Foreign investment in Cuba

Foreign investment in Cuba
Bye-bye embargo?

Nov 22nd 2007 | HAVANA
From The Economist print edition
Getting ready for a post-Castro bonanza

THE American businessman at this month's international trade fair in
Havana was full of excitement about the communist island's investment
prospects as its long-serving president ails. "It's a perfect storm," he
enthused: "Fidel will soon be gone, and a Democratic president will be
in the White House. Bye-bye embargo!"

Few of the foreign investors who have spent years struggling to make
money in Cuba, caught between American trade restrictions, communist
bureaucracy and preferential deals for key allies such as China and
Venezuela, see it quite so simply. But even the most jaded are wondering
whether things might be looking up. Hopes have been raised by news of a
huge deal in the making. It could be the shape of things to come.

After two years of negotiations, plans are moving forward for Dubai
Ports World, a partly state-owned company in the United Arab Emirates,
to invest $250m in converting the decrepit port in Mariel, just west of
Havana, into a modern container facility. A formal feasibility study has
been commissioned.

The choice of Mariel, one of the closest points in Cuba to the United
States, is significant. The port is best known as the setting for a
massive boatlift in 1980 when, over a period of six months, 125,000
Cubans set off in flimsy rafts as Fidel Castro turned a temporary blind
eye to those wanting to leave his poor one-party state. They were picked
up and taken to the United States by a flotilla of American yachts.

Mariel appeals to international port operators for the same reason—its
proximity to the United States. "This deal isn't just about getting
goods to Cuba," said one analyst who had studied the project. "It's
about getting into the US market." American ports are close to capacity,
and environmental restrictions make any big expansion of existing
terminals unlikely. In a post-embargo world, Mariel, which is expected
to be open for business by 2012, would be a well-positioned hub. Goods
could be transferred from the big container ships arriving at the port
to smaller vessels which could then reach dozens of harbours in the
southern United States.

Dubai Ports World refuses to comment on the deal. But there can be
little doubt that the company is eager to gain a foothold, if not
actually in the United States, then as close as possible to it. Last
year it was forced to abandon plans to operate six big ports in the
United States after Congress expressed security concerns. Although the
United Arab Emirates is considered a close American ally, two of the
hijackers involved in the September 11th 2001 terrorist attacks were UAE
nationals.

Does Cuba's acceptance of the Mariel project mean that the country's top
brass is beginning to plan seriously for the day when the American
embargo might end? That might appear premature, given that the Bush
administration has explicitly ruled out unrestricted trading with a
Cuban government under Raul Castro, Fidel's brother and presumed
successor, and that only one American presidential candidate (Chris
Dodd, a Democratic outsider) has called for a complete end to the embargo.

All the same, there is evidence that Cuban officials do believe that the
days of the bloqueo (as they refer to the embargo) are numbered. The
Cuban ministries that deal with foreign investment, known by their
Orwellian abbreviations of MINVEC and MINFAR, have recently been putting
the word out to foreign investors that tenders are welcome for a raft of
projects. Theme parks, super-yacht marinas, golf courses, even
airlines—all apparently geared to a future American market too—feature
prominently on the list.

An end to the embargo could provide a bonanza to investors with assets
in Cuba that would appeal to American corporations. The paltry returns
from, say, a share in a Havana hotel would be dwarfed by the value that
could be realised by selling that stake to an American hotel chain.
"That's the game plan," a

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