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article imageCuba opening up port as 'Special Economic Zone'

By Ken Hanly     Oct 24, 2013 in Business
Havana - President Raul Castro, president of Cuba signed law 313 in September creating a "Special Economic Zone" in the port of Mariel located 45 km west of the capital Havana. Foreign companies who invest in the zone will not pay the usual taxes and tariffs.
The law comes into effect this November but it is not certain exactly when the port will begin operations. Clive Yokes, who is director of Market Scoping International, specialising in foreign direct investment said to Al Jazeera: "I understand in Maribel bay there is going to be a tax holiday for 10 years. I think the announcement is consistent with a trend that has been gathering momentum for the last 20 years." There is information in the Havana Journal in English in question and answer format.
The zone will allow one-hundred per cent foreign ownership. Contracts can be extended up to 50 years rather than ending in 25 years as at present. The zone will be governed by a special office within the Cuban government. Foreign companies will be exempt from property tax and local sales tax and a tax on the use of the Cuban labour force according to a legal brief for prospective foreign investors prepared at the University of Havana.
The zone is already partly a function of foreign capital with Brazilian capital already investing $900 million so the port can accommodate about 1 million containers annually. Brazil-based Odebrecht construction began work in 2011. The zone may be open for business in early 2014. The zone itself is to be managed by a Singapore-based firm PSA. Cuba's foreign trade and investment minister Rodrigo Maimierca said during a visit to Beijing: "What the zone is intended for is to create a special climate where foreign capital is going to have better conditions than in the rest of the country," The government hopes that firms will ship raw materials into the zone, employ Cuban labor to manufacture finished products and then ship them to other markets. The norm for international ventures in Cuba is for salaries to be paid to the state rather than to the individual workers. The same would apply to those employed in the special economic zones. Of course in return the government will pay the workers but no doubt at a lower rate.
The 2011 Communist Party plans included measures to "increase exports, spur high technology and local development projects as well as create new jobs". The plan also spoke positively of foreign investment, promised reform to the cumbersome review of foreign investments, and mentioned that special economic zones were planned as part of the implementation of these policies.
The Cuban zone will be hampered by the US embargo on Cuban products. Investors may bank on the embargo being lifted but so far there is no sign of that happening. Jamaica, Haiti, and the Dominican Republic have also experimented with similar types of zones with mixed results, and they have access to US markets. To some the development is a sign that Cuba is intent on adapting to the global capitalist market by adopting what is clearly a neo-liberal project. A UK-based development organisation War on Want said in a report: "Rather than supporting long-term structural improvements for working people, trade liberalisation promotes less secure jobs and a 'race to the bottom' where companies move from country to country," The Cuban development is just one among many of these zones that allow international capital to escape regulations and restrictions or strong unions and environmental rules thus increasing their profit margins. Market Scoping International estimates there are 3,000 to 35000 of these zones around the globe. About 60 million people are employed in them.
In some cases such as China the zones have successfully spurred on developments elsewhere in the host country. Vokes, the trade analyst, claims; "The free zones in China, South Korea, and Dubai - where foreign workers can earn tax-free salaries developing software - have been quite successful. Others haven't been so lucky. A number of African countries have tried these - Kenya for example - and it had a limited impact. They haven't been able to attract much investment,""
Further details about the port and planned expansion can be found here. Whoever wrote the title on the appended video must have meant "capitalism" rather than "communism".
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