Mariel, Cuba Being Transformed To $900 Million Port, Commercial Zone

Life still moves slowly in this small, dusty town, where kids play freely in narrow streets nearly devoid of traffic and many people carry parasols to ward off the pounding tropical sun.

But that's all about to change. The town best known as the launch point of a mass maritime exodus to the U.S. in 1980 is being transformed into a huge, modern, $900 million port and special commercial zone.

The island nation's Communist authorities expect Mariel to become a center for foreign investment. It could also position Cuba to take advantage of a trade boom if the U.S. ever lifts its 51-year embargo and starts sending container ships south — something investors have been waiting for, in vain, for years. Others suspect the port's impact on Cuba may be more modest, reflecting the country's long-stagnant economy.

"The Port of Mariel could ... contribute to a revival of Cuban foreign trade, more so if there are improvements in relations with the United States," said Arturo Lopez-Levy, an economist and lecturer at the University of Denver.

Plans to overhaul the Port of Mariel began in 2009 when officials determined the country's main harbor in Havana is too shallow for bigger, deeper-draft "post-Panamax" vessels, which starting in 2015 will begin crossing through an expanded Panama Canal and carry an increasing share of regional cargo. An automobile tunnel that traverses the mouth of Havana's bay makes it impossible to make the waterway deeper.

Even with the U.S. embargo, the ability of Mariel to take in deeper-draft ships will let Cuba keep pace with global shipping innovations and accommodate more cargo. Hopes are equally high for the adjacent, 180-square-mile (465-square-kilometer) industrial park and special development zone, which officially launched Nov. 1.

During a recent visit by The Associated Press, orange-clad, helmeted workers in the port zone were building what looked like a large warehouse while trucks arrived loaded with construction materials. Hundreds of yards (meters) of docks appeared nearly completed, ahead of the port's expected opening early next year.

Simply swapping one port for another, however, won't be enough to right Cuba's rickety economy, which relies heavily on food and other imports while making most of its foreign income from tourism, nickel mining and the export of services such as tens of thousands of medical professionals.

Authorities hope to attract foreign firms to invest and set up shop in the development zone, with a priority on industries such as food, biotech, renewable energy, packaging and telecommunications.

Foreign companies that answer the call will be exempted from paying taxes on labor, profits and sales and services, at least at first. Tax rates will rise to 12 percent on profits after a decade of operation and 1 percent on sales and services after 12 months.

"It will be a world-class special zone," said Ana Teresa Igarza, director of the office overseeing the development zone during a presentation about the port last week at the Havana Trade Fair.

Still, Cuba has had trouble keeping the foreign investors already here, most of which are joint ventures with government agencies.

Earlier this year, the government said 190 mixed-ownership companies were operating in the country, compared with 400 in the early 2000s.

Foreign executives and diplomats have said stifling bureaucracy and corruption crackdowns targeting some foreign-run businesses have dampened enthusiasm, as have rules prohibiting foreign companies from hiring employees directly. Instead, they must contract workers through a state-run employment agency.

Critics also bemoan a lack of office space and infrastructure.

Investment also has been restricted by the embargo, which would ban companies from selling products routed through Cuba in the United States. Embargo rules also prohibit ships from docking in the United States for six months after calling in Cuban ports.

Cuban officials are betting Mariel will be attractive enough to overcome those problems.

"To what extent (the embargo) may affect the development of the special zone, we can't calculate," Foreign Trade Minister Rodrigo Malmierca said. "Despite the embargo, investors will still come."

Malmierca also vowed that the Communist government will never expropriate foreign businesses, as it did following the 1959 revolution.

Brazil, which is Cuba's No. 2 trading partner in Latin America after oil benefactor Venezuela, is providing credit to pay two-thirds of the project's costs. Raw materials are presumably coming from a mix of imports and items that can be produced locally, such as cement.

Igarza said Brazilian, Chinese, German, Japanese, Mexican, Russian, Spanish and Vietnamese investors have expressed interest. Venezuela, China and Vietnam are increasingly important business partners for Cuba, and Mariel could serve as a hub for petroleum products.

"I think that (Mariel) will generate interest among all businesspeople," said Leo Parejas, an executive at LeoProex, a Barcelona, Spain-based company that offers transportation and commerce services.

For the residents of Mariel, the port means an unknown number of new jobs, a window into the global economy and perhaps a few more cars on the streets.

"Before, this was a small fishing town with a dock where the boats would come in," said Jose Ramon Reyes, an 85-year-old barber who cuts his customers' hair on the front porch of his modest home. "Now it seems this is going to be a second Havana."

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