New Cuban port, economic zone a potential lifeline, but US embargo rules still a challenge

Life still moves slowly in this small, dusty hamlet with squat homes lining narrow streets, where some walk slowly with parasols to ward off the pounding tropical sun.

Best known as the launch point of a mass maritime exodus to the U.S. in 1980, the 40,000-person town of Mariel has practically no traffic and kids play freely in the streets without worrying their parents. But all that's about to change with the rise of a huge, modern, $900 million port and special commercial zone in and around the town's formerly sleepy harbor.

The island nation's Communist authorities have high hopes that Mariel could become a strategic economic center — especially if the U.S. lifts its 51-year-old embargo and starts sending container ships south. Others suspect the port's impact on Cuba may be more modest, reflecting the country's long-stagnant economy.

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.

"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.

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.

The ability to take in deeper-draft ships would 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.

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.

There are no available statistics on total foreign investment, although other figures suggest such inflows may have waned over the past decade. Earlier this year, the government said 190 mixed-ownership companies were operating in the country, compared with 400 reported in the early 2000s.

At the port presentation at the Havana Trade Fair, some attendees expressed skepticism about rules prohibiting foreign companies from hiring employees directly, instead forcing them to contract with workers through a state-run employment agency. Critics also bemoaned a lack of existing office space and other infrastructure.

One diplomat who attended said the inability to choose employees independently makes doing business harder and worried that the zone could suffer from the same cumbersome bureaucracy that plagued previous, smaller development zones in Cuba.

Some companies will no doubt be hesitant to set up shop knowing that U.S. embargo rules would almost certainly prohibit them from selling their products in the United States and that their Cuban operations could complicate any trade they do with Uncle Sam. Embargo rules 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. "We are of the opinion that despite the embargo, investors will still come."

Malmierca also said Cuba is "going to support and protect the businesses, the industrial projects. ... Foreign investments cannot be expropriated."

Brazil, which is Cuba's No. 2 economic partner in Latin America after oil benefactor Venezuela, is providing credit to pay two-thirds of the project's costs.

Igarza said Brazilian, Chinese, German, Japanese, Mexican, Russian, Spanish and Vietnamese investors have expressed interest.

"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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