seas this year. The Cuban government has improved repayments of its foreign debt as it seeks to attract more foreign capital for the infrastructural investments needed for national development.
In late March 2014, the National Assembly will discuss a proposed new Foreign Investment Law to replace the most recent laws, dating back to 1995 during the Special Period. Minister of Foreign Trade and Investment, Rodrigo Malmierca Díaz, commented: ‘it offers greater guarantees and incentives for foreign investment and ensures the attraction of capital which will contribute effectively to the objectives of sustainable development and recovery of the national economy, which today has a strategic connotation for the country’.