Cuba sets the stage to become major player in Caribbean trade

With all the proper pomp and circumstance, Cuban President Raúl Castro and Brazilian President Dilma Rousseff ceremonially opened the first phase of Cuba’s Port of Mariel with a ribbon cutting on January 27. The $1-billion renovation, largely financed by Brazil, will position Mariel as Cuba’s main foreign trade port, shifting the hub from Havana some 28-miles east. This move will allow Havana to assume its rightful role as a tourist entryway to a city and island with mystique hidden in large part for over a half century.

While high-ranking, international leaders and spectators looked on, Jacksonville, FL-based Crowley assumed an active and ironic role in the ceremonies by sailing in the first vessel, K Breeze, to the new megaport loaded with approximately 50-containers of mainly frozen chicken signaling to the world that Cuba was indeed open for business. On December 6, 2001, Crowley was the first U.S. carrier to transport cargo directly from the U.S. to Cuba since the U.S. embargo was established in 1962 and has continued to provide regularly scheduled common carrier services for U.S. Department of Commerce-licensed cargo ever since, making the company’s vessel and containers a fitting backdrop for the ceremony. Currently, the greatest majority of Crowley’s business in Cuba includes containerized frozen foods and some humanitarian shipments - all to the tune of about 40-containers, aboard one sailing per week. “Cuba has tremendous potential,” said Jay Brickman, Crowley vice president. “There are always companies lined up to offer their products and services to the people and government of Cuba. Crowley has been and continues to be in a position to help bridge the countries together through transportation if and when the trade opens and opportunities become available.” “From the Cuban point of view, trade is welcome; from the U.S. perspective, there are still restrictions,” said Brickman. Perhaps the Port of Mariel will serve as a step in the right direction. The first phase of the port project includes a 2,290-foot long wharf, which with dredging will eventually reach depths of nearly 60-feet allowing the Port of Mariel to handle Post-Panamax ships that will traverse the Panama Canal when its expansion is completed in the second half of 2015. This will make it a host to cargoes from around the world and deep enough to handle ships that currently can’t enter some of the largest markets in America, though dredging to change that, at least in one market the Port of Miami, is currently underway. While the infrastructure is indeed inviting, embargos on trade with the U.S. will still inhibit its potential even with foreign-flag ships. As it stands now, once a ship enters a Cuban port, it cannot then enter a U.S. port for six months without a special license - an obvious and deliberate deterrent to international nations looking to eventually have their cargo distributed on American shores. Despite this, during the ceremony, Castro said Cuba’s “geographic location along the route of the main maritime transportation flows in our hemisphere will favor its consolidation as a regional logistics platform of the first order.” While the Port of Mariel is undoubtedly an impressive facility in its own right and has future potential to be a major transportation hub, it is still very much in the building stage. Still to come and perhaps the real “secret” to the economic success of Mariel will be its planned Industrial Trade Zone. A foreign trade zone in the purest sense, this development will provide tax and customs breaks for products being assembled or manufactured within its 180-square mile radius. It will also provide the additional benefit of complete ownership retention to those businesses that seek to make operations there. Currently businesses that operate in Cuba are required by Cuban law to enter into a joint-venture with the Cuban government relinquishing majority interests to the government. Not so, in Mariel. Once fully functional, the zone could save manufacturers choosing to use it, cost and time. If U.S. manufacturers become permitted to actively participate within the Mariel Zone, transit times could be reduced by days over those into Central America where the U.S. currently sources close-to-home manufacturing. During his speech, Castro acknowledged that the $957-million project was dependent on partial financing equal to about two-thirds from the Brazilian government. Specifically from a Brazilian bank that operates much under the same premise as that of the U.S. Export-Import Bank (EX-IM), which has the mission to assist in financing the export of goods and services to international markets. U.S. industry is not, and has not, participated in the Mariel construction project and this isn’t the only mega project in their own backyard that lacks major U.S. participation. The country, its banks and businesses find themselves also sidelined on other major projects including the Panama Canal project and the copper mine in Panama. In total, these three infrastructure mammoths are in the $12 billion range – not a penny of which comes from U.S. funding.

In addition to Brazil’s National Bank financing the Mariel project with a $682-million loan, the construction was also handled by Brazil’s mega-corporation Odebrecht, the equipment came from China and other places, and the port operating company, PSA International Pte Ltd., is from Singapore. During the ceremony, Rousseff noted that Cuba also purchased more than $800-million in goods and services from Brazilian suppliers during construction, perhaps further fueling the argument that the U.S. should have taken a more proactive role in financing and thus benefitting from this, the largest infrastructure project in Cuba in decades. The priority during the next phase of improving Cuba’s transportation network, Castro said, will be upgrading the island’s rail system to help give the renovated port more value and lower transportation costs – a project that Brazil, if current involvement is the barometer – will be standing by to help with. “This container terminal and the powerful infrastructure accompanying it are a concrete example of the optimism and confidence with which we Cubans see a socialist and prosperous future,” Castro told the ceremony. When the project is complete, the port, built on the site of a former U.S. submarine base, is expected to be able to handle one million containers annually, three times that of its current port in Havana punctuating Cuba’s presence as a state-of-the-art port for the future. Ironically this site was once home to one of the largest exoduses of Cubans in history. In 1980, over 125,000 Cubans took to the shore of Mariel to be lifted to South Florida. Now, this former U.S. Naval base land finds itself repurposed as an entryway for businesses seeking to benefit from the country’s open door trade policy. A door it hopes will be utilized in the near future by American businesses looking to further near-source trade.