Mariel Special Economic Development Zone
After years of Cuba talking about the Mariel Special Economic Development Zone as the island’s economic future, the sprawling site 28 miles west of Havana is beginning to take shape with huge tracts of land leveled and ready for construction of two major manufacturing operations.
So far 27 companies, including firms from Spain, the Netherlands, Panama, Brazil, Mexico, South Korea, Vietnam, France, Belgium, and Cuba itself, have been given the green light to set up shop in the 115,000-acre zone. Only nine are currently operating there.
But Cuba envisions the zone and the Mariel port — perhaps best known in the United States as the gritty departure point for 125,000 Cubans who came to the United States during the 1980 boatlift — as the beginning of a bustling commercial city built on high-tech, advanced manufacturing and sustainable development.
When Cuban leader Raúl Castro and former Brazilian President Luiz Inácio Lula da Silva toured the refurbished Mariel port in February 2014, Castro called the Mariel complex the most important project carried out by the Cuban Revolution in the past 50 years.
“I think the port of Mariel represents the possibility of an industrial revolution for Cuba,” said Lula. During his administration, Brazil’s National Bank of Economic and Social Development (BNDES) extended loans that paid for most of the cost of developing the Mariel container terminal.
Over the last few years, container operations have been shifted from the Port of Havana, which has become Cuba’s main cruise port, to Mariel. The port — with more than 2,300 feet of wharf space, four super Post-Panamax cranes and the capacity to handle 820,000 cargo containers annually, has become a requisite stop for visiting business delegations. Managed by Singapore-based PSA International, the container terminal is the zone’s largest user.
“Sometimes there’s a little confusion — especially among the American audience. They see the zone as a port. The zone has a competitive advantage, which is the existence of the port, but it is much more than a port,” said Ana Teresa Igarza, managing director of the special zone, which is known by its Spanish acronym as ZED.
Until recently there wasn’t much to see in the zone, which was inaugurated in November 2013. Roads and traffic circles had been built among the rolling hills, but the zone was mostly wide, open spaces.
Now 25 acres of land has been fenced in and leveled for construction of the BrasCuba factory — a joint venture between Brazil’s Souza Cruz and Cuba’s Tabacuba. The $100-million plant will turn out Popular, Cohiba and H. Upmann cigarettes for export and the domestic market.
Across the street, a site has been prepared for a Cuban biotech factory, and Womy, a Dutch company that rents cranes and other heavy equipment, has just finished its building. Foreign companies such as BDC-Log and BDC-Tec also have begun operating in the zone’s logistics sector.
Unilever, which currently has an importing operation in Cuba, has completed site preparation for a joint venture with Cuba’s Intersuchel that will produce shampoo, deodorant, Lux soap, Omo detergent and Close-Up toothpaste. It hopes to be in production by 2018, said Igarza.
Rows of new warehouses with solar panels on their roofs that use only 10 percent of the energy they generate are nearing completion, and Mariel Solar, a French/U.K. venture, has won approval to build a solar farm at the zone.
Devox Caribe, a paint and coatings company with 100 percent Mexican capital, is among zone users that will be largely powered by solar energy. Its goal is to first produce for the Cuban market and then begin exporting to Mexico.
Two food companies, Richmeat de Mexico, which plans a processing plant and meat packing operation, and Profood Service, a Spanish company that plans to produce concentrated juice, cocktail mixes and powdered drinks to be used in drink dispensers, also have been approved.
But unless these companies can ramp up quickly to begin exporting, rather than just producing for the Cuban market, the zone’s financial incentives are little more than subsidies for domestic production, said Richard Feinberg, a professor of international economic policy at the University of California, San Diego.
“I wouldn’t say that after four years they have had that much success in attracting export-oriented industries,” he said.
To meet development goals, Cuba has said it needs to attract $2.5 billion in annual foreign investment, but it is still far from that goal.
Spain has the highest representation of any country in the zone with six approvals. So far no U.S. company has made the cut.
However, Igarza hints that may change soon. She said negotiations with three U.S. companies in the bio-pharmaceutical and heavy equipment industries are in the advanced stage. “Perhaps we’ll have some surprises at the International Fair of Havana,” she said. Until they have final approvals, she said the companies have asked that their names not be released.
The fair, which Cuba often uses to announce new foreign investment projects, will be held Oct. 30-Nov. 3.
“In our commercial relations we’ve decided to work with all countries,” said Igarza. “So trade with the United States and investment relations with the United States — which is a natural market for Cuba and Cuba is also a natural market for the United States — is in our work plan.”
But the thaw in U.S.-Cuba relations that began in December 2014 is threatening to freeze up again. In the wake of mysterious attacks that have affected the health of 24 American diplomats stationed in Havana, the United States has withdrawn all but key personnel from its embassy, expelled 15 diplomats at Cuba’s embassy in Washington, and has warned American travelers against visiting the island because some of the attacks on diplomats occurred at hotels.
The Trump administration also is writing new regulations that are expected to make it more difficult for Americans to do business with and travel to Cuba, but it hasn’t released them yet.
“We do see policies changing from those established under President Obama.... but in terms of interest by American firms, I don’t think it has diminished,” said Igarza. “We are constantly receiving entrepreneurs, state delegations or mayors here who are interested in the progress.”
Despite the travel warning, a delegation, which included council members and business executives from both St. Petersburg and Tampa, visited Cuba earlier this month and toured the special zone.
After the Obama administration’s opening to Cuba allowed limited U.S. investment and trade with the island, there was a flurry of interest by American businesses and even an announcement that Cleber, an Alabama company, had been approved to manufacture small tractors in the zone.
But that was premature, said Igarza. Even though Cleber had U.S. authorization to try to negotiate a deal with the island, Cuba had only acted positively toward a preliminary application. Ultimately, after Cleber submitted more technical data and it became clear the company wasn’t bringing any clean or advanced manufacturing processes to the zone, its proposal was turned down, Igarza said.
Cleber had proposed tractor technology from the 1940s — which Saul Berenthal, one of Cleber’s co-founders said was appropriate for small-scale agriculture in Cuba where some farmers still use oxen to till their fields. “We told him we weren’t interested because the technology was obsolete,” and the tractor also didn’t meet current safety and work health requirements in Cuba, said Igarza.
The Cleber rejection was a disappointment for those hoping it would be a harbinger of a deeper U.S.-Cuba business relationship. Some American executives also have complained about the lengthy Cuban decision-making process for potential U.S. ventures.
Igarza disagrees with that characterization. Decisions are not slow, she said, and are generally made within 60 days. But she conceded the process can be lengthy. After a company fills out a preliminary questionnaire, Cuba makes a determination whether a project is of interest. Then companies must submit extensive documentation and technical specifications.
“[How long it takes] all depends on how prepared their negotiating teams are,” Igarza said. Some companies have done all their paperwork in six months, she said.
The zone has received more than 400 applications from companies around the world, but not all have decided to go through the rigorous documentation process or have proposed projects that interest the Cubans. The zone works with 20 to 30 companies at a time on completing paperwork, said Igarza
At port seminars in the United States, Charles Baker, managing director of the Mariel container terminal, has talked about the port’s interest in serving as trans-shipment point. Big ships that have transited the expanded Panama Canal could call at Mariel where cargoes could be offloaded to smaller feeder vessels serving Tampa and other U.S. Gulf Coast ports that don’t have deep enough water for the huge Neo-Panamax ships now using the canal expansion.
But other ports, including Balboa in Panama, also are eager to expand their transhipment business and will offer plenty of competition. Currently the Mariel container terminal is operating at less than half its capacity.
The entrance to the Mariel channel is dredged to a depth of 45-feet, seven inches — not deep enough for Neo-Panamax ships, but dredging is continuing in phases. The goal is to reach a depth of just over 52 feet. The shipping channel at PortMiami, which is big-ship ready, has been dredged to a depth of 50 to 52 feet
As long as the U.S. embargo remains in effect, it will be difficult for Mariel to reach its potential as a trans-shipment and exporting port. “Look where Mariel is: facing the United States. The U.S. is the logical target,” said Feinberg. “Overall Mariel faces two major problems: very little access to the U.S. market and the wage issue.”
Even though workers in the zone receive a premium over other Cuban workers, foreign companies must do their hiring through state agencies and the government retains a big chunk of workers’ earnings. “Even though the wages Cuban workers actually get are low, Cuba is not considered a low-wage destination and that’s a problem for investors,” said Feinberg.
Meanwhile, the pieces of Cuba’s grand industrial project are slowly coming together.
A double-track rail line has already been completed from the zone to Havana, and a passenger terminal is under construction. Some 7,000 workers — many of them involved in construction projects — who now labor in the zone will be able to ride the train to work and take shuttles to their workplaces when the terminal is completed in January.
Outside Igarza’s third floor office at the Pelicano Business Center, there is a huge rendering of the future Mariel zone with all the open land filled in with factories and warehouses.
“A port open to the world,” it reads.
Follow Mimi Whitefield on Twitter: @HeraldMimi