November 20, 2013 -- Updated 1205 GMT (2005 HKT)
The Gateway goes behind the scenes of the world's major transport hubs, revealing the logistics that keep goods and people moving.
(CNN) -- In the sleepy seaside town of Mariel,
northwest Cuba, a hulking monument to the communist islands' evolving
economy is rapidly taking shape.
It is here, under the
intense glare of the Caribbean sun, that a giant free-trade zone (FTZ)
and container port are in the latter stages of construction.
The deep-water facility
will have an annual capacity of up to one million containers when
finished (three times that of Havana's existing port roughly 30 miles
away) and 700 meters of berth that it is hoped will host some of the
world's largest cargo ships.
Partially financed by
loans from Brazil and built by Brazilian construction firm, Odebrecht,
the port will be operated by Singapore's PSA. The FTZ, meanwhile, aims
to attract international companies to Cuba by offering them a low-tax,
low-regulation environment in which to manufacture goods.
Mariel, Cuba (click to expand)
"What the zone is
intended for is to create a special climate where foreign capital is
going to have better conditions than in the rest of the country," said
Cuba's foreign trade and investment minister, Rodrigo Malmierca, during a
September visit to Beijing.
The $900 million project
mirrors similar developments and FTZs that have sprung up in
fast-growing communist nations such as China and Vietnam in recent
decades -- although experts doubt whether Cuba will follow the same path
as the "Asian Tigers."
While the ruling
Communist Party maintains that state control will take precedence, the
ambitious development is the latest in a series of controlled reforms
that have been made since Raul Castro came to power in 2008. The
government has already relaxed its control over many sectors,
encouraging ordinary Cubans to fill the void with their own private
enterprises.
A sign at the entrance to the town of Mariel, Cuba (Credit: Derek R. Kolb)
"Cuba is shedding its old
skin and it's becoming something else which is like a hybrid of
models," explained senior Latin America fellow at the Council on Foreign
Relations and author of the book "Cuba: What Everyone Needs to Know," Julia Sweig.
"This will (likely
consist) of a much larger private sector, a much smaller social sector
with the basics of social protection left in place, a lot more personal
autonomy and economic freedom for Cuban people without necessarily
moving beyond the single party system," she added.
Regional developments
This new economic
direction -- which the administration refers to as an "update" of the
socialist economic system -- and in particular the Mariel development
have been brought about by a number of specific challenges and
opportunities for Cuba, Sweig explained.
The widening of the Panama Canal (which is due to be completed in 2015)
means more of the world's largest ships will soon be passing through
the Caribbean, providing Cuba with the chance to benefit as a transhipment hub thanks to its strategically favorable location.
Fast-growing economies
in the region, such as Brazil, Mexico and Chile, meanwhile, provide
fresh possibilities for foreign investment and trade tie-ups. Nurturing
new relationships has been made all the more important given the
volatile political climate in Venezuela, whose leftist government
currently sells subsidized oil and trades with Cuba on conditions that
are highly favorable to the island country.
A vitally important cog
in this wide-ranging strategy is Mariel. According to Carmelo Mesa,
professor of economics and Latin American Studies at the University of
Pittsburgh and author of the book "Cuba under Raul Castro: Assessing the Reforms," the port and FTZ are by far the most important development project on the island.
"The objective for
Mariel and the free zone is to expand infrastructure, increase exports,
reduce imports and develop high-tech projects that will create jobs,"
Mesa said. "This is important as the Cuban government has indicated that
anywhere from 1.3 million to 1.8 million workers in the state sector
are unneeded and must be dismissed.
"Cuban exports are
generally raw materials, except for pharmaceutical products and
biotechnology products but this is only about 8% (of exports). So they
want to have value added goods such as computers, appliances and expand
biotechnology," he added.
Breaking with the past
Whether the wider economic plan and investment in Mariel will achieve these aims, however, remains far from certain.
The 51-year-old U.S.
trade embargo still restricts Cuba's ability to trade freely with its
international partners. Any ship that docks in Cuba cannot enter the
United States for six months. If the embargo was ever lifted, however,
the FTZ would be favorably located (only 120 miles from Florida) to
serve as a low-cost site for companies looking to manufacture and ship
their products into the U.S. market.
As it stands,
international investors will have to be persuaded to choose Cuba over
nearby competitors. The likes of Panama, Jamaica and the Dominican
Republic already have established FTZs in their territories.
A panoramic view of Mariel, Cuba (Credit: Wikimedia Commons)
Mesa also points to
economic development zones introduced under Fidel Castro in the 1990s
and early 2000s which expanded very quickly before "there was a
re-centralization of the economy" leading many foreign firms to pull out
of Cuba.
According to Diego Moya-Ocampos,
a Cuba specialist at IHS Global Insight, many investors still see Cuba
as a "hostile business environment" and will treat any opening of the
economy with a high degree of skepticism.
"This opening is going
to be taken with a pinch of salt ... it's still to be assessed what the
tax and regulatory benefits of the (FTZ) will be," he said.
The end of communism?
Despite these
significant challenges, Cuba still has much to offer international
companies, not least a well-educated labor force -- Cuba has one of the
highest literacy rates of any country, according to data compiled by the CIA World Factbook.
Mesa however identifies
laws that restrict foreign companies hiring Cubans directly as a
potential disincentive to FTZ investors. Instead, workers are employed
via a government agency that makes all decisions on the wages they
receive often driving up the price of labor -- although new laws on
foreign investment are expected.
Sweig meanwhile points
to the lifting of travel restrictions between the U.S. and Cuba in
recent years and a gradual shift in rhetoric in Washington policy
circles that indicates a softening on the issue of the embargo.
All concur however that,
despite the tentative adoption of market principles and the loosening
of central economic control, this is far from the beginning of the end
of communism in Cuba.
"(The Cubans) know they
need to create these types of clusters where they can operate more
aggressive free trade economic policies without necessarily affecting
the economic dynamics of ordinary Cubans," Moya-Ocampo said.
"It's pragmatism," he added. "Cuba is trying to update its structures to meet the new realities of Latin America."
No comments:
Post a Comment