Maersk’s Cuban delight

In just a few years, Maersk has managed to secure volumes north of 23,000 FFE to Cuba. Key to the success is a direct route from Europe, a high service level and a commitment to the business ambitions of the Caribbean island, where international politics continue to impact the flow of trade.

Today, the most frequently imported commodities to Cuba include building materials, spare parts for cars, tires, heavy machinery and also school materials and raw materials for a budding medicine production that the country is also betting on. Exports, on a much smaller scale, include rum, honey, charcoal and seafood.

Record volumes

In 2016, Maersk’s operation in Cuba broke all records, seeing its vessels carry 23,094 FFE to the ports in Mariel and Santiago. Volumes came from Asia primarily but also, increasingly, from Europe via a direct service which was launched the same year.

“We are the only global carrier that has a direct service to Cuba. It is an important asset to us and our strategic commitment to be Cuba’s partner in shipping and logistics, enabling them to propel their business needs and ambitions. Basically, we identified the potential and promised the government of Cuba to put in a service if they would give us the volumes,” says Berny Villalobos.

Dealing with the ‘Negotiator Group’, a body appointed by the government of Cuba which controls the negotiations and transportation of all Cuban trade, Maersk has seen the strategy pay off, winning the annual tender from Asia three years running and from Europe two years running. Volumes this year are expected to match those of last year, with as much as 20,000 FFE coming from Asia.

“China provides some financing to Cuba and is clearly a strategic partner not just politically but also financially and economically. This is why we continue seeing Asia as a strategic origin and as a key trade for us,” says Villalobos.

The imported volumes primarily end at government entities, but the small and growing number of Cuban entrepreneurs are also able to import raw materials and products through the Negotiator Group.

One of these entrepreneur is Sandra Aldama, who recently founded a company that imports base soap from France and creates unique soaps with scents of e.g. coffee, red wine and herbs. Sales have ramped up to around 1,500 bars of soap per month in Cuba and ambitions are even bigger.

“We need to import more base soap and at the same time begin exporting our products. I want to work with Maersk to bring my products to other countries and bring in ingredients that I cannot find in Cuba. I imagine that it will be a step-by-step process but this is where I see us going,” says Sandra Aldama.

Working with the embargo

While the political alliance with China is benefitting the flow trade to Cuba, its northern neighbor, the United States continues to maintain the commercial, economic, and financial embargo which was imposed in 1960. Discussions between former President Barack Obama and the government of Cuba held out prospects of the embargo being lifted, but when President Donald Trump took office earlier this year, discussions were discontinued and even rolled back.

Thus, Sealand - A Maersk Company, Maersk’s intraregional carrier in Latin America, is unable to serve Cuba because the company is registered in the United States. Nevertheless, Berny Villalobos still sees an opportunity to tap into the intra-regional trade to Cuba, which amounts to roughly 20,000 FFE.

“We have identified some Latin American origins where we can do business using the Maersk brand, which would involve third party feeders and keep Sealand - A Maersk Company out of the equation entirely. This is in compliance and something that we are looking into,” he says.

Based in Panama, Villalobos has already begun the preparation for the 2018 tender negotiations with the Negotiator Group to continue with the partnership. The goal is to extend the winning streaks, taking the cargo nominations from Asia to four, Europe to three while getting started with the Latin American market.