Cuba bids to lure foreign investment with new port and trade zone

Cuba bids to lure foreign investment with new port and trade zone

By Marc Frank



HAVANA (Reuters) - Cuba published rules and regulations on Monday

governing its first special development zone, touting new port

facilities in Mariel Bay in a bid to attract investors and take

advantage of a renovated Panama Canal.



The decree establishing the zone and related rules takes effect on

November 1 and includes significant tax and customs breaks for foreign

and Cuban companies while maintaining restrictive policies, including

for labor.



Cuba hopes the zone, and others it plans for the future, will "increase

exports, the effective substitution of imports, (spur) high-technology

and local development projects, as well as contribute to the creation of

new jobs," according to reform plans issued by the ruling Communist

Party in 2011.



The plan spoke positively of foreign investment, promised a review of

the cumbersome approval process and said special economic zones, joint

venture golf courses, marinas and new manufacturing projects were planned.



Most experts believe large flows of direct investment will be needed for

development and to create jobs if the government follows through with

plans to lay off up to a million workers in an attempt to lift the

country out of its economic malaise.



The Mariel special development zone covers 180 square miles (466 square

km) west of Havana and is centered around a new container terminal under

construction in Mariel Bay, 28 miles from the Cuban capital.



The zone will be administered by a new state entity under the Council of

Ministers, and investors will be given up to 50-year contracts, compared

with the current 25 years, with the possibility of renewal.



They can have up to 100 percent ownership during the contract, according

to Cuba's foreign investment law.



Investors will be charged virtually no labor or local taxes and will be

granted a 10-year reprieve from paying a 12 percent tax on profits. They

will, however, pay a 14 percent social security tax, a 1 percent sales

or service tax for local transactions, and 0.5 percent of income to a

zone maintenance and development fund.



Foreign managers and technicians will be subject to local income taxes.



All equipment and materials brought in to set up shop will be duty free,

with low import and export rates for material brought in to produce for

export.



However, one of the main complaints of foreign investors in Cuba has not

changed: that they must hire and fire through a state-run labor company

which pays employees in near worthless pesos while investors pay the

company in hard currency.



Investors complain they have little control over their labor force and

must find ways to stimulate their workers, who often receive the

equivalent of around $20 a month for services that the labor company

charges up to twenty times more for.



And investors will still face a complicated approval policy, tough

supervision, and conflict resolution through Cuban entities unless

stipulated otherwise in their contracts. And they must be insured

through Cuban state companies.



MARIEL PORT



The Mariel container terminal and logistical rail and highway support, a

$900 million project, is largely being financed by Brazil and built in

conjunction with Brazil's Grupo Odebrecht SA. The container facility

will be operated by Singaporean port operator PSA International Pte Ltd.



The terminal is scheduled to open in January.



Future plans call for increasing the terminal's capacity, developing

light manufacturing, storage and other facilities near the port, and

building hotels, golf courses and condominiums in the broader area that

runs along the northern coast and 30 miles inland.



Mariel Bay is one of Cuba's finest along the northern coast, and the

port is destined to replace Havana, the country's main port, over the

coming years.



The Mariel terminal, which will have an initial 765 yards of berth, is

ideally situated to handle U.S. cargo if the American trade embargo is

eventually lifted, and will receive U.S. food exports already flowing

into the country under a 2000 amendment to sanctions.



Plans through 2022 call for Mariel to house logistics facilities for

offshore oil exploration and development, the container terminal,

general cargo and bulk foods facilities.



Mariel Port will handle vessels with up drafts up to 49 feet compared

with 36 feet at Havana Bay due to a tunnel under the channel leading

into the Cuban capital's port.



The terminal will have an initial capacity of 850,000 to 1 million

containers, compared with Havana's 350,000.



(Editing by Tom Brown and Jim Marshall)



Source: "Cuba bids to lure foreign investment with new port and trade

zone | GlobalPost" -

http://www.globalpost.com/dispatch/news/thomson-reuters/130923/cuba-bids-lure-foreign-investment-new-port-and-trade-zone