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Foreign Investment

Mariel Special Development Zone: Conning Cubans

Even if Raúl Castro visits its and says that 'it's coming along, it's going well' ... it is not going well, at least, at least not in economic terms... because in political terms it conforms to the regime's strategy.

La Habana
Raúl Castro and Díaz-Canel during a visit to the Mariel Special Development Zone in 2020.
Raúl Castro and Díaz-Canel during a visit to the Mariel Special Development Zone in 2020. Granma

The fact that Cuba's ruling caste does not want to fully imitate China's reforms is clear, due to its reluctance to take the steps that yielded economic results in the Asian nation, dramatically improved the well-being of its population, and even increased individual rights, albeit in the context of a political dictatorship.

It is also obvious that Castroism is reluctant to do so because it has calculated that, given Cuba's specific circumstances —sociological, geographical, demographic— the people's rapid economic advancement does not behoove those in power. The power pyramid hinges, to a large extent, on keeping the civilian population, poor and uncoordinated, dependent on the State, and inert.

However, in need of external revenue to compensate for the congenital unproductivity of the Castroist economic system, copying a political strategy similar to that followed by the Chinese government in the late 1970s, based on cultivating economic development in isolated enclaves of the population and local bureaucracies, in 2013 Castroism inaugurated the Mariel Special Development Zone (ZEDM), inspired by and modelled on China's Special Economic Zones (SEZs), which were and are one of the cornerstones of that country's rebirth.

EEZs have specific rules, mainly in terms of investment conditions, international trade, Customs, taxes and administrative regulations. They strive to create a liberal (from a political/economic perspective) and effective (from an administrative perspective) business environment. Unlike FTZs, EEZs are more inclusive, offering incentives not only for manufacturing, but also for agriculture, tourism, trade, finance, real estate development and technological innovation.

Specifically, Chinese-type EEZs, which Mariel seeks to replicate, attempt to turn a small portion of a country historically resistant to free market and private property into an oasis for direct foreign investment, areas where socialism is suspended and market laws are allowed to function. Their success is measured by the volume of investment they manage to attract.

The first opened in China was Shenzhen, in 1980. In 1982, that city was already so attractive that it accounted for 50.6 per cent of the country's foreign investment, quintupled its inhabitants' income, and saw the construction of more than 300 factories. During the first five years, local GDP growth exceeded 50%. It was so successful that, in the following nine years China replicated the experience in another 24 enclaves, and not small areas, but even larger provinces and geographical areas, where EEZS have multiplied.

After nine years, the first EEZ inaugurated in Cuba, the Mariel Special Development Zone (ZEDM), is still the only area of the country with these characteristics, which is logical, as there are only 62 approved businesses, with only 36 operating, and, of the 22 billion in investment (2.5 billion annually) that the ZEDM was supposed to attract, at this point only 3 billion dollars have been "committed," and the concretized ones barely exceed one third of this limited amount. Each year, it has invested 25 times less than expected when the ZEDM was promoted.

Can you see the difference between Cuba's first EEZ and China's? Though Raúl Castro personally visited Mariel and stated that "it's coming along, there is much more experience, it's going well", no, it is not going well, at least in economic terms... because in political terms it conforms to the Raulista strategy.

Raúl Castro's government, directly or through front men, has implemented a litany of economic reforms that project the impression of an opening up, but that are only a mirage, a ruse to buy time by keeping the people believing that it is evolving towards a "more normal" country, while the government pursues a strategy of fraudulent change, striving to transform Fidel's failed and unsustainable socialism into a mercantilist one supported by a base of economic privileges with political connections, with future oligarchs operating in the shadows and real power remaining in the hands of the political/military aristocracy.

They have created an EEZ,  and they have also updated the  foreign investment regulations, offering very advantageous fiscal and labor conditions, financing, access to sectors prohibited for nationals, a captive market of 11 million consumers, protection against foreign competition, and the agility of a "one-stop shop."

All this is done to feign that Cuba is opening up to the world, but the real result is that, of the 400 companies that were interested in investing in the ZEDM in 2016 (we don't know how many more may have expressed interest since) the government has only approved 62, of which, as we said, just 36 are operating.

What this reveals is that the scant foreign investment in the island is not due to the US embargo. Not at all. The real problem is that, of the investments that arrive, Castroism blocks more than 90%, rejecting hundreds, even thousands, of companies willing to bring development and well-being to the Cuban people.
Cuba is changing, but while Cubans are made to believe that the government is trying to evolve towards something better for the people, a freer and more modern economy, the truth is that the change sought is something better for the government.


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