CUBA-ECONOMY: Cuba to Develop Duty-Free Zones

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Sep 13 1996 (IPS) - Cuba took another step in the process of opening its economy to foreign capital this week with the creation of a commission to work on a programme to develop duty-free zones and industrial areas.

The duty-free zones are intended to attract new foreign investment which the government hopes will get the economy back on its feet. The country’s economy has been in crisis since 1990, partly because of the demise of the Soviet Union, previously the island’s main trading partner.

The commission will come under the direction of Minister of Foreign Investment and Economic Cooperation Ibrahim Ferradaz, the state-run ‘Radio Rebelde’ reported this week.

The Law on Foreign Investment, passed in September 1995, announced the possibility of duty-free areas as part of a broad process of opening to foreign capital that excluded only the areas of health, education and defence.

According to the labour regulations that would govern such areas, foreign firms would be required to use the state employment agency for the hiring of personnel. Joint-ventures would be authorised to create their own mechanisms for hiring and firing.

The duty-free areas would be delimited spaces without residents, with free importation and exportation of goods. In those areas there would be place for industrial companies, commercial activities and for the services sector.

As part of the duty-free system, companies in the production sector would be tax-exempt for a period of 12 years. For the following five years, they would pay half the normal tax rates on profits and labour.

Investors would be authorised to produce, assemble, offer banking, financial and insurance services, totally exempt from tariffs and any other customs duties.

“The new legislation will facilitate the task of merchants in their relationship with the largest island of the Antilles,” Antonio Vallet, director of the Spanish food distributor Enaco, said during a recent business seminar.

Local experts hope that the zones will bring jobs to Cuba as well as access to hard currency and new technologies. Authorities say they are confident that Cuba’s location and the quality of its workforce will make the duty-free zones attractive to foreign capital.

Accorpital.

According to Ferradaz, the new scheme is expected to attract more foreign capital, but his office has not yet received requests from foreign firms for licences to operate in the new industrial areas and duty-free zones.

The minister denied rumours that the Mexican company Domos had obtained a concession from the Cuban government for the installation of the first industrial area in the country, in the vicinity of Havana’s international airport.

Domos and the Cuban investment firm Caribe S.A. were said to have signed in June 1995 a letter of intent for an estimated investment of 20 million dollars, in an area of 180 hectares.

The project would supposedly include a manufacturing complex for clothing, toys and electronic equipment for export, as well as the assembly of equipment for modernising Cuba’s telephone system.

Domos is one of the top firms on the U.S. government’s black list for sanctions stipulated by the Helms-Burton law, because of its participation in Etecsa, a communications firm in Cuba. The Helms-Burton law is a U.S. law which aims to curb the flow of foreign capital to the island. More than three decades ago, the United States imposed an embargo on Cuba.

Sources at the Ministry for Foreign Investment and Economic Cooperation said areas near the Havana airport, and the ports of Mariel and Cienfuegos – 35 and 300 kilometres from Havana, respectively – will be the first to be developed as part of the new system.

Another possibility being studied is creating a duty free industrial area in Santiago de Cuba, 900 kilometres from Havana, which authorities want to convert into a “capital of the Caribbean”.

Local observers say the new programme is one of the most important steps in Cuba’s process of opening to foreign capital since the U.S. Congress approved the Helms-Burton law, which aims to curb the flow of foreign capital to the island.