As part of its first special development zone, Cuba plans to construct a new container-handling port in Mariel Bay. The hope is that the facility will be able to attract significant foreign businesses, in addition to benefitting from an increase in regional transhipment volumes once the Panama Canal expansion is completed in 2015. However, BMI would caution that the port will face considerable competition in this endeavour from other Caribbean ports, and the substantial investment being made in facilities the length of the US East Coast.
Cuba is in the process of establishing a special development zone on 466 square km at Mariel Bay, to the west of the capital city Havana (Habana). The zone will provide significant tax breaks for companies setting up businesses there, and will, according to the plans announced by the Communist Party in 2011, 'increase exports, the effective substitution of imports, [spur] high-technology and local development projects, as well as contribute to the creation of new jobs.'
The centrepiece of the zone will be a new container port, which will supersede the current primary container-handling Cuban facility at Havana. With the ability to handle 850,000 twenty-foot equivalent units (TEUs), the port will be considerably larger than the port of Havana, which has an annual handling capacity of just 350,000 TEUs.
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|Port Of Havana Container Throughput, 2007-2012 (TEUs)|
We note, however, that even this relatively small handling capacity at Havana is not being troubled at present; in 2012 the port handled just 240,000 TEUs, which was in fact a decline of 2.7% on 2011's throughput of 246,773 TEUs, and far from the 2007 peak throughput volume of 319,857 TEUs.
The hope is that the new development zone will encourage foreign businesses to set up there, so generating considerable box volumes of their own, not necessarily bound for the domestic market. The newly opened Khalifa Port in Abu Dhabi, linked to the Khalifa Industrial Zone Abu Dhabi (KIZAD) is one successful example of such an endeavour.
This expectation appears to rest somewhat on two potential developments. First is that US trade embargos on Cuba will finally be lifted after they have for decades stifled the country's international dealings. As the Cuban economy has been very slightly freed in recent years, with the encouragement of small businesses, there has been slight rapprochement with Washington. Remittances and family travel between the US and Cuba have been allowed since 2009, and should all sanctions be lifted there would be a massive boost to the Cuban economy.
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|Top Ten Caribbean Ports 2012 Container Throughput (TEUs)|
Second is the expansion of the Panama Canal. If trade between the world's superpower and Cuba was opened up, then the new Cuban port could serve as a transhipment facility for the US East Coast. This is becoming a key issue in the region, as the widening of the Panama Canal's locks, due for completion in 2015, will enable vessels capable of carrying as many as 12,500 TEUs (compared to the current maximum of 3,500 TEUs) to pass through the channel. Shipping companies are expected to take advantage of these new economies of scale, and ship directly to the East Coast. However, US East Coast ports are not capable of accommodating these large ships at present. While they are desperately seeking funding and carrying out works in order to make sure they are ready by 2015, Caribbean facilities are also seeing opportunities to establish themselves as transhipment hubs for the region. The new Cuban port will have a draught of 15 metres, sufficient for larger vessels.
Cuba is not the only port looking to capitalise on the expected influx of tonnage into the Caribbean, however. The Bahamas Freeport Container Port (FCP), the largest container port in the area by throughput, is investing in new cranes and extending its berth to 1,536, and the Dominican Republic's port of Caucedo, the second largest, is also investing in preparation for the completion of the Panama Canal expansion. In March 2011, the second phase of DP World's Caucedo Multimodal Port came online. The project boosted the facility's handling capacity by 25% to 1,250,000 TEUs, adding 300m of deepwater berth and new equipment with two broad yield mobile cranes, which added to the existing five Post-Panamax gantry cranes at the port.
In such an environment the port at Mariel Bay might not trouble its throughput capacity for some time, especially should the relaxation of US sanctions not be forthcoming as soon as might be hoped. Nevertheless, we acknowledge that the port is part of a major investment, financed by Brazil at US$900mn, it will have major rail and highway infrastructure attached. Further, the port will be operated by a major international player - PSA International - which will bring its global expertise and connections to the Cuban port.