Cuba's big bet

Cuba
mariel.JPG

Mariel port, from afar. © Vanessa Baird

The tatty windswept coastal town of Mariel looks too mundane and inconsequential to bear the weight of its history – let alone its future.

This is where US gangster Lucky Luciano was hoping to build a casino until his plans were spoiled by the 1959 revolution.

It was also here that Russian naval vessels docked to unload the nuclear warheads that triggered the 1962 Cuban missile crisis.

And this place gave its name to the Mariel Boatlift, a mass exodus of 120,000 Cubans for the US, between April and October 1980. It began with thousands descending on the Peruvian embassy in Havana to claim asylum. Fidel Castro responded by saying people who wanted to leave the island could do so, within a certain time-span.

Among those who took the chance were many lesbian and gay Cubans persecuted by the regime.

Today Mariel is in the news again – but for a rather different reason. It’s the spot that’s been chosen to radically alter Cuba’s economic place in the world

A vast deep harbour facility is being built to accommodate giant ships for the ‘post-Panamax’ era. From 2015 a deeper and wider Panama Canal will be able to accommodate ships carrying three times more cargo, drastically cutting transport costs.

It is expected to divert a quarter of the Asia-to-US shipping that currently unloads on the US west coast to ports on the east coast.

Few existing ports can handle mega-ships – hence the need for a conveniently located transhipment hub where containers can be moved onto smaller vessels for regional distribution.

Mariel is a prime contender. Its location on the north coast of Cuba is ideal. The project is already well under way, the first phase due to be completed by the end of this year. Most of the funding ($900 million) is coming from Brazil, and once completed the port will be managed by a world leader in the field, Singaporean port operator PSA International.

There’s one glaring disadvantage, though, and it’s a big one: the US embargo on Cuba.

Cuban PR about Mariel chooses to look beyond this rather large elephant in the room. The official view is that Mariel is a winner, with or without the US.

Transcending the elephant

At an opening ceremony earlier this year, with Brazilian president Dilma Roussef in attendance, Raúl Castro described Mariel as a ‘transcendent’ project.

The port, and the 180-square mile (46,620-hectare) free-trade zone that will surround it, is seen as a launch pad for the country’s future economy.

For years Cuba has consistently imported more goods than it exports. Productivity is comparatively low. One thing it does produce and export very successfully is medical staff, under what is called ‘international co-operation’. This peaked with the export of 30,000 Cuban medics to Venezuela and there are currently 7,400 in Brazil.

Cuban Office of National Statistics and Information (ONEI)

However, a scale-back in medical services to Venezuela is anticipated and falling revenue from nickel will mean the balance of trade is worse this year. Tourism is healthy, but it’s still not enough to cover for the fuel and food the island needs to import and for the cost of its social provision.

The country is also over-reliant on Venezuela, which has become increasingly unstable since the death of President Hugo Chávez. So Cuba needs to up its own production and diversify its trade partners.

The Mariel project is seen as a key part of that plan, which will boost exports, fuel development and create employment opportunities. To pave the way, in April this year, the Cuban parliament passed a new foreign investment law.

Investors will now be given contracts for up to 50 years with the possibility of renewal and 100-per-cent ownership. They will be charged no labour or local taxes and will be granted tax breaks on profits which can be repatriated. This compares with a 30 per cent profits tax and 20-per-cent labour tax in the rest of the country.

Some free-trade zone watchers are alarmed. It is easy for such areas to become low-wage sponges where (mainly female) labour is exploited, and which operate in a way that fails to benefit the rest of the economy.

‘If Cuba, like so many others who have embraced the EPZ [export processing zone] model, is not careful on this new economic path, it may end up sacrificing its self-determination and human development only to receive increased levels of poverty in return,’ warns NACLA’s Kevin Edmonds.1

But Cuba’s new investment law is far more protective of local and national interest than is usual, points out Emily Morris, a leading expert on the Cuban economy who teaches at London University. It has, she says, ‘been formed by the best practice of how foreign investment can benefit the receiving country’.

A government appraisal team will need to be convinced that any proposal will contribute to Cuban development by offering new finance, technology, management ‘know-how’, or markets. This may seem like basic common sense, but it is by no means the norm. Another unusual aspect is that there will be no direct employment of Cubans by foreign capital; all will be managed through the state.

But what about the blockade?

The US embargo cannot be held responsible for all Cuba’s inefficiencies or absurdities. As novelist and journalist Leonardo Padura put it recently: ‘You can’t blame the embargo for lack of potatoes in the market.’*

Nonetheless, the impact of the US sanctions is profound and wide-ranging. It does not just block Cuban trade with the US, but with third parties too. Often companies have to choose whether they want to do business with the US or with Cuba – hardly a choice.

It also affects Cuba’s access to financial markets and its ability to raise funds for its development. And it even reaches into Cuba’s humanitarian work.

Companies often have to choose whether they want to do business with the US or with Cuba - hardly a choice

The Spanish airline Hola had to ditch its contract with a Cuban overseas aid programme to treat people with eye diseases after the US government told Boeing to stop servicing Hola’s planes.

The US government even seized $4.2 million of funding from the Global Fund to Fight AIDS, Tuberculosis and Malaria because they were earmarked for implementation in co-operation projects with Cuba.2

To trade with others Cuba has to be able to handle payments, but many systems (including Paypal) are routed via the US. Sometimes payments (made in dollars) are routed via the US by accident and then seized there. The fines imposed by the US authorities on companies that break sanctions (accidentally or not) can be phenomenal.

In June this year French bank BNP Paribas agreed to pay a record $8.9-billion fine after admitting transactions with Cuba, Sudan and Iran – identified by the US as ‘states that sponsor terrorism’. This followed other big fines handed out to the Dutch Bank ABN Amro and the Royal Bank of Scotland (RBS) for similar infractions.3

Closest of enemies

Most countries in the world condemn the embargo. But in recent times calls for it to be lifted have increased within the US, too.

The US Chamber of Commerce now argues that the embargo is harming American business interests, especially those of smaller companies that do not have the means to get around it by registering branches in separate jurisdictions.

Even Cuban Americans in Florida, traditionally the most hardline defenders of the embargo, are turning against it, according to a recent poll.4 This partly reflects a demographic shift as the hardliners grow old or die and a new generation wants relations between the two countries to be normalized.

However, the embargo is unlikely to be lifted any time soon – and the reason for this is partly constitutional. Its current incarnation – codified primarily in the 1996 Helms-Burton Act – stipulates that sanctions may not be lifted until Cuba holds free and fair elections and transitions to a democratic government that excludes the Castros.

In addition, there might be a motive in keeping Cuba on the list of ‘terrorist states’ so as to make it harder for other countries to get into Cuba before the US has the opportunity to do so.

While US and Cuban governments may be at loggerheads, ordinary people are not. Around half of all Cubans have some family members living abroad, most in the US. Some are political exiles but many more are economic migrants, sending remittances home.

Travel between the countries is now easier than it has been at any point since the revolution. A total of 332 flights from the US to Cuba were registered during one month in 2013. More than 520,000 Cuban-Americans are expected to visit the island this year.5

Rafael Hernández, of the Havana-based Temas magazine, reckons the embargo may not be lifted but will ‘fade away’ as more and more exceptions are introduced. There is already a major exception in that the US exports large quantities of food to Cuba each year, a process that began in 2001 when Cuba’s harvest was all but wiped out by Hurricane Michelle.

Looking ahead

Back at Mariel huge swathes of earth have been moved and reshaped, cut and sliced, as though by a playful Titan. Diggers, like sinister insects, are poised on the horizon, ready for action.

The project attracted the interest of Vladimir Putin on a recent official visit to Cuba. Russia has agreed to settle defaulted Soviet-era debt at the value of $3.5 billion, which will be re-invested in Cuba.

Keeping things warm, both Castro brothers have given fulsome backing to Russia’s intervention in Ukraine. There were reports that Russia would reopen an electronic listening post on the island, later denied by Putin.6

Chinese leader Xi Jingping also visited in July, accompanied by 50 Chinese business leaders.

Several trade, agriculture, biotech and infrastructure deals were signed. There are construction opportunities aplenty at Mariel – factories, rail and road infrastructure, hotels, condominiums, even a luxury golf course.

Up until now, China, Cuba’s largest creditor, has been put off by a Cuban reluctance to allow investing countries to bring in their own workers. But the new foreign investment law enables, for the first time, investors to bring in their nationals for construction projects.

What impact all of this will have on Cuban workers – and society in general – remains to be seen.

One thing is certain, though – Cuba’s big neighbour, just across the water, will be watching with interest.

* see our interview with Leonardo Padura.

Alan Gross and the Cuban Five

Two cases in particular have been aggravating US-Cuban relations.

One relates to US citizen Alan Gross. The US Agency for International Development subcontractor and supposed CIA informant still has 11 years to serve in a Cuban jail for bringing satellite communications equipment into the country.

Gross claimed he was trying to help the local Jewish community with its communications and not attempting to get round the country’s strict internet controls with subversive intent. The Cuban court, sentencing him in 2011, was not convinced.

The US, meanwhile, is still holding three of the five undercover Cuban intelligence officers arrested in Florida in 1998 and convicted on 26 charges including conspiracy to commit espionage and murder. The Cubans were trying to foil terrorist attacks on Cuba planned by a network of Miami dissidents.

The convictions and treatment of the Cuban Five have met with international criticism, including from Amnesty International. Cuba claims it has offered to release Gross in exchange for the remaining intelligence officers, but the US has declined.

  1. Kevin Edmonds, NACLA, ‘Cuba’s Reforms Favour Foreign Investment, Create Low Wage Sponge’, 31 October 2013.

  2. Salim Lamrani, The Economic War against Cuba, Monthly Review Press, 2013.

  3. Reuters, US Government to unveil near $9 billion fine, 30 June 2014

  4. NPR, Most Cuban Americans oppose embargo, poll finds, 17 June 2014

  5. Havana Times, Miami-Cuba flights are booming

  6. BBC, ‘Putin denies Russia plans to open spy base’, 17 July 2014