2014: Tighter Cash Flow Adds Challenge to Already Complex
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Vol. 22, No. 1 January 2014 In the News 2014: Tighter cash flow adds How Mariel measures up challenge to already complex scenario BY JOHANNES WERNER Where does the Mariel Zone fit in the With prices of Cuban export commod- big picture of EPZs? .........Page 2 uba’s reformers — already busy ities such as nickel and sugar expected with currency unification, simulta- to continue their decline, tourism stag- Cneously encouraging and limiting nating, expenses for food imports des- Central Bank issues bonds private-sector growth, turning around tined to rise yet again, and many state Cuba will emit 20-year bonds to cover its dysfunctional state companies, and sell- companies likely to require continued budget shortfall in 2014 ..........Page 3 ing the Mariel export processing zone subsidies, the government will have to to investors, among many other tasks — extend its austerity policy in order to may also have to cope with tightening keep the country’s recent debt-service Domingo on Cuba cash flow in 2014. record clean. Notes from the Assembly: Majority, not As economic reforms have yet to “In 2014, international prices could unanimity .........Page 4 produce any tangible results as far as trigger a shock of terms of exchange,” revenues go — just two years from the says Pavel Vidal, a former Central Bank 2016 deadline set by the lineamientos of economist who now teaches at Univer- Domingo on Cuba reform in 2011 — officials predict con- sidad Javeriana in Colombia. “In such How Spain and Cuba continue their dual- tinued sluggish GDP growth in 2014. a scenario, and given that the reform track relationship .........Page 4 Following a disappointing 2.7-percent doesn’t show robust results in revenue increase in 2013 — 0.9 percent less than generation, a new adjustment in imports predicted — the economy is expected and a heightening of hard-currency re- Remittances growing fast to grow at a dismal 2.2 percent in 2014, strictions should not be dismissed.” U.S. remittances to Cuba reached a re- Economy and Planning Minister Adel As the overall deficit for 2014 is ex- cord $2.77 billion in 2013 .........Page 6 Yzquierdo told the National Assembly at pected to reach 3.9 billion Cuban pesos, its year-end session. See Cash Flow, page 3 Chinese cars, hecho en Cuba Geely plans a semi-knock down assem- Cuba pitches Mariel Zone to investors — bly plant on the island .........Page 7 and who is going to bat? Mariel Zone — the ultimate map BY VITO ECHEVARRIA Cartographer Armando Portela de- In his effort to attract manufacturers and service companies to the Mariel signed detailed maps .......Pages 8-9 uban Foreign Investment Minis- ter Rodrigo Malmierca has been a Zone, Malmierca has all but ignored Cbusy man in recent months. Any- Cuba’s long-time investment partners Bank trouble hits U.S.-Cuba travel one keeping track of his movements will Canada and the European Union. Cuba has a hard time finding a bank for know that he has made the rounds visit- Will he have anything to show for the grand opening of the $900 million con- its U.S. diplomatic mission ...Page 10 ing allies worldwide, in an attempt to sell the Mariel Special Development Zone to tainer hub at the Port of Mariel, slated companies from Brazil, China, Vietnam for late January? and Russia. Malmierca can already claim some An investor’s Cuban divorce success in at least stirring up awareness Book review: Michel Villand, My Associ- In November, Malmierca toured Bra- zilian cities São Paulo, Porto Alegre, Rio of Mariel, and by extension the Cuban ate Fidel Castro .........Page 14 Grande do Sul and Rio de Janeiro. In late market. October, he promoted Mariel to the Rus- After his pit stop in Beijing last Sep- sian Chamber of Commerce. The month tember, Havana’s annual FIHAV trade CubaNews (ISSN 1073-7715) is published monthly fair that was held two months later at- by CUBANEWS LLC. © 2013. All rights reserved. before, he was in Beijing, pitching the Mariel Zone to hundreds of Chinese tracted 62 Chinese companies (a 55-per- Annual subscription: $398. Nonprofit organizations: cent increase from the 40 that showed $198. Printed edition is $100 extra. For editorial in- businesspeople. Also in September, dur- ing a visit to Hanoi, Malmierca made a up in 2012). quiries, please call (305) 393-8760, fax your request At least some of these FIHAV partici- to (305) 670-2229 or email [email protected]. similar pitch to Vietnamese business people. See Mariel Zone, page 2 2 CubaNews v January 2014 rather than a private Chinese group,” depends on a series of factors in order Mariel Zone —FROM PAGE 1 said a China-based investor, who spoke for it to be viable, such as demand, ad- pants are likely to study the possibility on background. “This would be facili- equacy of the (bus) models, investments of locating at Mariel. Zhejiang Geely Au- tated at a high diplomatic level.” in manufacturing facilities, labor train- tomotive Corporation, one of the fastest- It remains to be seen how serious in- ing, etc.” growing automobile makers in China, vestors are with Mariel. So far, only one Secco declined to comment on reports hinted in a press release it may build a Brazilian company — glass maker Fa- that Marcopolo was unable to raise suffi- small assembly plant in Cuba, although navid SA — has reportedly expressed cient capital to launch a Mariel venture. it didn’t say where (see page 7). its intent to invest at Mariel. Reports of q If there’s manifest Chinese interest in Brazilian bus maker Marcopolo setting Mariel, it may be state companies that up shop there turned out to be prema- More information at www.zedmariel.com come first, one Chinese observer says. ture. “(The) company will not be open- “I think there would be a stronger pos- ing a factory in Cuba,” said Marcopolo Vito Echevarria, a New York-based freelance sibility that a state enterprise may end up spokesman José Carlos Secco. “The set- journalist, has written for CubaNews since our being a first mover on the Mariel project ting up of an operation in any country establishment in 1993. How the Mariel Zone measures up ts deepwater port and 180-square mile expanse place it assets being expropriated. among the most prominent Export Processing Zones Nor does Cuba seem to be willing to concede the rock- I(EPZ) in the hemisphere, but experts are split over the bottom wages competitors in the region offer to employers. prospects of the Mariel Special Development Zone. The law guiding the Mariel Zone continues the practice of Not surprisingly, observers linked to EPZs in the region forcing investors to hire employees through a government that are closely tied to U.S. markets — assembling apparel agency that has been charging a premium on wages. and other light products with low-cost labor — are having a Even so, one U.S. observer concedes a “limited scope” of hard time making sense of the Mariel Zone. success for Mariel, if investors take a long-term view. José Manuel Torres, executive vice president of the Aso- “If an EPZ is established with the intent of addressing the ciación Dominicana de Zonas Francas (ADOZONA), a trade hemisphere, there may be some limited scope,” said Anton group that represents companies operating in the EPZs Edmunds, a Washington-based trade consultant special- of the Dominican Republic, believes Mariel has a chance izing in Caribbean markets. “The Cuba plan may serve to position the country for 10 years down the road, more so than three to five.” To most European, Canadian and — of course — U.S. companies, Mariel makes sense once the United States lifts sanctions against Cuba. However, one group of businesses may already be able to take advantage of the Zone. The heart of the Mariel Special Development Zone Under the radar of U.S. observers, is a container terminal with a 700-meter pier (under Chinese, Brazilian, Russian and Indian construction, r.) that accommodates post-Panamax courtesy www.zedmariel.com Photo export goods have already swamped vessels. Also see Mariel Zone maps on pages 8 & 9. smaller markets of Central America, the Caribbean and South America. Jonathan Benjamin-Alvarado, a politi- cal scientist with the University of Ne- if coupled with free-trade agreements such as CAFTA-DR. braska at Omaha, believes that Chinese manufacturers can CAFTA provides preferential treatment and legal protec- use Mariel to assemble automobiles and heavy household tions for foreign companies that are vested in that island’s appliances for sales in nearby Latin and Caribbean markets, EPZs, giving investors the option of pursuing binding inter- thereby saving shipping costs. national arbitration against the host state. Rather than looking at EPZs in Jamaica, Honduras or the “I consider that [the Mariel Zone’s] success will depend Dominican Republic, Mariel prospects may have to look at on various factors, including the need to promote the sign- Asia for guidance, Benjamin-Alvarado suggests. The Cuban ing of a free-trade agreement with the potential markets, in- government is really seeking to repeat the technology trans- centives, and legal protection of investments,” Torres said. fer by EPZs in China and South Korea. Although Cuba is pursuing trade agreements with fellow “This is consistent with the larger trajectory of Cuban eco- members of the ALBA bloc and PetroCaribe, CAFTA-style nomic development dating back to the 1980s,” he said. “In free-trade agreements are out of the question. The Cuban fact, many of Cuba’s ventures during the Soviet period were government has drummed up benefits for investors oper- undertaken to enhance Cuban technological capabilities in ating in the Mariel Zone (from 100-percent ownership for critical scientific technical fields — biosciences, engineer- foreign investors, to a ready pool of skilled workers, to tax ing, nuclear science, and information technology — and fa- breaks), but it has not spelled out a legal framework that cilitating the technology transfer.