Zone Introduction

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In 2011, the Sixth Congress of the Comunist Party of Cuba approved the “Guidelines of the Economic and Social Policy of the Party and the Revolution'' which established and promoted the creation of Special Development Zones (known by the Spanish acronym ZED) [1]. These ZEDs aim to stimulate export, incubate projects in Cuba’s fast growing tech scene, and employ thousands of workers at the local level. 

Mariel (ZEDM) is one of the most successful zones created by this framework. The zone was approved under Decree Law No. 313 in 2013 by the Council of State and regulated by Decree Law No. 316/2013 [2] [3]. The legislation approves a broad range of regulatory bodies including: the  Council of State: the Cuban Central Bank: the General Customs: and the Ministries of Science, Technology and the Environment, Finance and Prices, Interior, and Labor and Social Security.

Two years before the approval of ZEDM, the development of Mariel Bay had begun with the construction of the Container Terminal of Mariel (TCM). The project was financed with US$ 900 million from the Brazilian Development Bank and the International Economic Association (IEA) [4]. A Brazilian company, Odebrecht, was in charge of constructing the port, and PSA International, a leading port group from Singapore, won the bid to administer it [5]. In 2014, when the TCM was inaugurated, it was announced as the first phase of the ZEDM development [6].

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Zone Layout

ZEDM has an area of 465.4 km² and is based in the north of Artemisa province, which is 45 km west of Havana. The zone is located on the coast and taps into the main maritime commercial traffic routes in the Western Hemisphere.

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ZEDM is divided by 9 sectors and each sector is divided by areas [7]:

• Sector A - industry and logistics; 
• Sector B - industry; 
• Sector C - industry and tourism; 
• Sectors D and E - livestock and forestry; 
• Sector F - agricultural and quarrying;
• Sector G - industry, quarrying, and livestock; 
• Sector H - tourism, agriculture, and livestock;
• Sector I - agriculture and livestock.

Sector A, approximately 43km² and located west of Mariel Bay, was the first to be developed with the construction of the Mariel Container Terminal.

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The Mariel Container Terminal is one of the most modern ports in the region and is designed to operate Neo Panamax vessels. The zone currently has roofed (46,784 m² ), open (30,000 m²), and refrigerated (8,500 m³) warehouses. The zone is connected to the rest of the national territory through the connection with the Havana-Pinar del Rio Throughway and the Pan-American Highway [8]. In 2014, a double track railroad began operations for the transport of cargo and passengers from the zone to the rest of the country's railroad network.

The zone has commercial office space for rent, fiber optic internet, and a variety of amenities for its tenants.

The Economics of Mariel

So far, 8,560 jobs have been created directly within the zone and 100% of the businesses operating in the zone have at least some Cuban investment [9]. The zone’s main industries include biotech, logistics, agriculture, construction, pharmaceuticals, transportation, and real estate.

Legal

The zone has a special tax regime applicable to all concessionaires and users that is comparatively more attractive than those established in Law No. 113/2012 of the Tax System and in Law No. 118/2014, of Foreign Investment [10]. This is primarily due to four aspects:

• Taxes on sales and services are waived during for the first 12 months and are taxed at 1% afterwards;
• Corporate tax is waived during the first 10 years of operation and is 12% afterwards;
• Users are exempted from the tax on the use of labor force contribution to local development;
• There are no customs duties on importing means and equipment for the investment process.

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The ZED Mariel regulatory framework establishes only two levels of approval within a term not exceeding 60 days from the submission of the file containing the relevant documents and its acceptance by the Office of ZED Mariel [11].

The Office of the Mariel Special Development Zone, in addition to administering the Zone, controls its activities [12]. The office prepares and conducts its Development and Business Program, based on the approved Land and Urban Development Plan.  It is in charge of processing applications, licenses, permits and authorizations through a one-stop shop system, meaning an institution where all documents are submitted at once and approval or denial is received.

Besides the tax and regulatory incentives, there are other motivations for foreign investment in ZED Mariel. The zone has a strategic position, located in a point of wide commercial exchange. It is located where the north-south and east-west axes cross in the Western hemisphere, both for air and maritime transportation.

The zone lists the following as their primary advantages:

1. Special customs treatment contained in Resolution No. 278/2014 of the General Customs of the Republic [13].
2. Most favored nation status granted by Cuba to the members of the WTO and the economic complementation and partial scope agreements signed with the countries of Latin America and the Caribbean, through the Latin American Integration Association (ALADI) and the Caribbean Community (CARICOM).
3. Incentives for the installation of photovoltaic solar panels on the roofs of the facilities. 
4. 32 ports in 17 countries, some of the most important in the region, are located within a thousand miles of the Zone.

Controversy and Complexity

The project is not without controversy: While today the Cuban population has some freedoms that they did not have in the past, the country is not yet moving in the direction that the proposed reforms had planned. Cuba’s ease of doing business remains low in general, and the Mariel zone has done little to advance Cuba’s rankings [14]. 

In 2015, the BBC performed a study about the effects of the ZED Mariel on residents and users, and they established that they had seen almost no benefits for the city [15].

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Some cite the persistence of the U.S. economic embargo and complex rules for foreign investment in Cuba as factors that make entrepreneurs reluctant to invest in Mariel. Overall, the influence of countries like the U.S, China, and Russia in Cuba make any project complex from a  geopolitical standpoint. For example, there are 32 active lawsuits in U.S. courts under Title III of the Helms-Burton Act against entities that profited from property confiscated in Cuba after 1959 [16]. 

However, this isn’t the only problem regarding the site. Analysts and reporters also pointed out that one of the biggest barriers to investment in Mariel is that the Cuban law requires foreign companies to hire employees from government-designated cooperatives. 

Conclusion

The project at Mariel plans to progressively move Cuba toward a more competitive and business-friendly economy. The process has been slow on many fronts, due in part to a legacy of government inefficiency.  

However, Cuba’s economy is the largest in the Caribbean after the Dominican Republic - if the special economic zone experiment proves successful in Cuba, it may change the face of Caribbean economies. 

Investments have gone into the zone from such places as Singapore and Brazil, and with Cuba’s trade relations slowly warming with the USA, there is much to look forward to. As FDI magazine rightly points out: this is a crucial zone to consider for the future [17].

See more about the Mariel Special Development Zone in our Open Zone Map here.

Sources

1. Guidelines of the Economic and Social Policy of the Party and the Revolution. http://www.granma.cu/granmad/secciones/6to-congreso-pcc/Folleto%20Lineamientos%20VI%20Cong.pdf
2. Decree Law No. 313. https://www.gacetaoficial.gob.cu/es/decreto-ley-313-de-2013-de-consejo-de-estado
3. Decree Law No. 316/2013. http://www.granma.cu/file/sp/cartera-de-inversion-14/datos/documentos/marco_regulatorio/Marco%20Legal%20de%20Zona%20Especial%20Mariel_ENG.pdf
4. Cuba inaugurates the port of Mariel and plans a special economic zone. https://ictsd.iisd.org/bridges-news/puentes/news/cuba-inaugura-el-puerto-de-mariel-y-proyecta-una-zona-econ%C3%B3mica-especial
5. Singapore PSA to manage Cuba container port. https://www.reuters.com/article/transporte-cuba-puerto-idARN1E76519J20110706
6. Raúl and Dilma inaugurate the first phase of Mariel Terminal. https://www.zedmariel.com/en/news/ra%C3%BAl-and-dilma-inaugurate-first-phase-mariel-terminal
7. About us, ZED Mariel. https://www.zedmariel.com/es/nosotros
8. Frequently asked questions, ZED Mariel. https://www.zedmariel.com/en/faq 
9. ZED Mariel. https://www.zedmariel.com/en
10. ZED Mariel Incentives. https://www.zedmariel.com/en/incentives
11. Fast approval regime. https://www.zedmariel.com/en/fast-approval-regime
12. ZED Mariel Administration. https://www.ecured.cu/Zona_Especial_de_Desarrollo_Mariel#Administraci.C3.B3n_de_la_Zona
13. ZED Mariel Overview. https://cel-logistica.org/wp-content/uploads/2020/03/Resumen-ZED-Mariel.pdf
14. The paradox of Cuban reforms. https://amp.asuntoslegales.com.co/opinion/la-paradoja-de-las-reformas-cubanas-2164271
15. Port of Mariel: the Cuban capitalist showcase that still does not work. https://www.bbc.com/mundo/noticias/2015/10/151013_economia_demoras_puerto_mariel_lf.amp
16. Defendants under the Helms-Burton US companies with investments in the Mariel Economic Zone. https://diariodecuba.com/cuba/1608760374_27511.html?__cf_chl_jschl_tk__=pmd_6nHeQODg081RcHtioqAB8ra5NMwINZRKKesM3ijQWb4-1630123024-0-gqNtZGzNAfujcnBszQl9

Cuba expands FDI policy with port transformation.https://www.fdiintelligence.com/article/54343