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Cuba, a Window to the Outside

In this column, Leonardo Padura - a Cuban writer, journalist and winner of the 2012 National Literature Prize, whose novels have been translated into more than 15 languages - writes about the conditions for foreign investment in Cuba.

HAVANA, Nov 6 2013 - For the Cuban economy, the year 2014 is set to start with the opening of the first installations in the Special Economic Development Zone in the upgraded Mariel port, 70 km west of Havana.

The new trade and industrial hub will include a container port, enormous warehouses, a free trade zone, industrial endeavours with foreign capital, and modern infrastructure. It will be the country’s leading industrial centre, and is already considered Cuba’s main window to the world of imports and exports.

As soon as the Mariel container terminal begins to operate, Havana’s ageing port will start to be overhauled and renovated, to turn it into a marina for yachts and cruise ships, especially once the half-century U.S. embargo is lifted to allow tourists to come and boats from the United States to dock on Cuban shores.

The upgrade of the Mariel port installations has been mainly financed – 640 million of the 900 million dollars invested – by a loan obtained through an intergovernmental agreement signed by Brazil and Cuba.

Leonardo Padura

Leonardo Padura

The involvement of Brazil and its companies in the construction and investment gives some indication of that country’s interest in gaining a commercial and productive foothold in this privileged geographic location in the Caribbean, at the entrance to the Gulf of Mexico and across from the U.S. coast, just before the expansion of the nearby Panama Canal, which will be able to serve bigger ships as of 2015.

The big question with respect to the future of Mariel is who will invest, and under what conditions, in the development zone, which will have not only port installations and warehouses but also industries.

There has been a great deal of talk about the need for the Cuban government to finally declare whether it will modify its legal relations with foreign capital.

Back in July 2012, an official announcement was made that a new investment law was to go into effect by the end of that year, to replace Law 77 passed in 1995.

But there has not yet been a clear response to the expectations created. Meanwhile, what has actually happened is that 190 joint enterprises between the Cuban government and private foreign capital were operating in mid-2013 – only half the number in operation in 2000.

According to a recently read report, from which I took the previous figures, a Cuban deputy minister of foreign trade stated that “a general and sectoral policy to accompany the fomenting of foreign investment is currently being evaluated, and although a modification of the law is not being considered, certain regulations could be updated.”

In other words, no new law can be expected for the time being, and the Mariel Special Economic Development Zone will move towards its future under regulations that in the last few years have scared off more investors than they have attracted, according to the most simple of mathematical operations.

However, due to its special characteristics, Mariel could be governed by different legal mechanisms, which will perhaps be among the regulations to be updated.

The economic transformations undertaken by the government of Raúl Castro, outlined in the economic and social policy guidelines approved at the Sixth Congress of the Communist Party of Cuba in 2011, have gradually modified certain structures and fundamentals of the Cuban economy.

Self-employment has been revitalised, numerous agricultural and services cooperatives have been created and small private businesses have been opened, which has improved services, gastronomy, passenger transport, and food production to a certain extent….

But because of their reduced level of influence on macroeconomics, the changes have failed, and will fail, to become a motor to accelerate development in a country in urgent need of efficiency, productivity, modernisation of all infrastructure, liquidity and access to finance – that is, the elements capable of generating palpable wealth, and with that, an improvement in the living standards of a populace that for nearly a quarter of a century have been getting by on depressed wages that make it impossible to satisfy all of their basic needs, including food.

On several occasions, high-level government officials have said that the most significant economic modifications are yet to come. But the content of what has been promised is unknown and the timeframe for implementation uncertain.

If the announced new law on foreign investment is not approved in the end in a form that manages to draw foreign capital, it is hard to imagine who will be interested in investing in Cuba, even in the Mariel development zone.

Besides Brazilian, Chinese and Russian companies that are predictably close to that investment, the geographic factor and hopes for future changes alone no longer seem sufficient attractions for businesspersons who, upon arriving in Cuba, would even have a problem buying a vehicle for driving around executives and employees.

And a pending question would be where Cubans – that is, Cubans living in Cuba – fit in these new structures, because according to what I read, the Mariel Special Economic Development Zone could be a source of employment for them…but not investment.

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