Bigger ambitions than cigars and rum

One of the world’s last Communist countries is opening up to the world. With a new direct service to the island from Northern Europe, Maersk Line underlines its commitment to a developing Cuba.

Cuba street
Analysts are predicting a 5-10% annual growth rate in trade to and from Cuba in the future, especially if US trade and investment sanctions are lifted.

The Feria Internacional de la Habana was buzzing this year. A record attendance from international companies at Cuba’s annual trade show is testament to changing times in one of the world’s last Communist countries. Thanks to economic reforms and growing engagement with the outside world there is more interest than ever from foreign companies looking to do business with Cuba.

“There was a huge presence especially from European, Chinese and Russian companies,” says Carolina Aristizábal, Marketing Manager for the Caribbean Sea Cluster who represented Maersk Line at the event. “Many foreign companies are looking for investment opportunities in Cuba today.”

It’s tender season, which means shipping lines are bidding for an annual contract from the government to carry cargo from Europe and Asia – as the Cuban government still controls most of the import and export business. The business value is significant – around 5,000 containers are imported from Europe and 25,000 from Asia every year.

Maersk Line is hoping its new direct service from Rotterdam, the first ever from Northern Europe to Cuba, will be instrumental in securing a major deal. A 2,556 TEU vessel now makes a weekly call to the state-of-the-art Mariel Port outside Havana, which is key to the government’s plan for attracting foreign investment.

“It’s crucial that we land the long-term deal with the Cuban government,” explains Aristizábal. “It’s a one-year tender and its constant cargo. We have submitted a very competitive bid, and our new service from Rotterdam, the first mother vessel to call Cuba, shows our commitment to the economy.”

A new production hub

While Cuba imports about USD 14 billion in goods per year, it exports just USD 5 billion so there is a huge potential for growth in that area.

“In the future, especially if US trade and investment sanctions are lifted, one could easily imagine a 5-10% annual growth rate in trade,” says Richard Feinberg author of “Open for Business: Building the New Cuban Economy”.

“In addition, once the transshipment port of Mariel is fully operational, ships could pass through the Panama Canal, off-load in Cuba, while the containers continue to ports along the Atlantic Seaboard of the USA. So opportunities for shipping are only limited by the imagination - and by the capacity of Cuban authorities to take advantage.”

Opportunities for shipping are only limited by the imagination – and by the capacity of Cuban authorities to take advantage.

RICHARD FEINBERG, AUTHOR OF OPEN FOR BUSINESS: BUILDING THE NEW CUBAN ECONOMY

Cigars and rum are the most famous Cuban products, but the government has much bigger ambitions to turn the area around Mariel Port into a hub for production – bringing in raw materials from China and processing them for re-export in sectors from pharmaceuticals to automotives.

“From a technical perspective they don’t have the ability to do this yet and that’s why they want to bring foreign investment to Cuba,” says Andres Felipe Rodriguez who worked as Maersk Line’s general manager for the Caribbean.

“From a people perspective they do. Cuba has one of the most skilled and educated populations in the Americas. The level of spoken English is fairly high despite most people having never left Cuba. If they are able to realise this vision of being a hub for production, it might create an export market, but a lot of things would need to be in place first.”

Lifting trade barriers
A major stumbling block is the US trade embargo, imposed 56-years ago when the US banned exports to Fidel Castro’s communist regime.
Fines for breaking the embargo can be enormous, so for many ­companies, doing business in Cuba is just not worth the risk.

“If we by accident send cargo bound for Cuba to the US the fines are huge,” says Anne Sophie Zerlang Karlsen, Maersk Line trade manager for Europe.

Added to that, ships calling Cuba are banned from entering US waters for 180 days, so it’s been a major juggling act to get the route in place.

President Barack Obama made a historic visit to Havana earlier this year but the embargo still stands, and there is no timeline for when it will be repealed.

For SeaLand – Maersk’s US based intra-Americas shipping line – Cuba is a case of ‘wait and see’.

“The future potential is significant,” says Craig Mygatt, CEO, SeaLand. “Cuba is the largest of the Caribbean islands. It represents a market of 11 million people just 90 miles from Florida in dire need of all types of products and services with good infrastructure at the Port of Mariel. But we cannot get ahead of the ball on this. We have to abide by current embargo rules.”