• Cuba’s Port of Mariel and Free Trade Zone Preparing for Exponential Economic Growth
  • October 13, 2016 | Authors: Ira Gonzalez; Andrew A. Pidgirsky
  • Law Firms: Adams and Reese LLP - New Orleans Office; Adams and Reese LLP - Houston Office
  • Reforms on the island nation of Cuba have attempted to loosen burdensome governmental control and establish private sector economic expansion to limit dependency on the state. One of those initiatives is the Port of Mariel, a Brazilian financed deep-water port seeking to accommodate the world’s largest cargo ships and establish a “free trade zone” for international interests with no apparent Cuban government mandated partnership. The Port of Mariel may be poised for exponential growth in capacity considering the Panama Canal expansion is now complete.
        
    Roughly two years after the ‘mega-port’ was launched, at least five wholly foreign owned companies have begun operating or have been approved to do so. The foreign companies derive from Mexico, Belgium and Spain, and cover business sectors that include food, chemicals and logistics. Another Cuban-Brazilian joint venture is also in operation to produce cigarettes to the domestic Cuban market and for export. Cleber, LLC, an Alabama-based tractor company was the first U.S. firm to be approved for operation in Mariel, and Unilever will build a $35 million soap and toothpaste factory as part of a joint venture with the Cuban government.

    The Port of Mariel is located approximately 28 miles from Havana, and is the first part of the port and planned development zone, which occupy some 11,000 acres of bay shore and low hills. Additionally, Mariel Bay has been dredged to a target depth of 60 feet (18 meters) to accommodate deeper-draft ships than those that can used at the port of Havana, which cannot be expanded because of an automobile tunnel that traverses its mouth.

    Mariel has the potential to be an exporting haven and may become the first port of call for neo-Panamax container ships after passing through the Panama Canal to the U.S. East Coast, with feeder services providing direct connections from Mariel to U.S. Gulf Coast ports in Tampa, Florida; Mobile, Alabama; New Orleans, Louisiana; and Houston, Texas. Analysts believe that delivering cargo to Mariel and feedering it to the Gulf ports would also be attractive to shippers, given the vastly improved transit times.

    Historically, the largest hurdles to expansion of Cuban port activities regarding its transshipment business were the American embargo, which remains in place, and more importantly, U.S. law that dictated that a vessel regardless of flag cannot call at a U.S. port within 180 days of calling in Cuba. This law would have prevented transshipment from Mariel because any vessel deployed for feedering would lose the flexibility to call in the U.S. for an extended period, and vessels cannot sail to final destinations in the U.S. after dropping off cargo shipments bound for non-U.S. destinations in Mariel. This year, as part of the loosening of sanctions against Cuba, the U.S. Department of Commerce’s Bureau of Industry and Security will generally authorize vessels to transport authorized cargo from the U.S. to Cuba and then sail to other countries with any remaining cargo that was loaded at a U.S. port.

    While the newly promulgated regulations provide the maritime industry with an access to Cuba that has not been available for several decades, vessels will not be permitted to enter U.S. ports while transporting cargo destined for Cuba from outside the U.S. Further, if a vessel has stopped in Cuba for purposes other than the loading or unloading authorized cargo, the prohibition against entering a U.S. port for 180 days from the date the vessel departed Cuba remains in effect.