Cuban Infrastructure and Brazilian State Capitalism: The Port of Mariel

By Eric Hershberg

Panamax Container Ship / Wikimedia Commons

Panamax Container Ship / Wikimedia Commons

The Port of Mariel – long associated with a boatlift in 1980 that brought more than a hundred thousand Cubans onto U.S. shores – could either help launch Cuba into a new regional role as a shipping/trading hub or be yet another white elephant project.  This irony was noted in a recent New York Times piece, which portrayed the venture in an optimistic light.  According to some observers, the massive port upgrading that is underway there at the moment, with Brazilian funds and a leading Singaporean port operator slated to operate the venture, is a ticket for Cuba to thrive in the 21st century as a vital logistics hub, funneling goods to Europe, the Greater Caribbean and, eventually, the United States.  All of this is on the agenda because of the Panama Canal expansion that will allow for post-Panamax ships to transit the canal.  These ships will have the capacity to carry over twice the amount of cargo than the current vessels that transit the canal, thus re-routing trade that now travels from the west coast of the U.S. by land to the east coast, and at the same time expanding traffic from Asia on to Western Europe.

The $957 million Mariel project entails a Brazilian investment of $682 million with the rest of the financing coming from Cuba.  The ambitious project goes well beyond the port itself, as the Cuban government has taken the exceptional step of authorizing a surrounding free trade zone – essentially an export processing zone along the lines of those that have housed maquilas throughout much of the Greater Caribbean as well as in regions such as Guangdong, in China, which became an export powerhouse.  The notion is that industries that locate within the special economic zone around Mariel will enjoy 50-year, renewable contracts and numerous beneficial tax treatments, including tax-free processing of imported inputs into products that will in turn be shipped out through the state-of-the-art port.

For some analysts of Cuba’s economic development prospects, this is a historic opportunity, one that will become even more relevant once the U.S. embargo finally goes away.  By this account, a combination of geographic location and a highly skilled workforce places Cuba in an ideal situation to take advantage of these massive investments.  If the Mariel initiative were to work as envisioned, the result would be a massive increase in industrial employment in Cuba which, under this scenario, could become a high value-added manufacturing hub and a distribution point for goods transiting from Asia to the greater Atlantic.  The opportunity may be all the more exciting given the failure of the U.S. federal government to invest in port upgrading of a sort that a well-functioning capitalist state would undertake.  At the moment, The Economist reports only Baltimore and Norfolk have the capacity to accommodate post-Panamax ships, leaving the field open for newcomers such as the Bahamas (already equipped) and Havana (about to be so).  Other analysts observe, however, that the project faces severe constraints, ranging from the institutional bottlenecks in Cuba to the reality of competition from other deep water ports (which do not suffer from the sclerotic institutional environment that plagues so much in Cuba), as well as competition from other countries with highly skilled workforces (Costa Rica, the Bahamas, and much of the English-speaking Caribbean).

Nevertheless, critics in Cuba and abroad question whether the massive Brazilian investment in the project – essential to its success – is driven not only by economic opportunities but also by the domestic political calculations of President Dilma Roussef. Loans provided to the Brazilian engineering conglomerate Odebrecht to build the port are from the Brazilian development bank, BNDES, and guaranteed by the Brazilian state, so unlike EU companies that eschewed investment in Mariel, Odebrecht incurs minimal risk.  Mariel represents both a geostrategic and a domestic political calculation by the Dilma government. Brazil is happy to take advantage of the U.S. absence in Cuba to build the port and its relationship with Cuba.  At home, it allows the government to reward the construction firms – such as Odebrecht – that are consistently the largest campaign donors in Brazilian politics.  It also helps to slake the passions of factions of the left that seek closer ties to Cuba, and have been disappointed by the Dilma and Lula administrations’ relative political moderation at home.  The fortunes of Mariel may in the end reveal as much about Brazil as about Cuba.

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1 Comment

  1. K SEBASTIAN LEON

     /  February 26, 2014

    I wonder what kind of impact this might have on South FL businesses that specialize in international trade and freight forwarding. The Port of Miami has spent millions in making the port deeper (Port of Miami Deep Dredge Project) and improving its infrastructure so that trucks can have more efficient access to the port (Port of Miami Tunnel Project).

    As of now, the only port near the southern US that can handle the new mega cargo ships passing through the Panama Canal is the port in Norfolk VA.

    It will be interesting to see what the effect that a deep-dredge style port in Cuba, financed by Brazil, could have on South Florida’s economy and US trade generally. Would Miami lose volume? Would there be a substantive preference between Miami and Cuba when selecting a trans shipment port when moving cargo to/from Asia and Europe?

    These are all, of course, research questions that can be tackled 🙂

    Reply

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