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Mariel, the Embargo and Freedoms

The greatest infrastructure work in Cuban history depends on an end to the embargo, and the country's democratization.

La Habana

According to the newspaperGranma,on March 23, the Special Mariel Development Zone (ZDEM) already had "34 users from 16 countries, including Cuba, nine multinationals, and has managed to attract total investments amounting to over 1.19 billion dollars."The news, not withstanding critical analysis, is misleading.

The history of the ZDEM goes back to the 90s, when the crisis generated by the collapse of the Soviet Union spurred the Government, among other things, to create three free zones for manufacturing activities, assemblywork, and the processing of finished and semi-finished products, without intervention by Customs authorities. One of them was located in the Port of Mariel.

The measures impacted the number of foreign companies in the country. In 2002, the figure was 400, with a investment commitments coming to almost 3 billion dollars. Starting in that year, as a result of the government's hampering, those companies began to leave, until in 2008 they were a bit less than half.

The expansion of the Panama Canal - initiated in 2007 in response to the increase in demand for maritime transport through it - did not go unnoticed by the Cuban Government. Among the reform measures approved in 2011, dubbed the "Guidelines for the Economic and Social Policy of the Party and the Revolution," number 103 was dedicated to "Promoting Special Development Zones". And in 2013 the corresponding Decree-Law was enacted.

The project, which includes a railway line connecting Mariel and Havana, with the capacity to transport 300,000 containers per year; and a special industrial and agricultural zone, was assigned to the Brazilian construction company Odebrecht. It was financed with a loan for 682 million dollars from the National Economic and Social Development Bank of Brazil, while its management was assigned to the Port Authority of Singapore company.

In January of 2014, when the first stretch of the 702-meter pier and a 28-hectare container yard were inaugurated, Brazil's president, Dilma Rousseff, present at the event, announced another loan of 290 million dollars.

As more than half of international trade is carried out using container transport, the Panama Canal was expanded to make way for mega-ships in response to the growing flow of goods between Asia and North America, which is revolutionizing the logistics of global value chains through productive networks featuring components and processes found all over the planet.

A portion of the megaships will connect directly with Asian and North American ports, but the magnitude of the transfer of goods requires megaports in the Caribbean to transfer loads, reorganize the contents of the containers, add value at the local level, and forward them to their destinations on smaller ships.

Cuba, together with San Cristóbal, in Panama; Freeport, in the Bahamas; Caucedo, in the Dominican Republic; and Miami, in the United States, are potential beneficiaries, among others, which makes the ZEDM vital and converts it, thanks to its geographical location, into the main infrastructure project in the history of Cuba – one which could have an impact similar to that of the occupation of Havana by England in 1762, or the collapse of Haiti in the early years of the 19th century.

However, there is a series of obstacles to Cuba fully participating in the revolution that global value chains are undergoing, with productive networks in different countries. Among them: the dual monetary system, which means that money loses or sees its functions diminished; the economic inefficiency entailed by the inability to pay debts owed to creditors, thereby hindering access to international credit institutions; and the imposition on Cuban workers of being hired through a State agency that retains 80% of their salaries, while the 20% they receive in convertible pesos (CUC) is converted into Cuban pesos (CUP), not at the official rate of 1 x 24, but rather at a special rate of 1 x 10, in a country where the only permitted union organization represents the interests of the State.

There are two other obstacles that I consider to have the greatest negative impact:

  1.     The American embargo, which prevents any vessel that visits a Cuban port from entering US ports for six months. The example of Vietnam it is very illustrative in this regard: after waging a long war and suffering enormous human and material losses, the changes introduced in that country led the US Government to lift its embargo in 1994. In 2000 a Free Trade Agreement was signed, and now the US is actually the country's leading business partner. Unlike Vietnam, Cuba insists on denouncing the embargo, but not on changing it.
  2.     There is a crippling lack of freedom within the country, such as the absurd prohibition against Cubans operating as entrepreneurs, or being freely hired by foreign companies.

These factors constitute a set of obstacles hindering, in the short term, the achievement of the objectives pursued through the ZEDM project, as shown by the meager results obtained thus far.

In 2013, when the ZEDM Regulatory's Office was opened, it was reported that they had proposals from Brazil, Mexico, Argentina, Chile and the Dominican Republic. Soon after a major promotional campaign was unleashed: in that year, during the 31stInternational Construction Fair in Havana, the director of the Regulatory Office announced that there were proposals from foreign investors from some 15 countries. Foreign Trade and Foreign Investment Minister Rodrigo Malmierca then toured Brazil, China, Vietnam and Russia.

In 2014 the promotion continued during the CELAC summit at the International Construction Fair, and at the International Industry Fair.

From 2015 to 2018 every possible event has been used, within and outside of Cuba, to promote foreign investment, and the portfolio of opportunities has been expanded.

Five years later the ZEDM has 34 official users, but just 10 are actually operating, which demonstrates that its objective has not been achieved, nor will it be achieved in the short term without the introduction of changes. Cuba requires some 2.5 billion euros in annual direct investments, while the figure secured over these last five has been less than 1.2 billion.

The Helms-Burton Law and the Government of Cuba are temporary. Mariel's geographic location, however, is forever, and maritime transport through this transoceanic route will become even more crucial over time, which indicates its importance in the medium/long term.

The ZEDM could become a driving, vitalizing factor in the economy and in society. The conversion of this possibility into a reality hinges on an end to the embargo, and the democratization of Cuba. It is as simple as that. The rest has been, and will be, fruitless.

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