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Talking about communist countries, Cuba comes to the mind first. Compared to China and Vietnam, communist countries that have undergone big reforms, Cuba has remained a strict communist country. While strongest republics like Soviet Union did not survive, Cuba has survived even when its location is so close to the US.
Looking at the pictures or walking on a street in the island nation, still gives the sense of being in a true communist land, which has not changed much over the years. Posters of Che Guevara are still dominating the walls, mid-century American cars plying on the road and communist party governing the people and economy.
In 1991, Soviet President Mikhail Gorbachev announced in Moscow with U.S. Secretary of State James Baker that Soviet Union would eradicate its multibillion-dollar annual subsidy to Cuba. Soon there were hopes that Cuba will see a pro-western revolution, like those in East European countries in 1989, and throw the communist government for a pro capitalist system. Nothing of that sort happened, but gradually Cuba did actually choose a path of change.
“We reform, or we sink,” said Raúl Castro in a national address in 2010. In the same year, he surprised everyone and created a media buzz by telling an American journalist, “The Cuban model doesn’t even work for us anymore.” So where is Cuba heading now?
The model is not new, and draws its inspiration from China. Despite being a communist country, China’s successful economic model has made it world’s second largest economy. Cuba is relying on the same concept and is building a Chinese style special economic zone, 30 miles west of capital Havana, on the banks of Mariel Bay. This will include refurbishing of Mariel Harbor, with the help of Brazilian capital led by the Brazilian conglomerate Odebrecht, with support from the Brazilian National Development Bank. The work has already started and the expectations are to complete on schedule, in January 2014, when it will start acting as the major container shipping port of the region.
The port is strategically situated to handle trade on the route between US, Europe and Panama Canal. The port is designed keeping in mind the enormous traffic this region is going to see after the expansion of Panama Canal is completed in summer next year. Once US lifts the embargo, we can see some long-term benefits of this port. Apart from helping in the refurbishing of the Mariel Harbor, Brazil is also helping Cuba economically to renovate and expand operations of five airports throughout the island.
The special economic zone is itself going to be a 180 square miles big stretch that will be immune from laws of Marxism. Cuba is expecting to invite foreign companies to invest, set up manufacturing plants, research and operational centres.
When there is China, India and new favourite destinations like South East Asia and East Europe, then why would someone especially from a capitalist country risk their money by investing in a strict communist country? The reason behind the cold relations between US and Cuba is not economic and political ideology with which these countries differ, but nationalization of billion dollar worth foreign assets mainly from US after Fidel Castro’s 1959 revolution.
Cuba’s Foreign Trade and Investment Minister Rodrigo Malmierca has assured on behalf of Cuban communist leaders that this special economic zone will be free from any communist ideology and properties within this 180 square mile area cannot be expropriated. In addition to that, the communist government of Cuba is offering investors 100% ownership of their business, 50 years contract, duty free imports and no tax for the first 10 years for doing business on the island.
Cuba’s ideological allies: China and Vietnam along with Cuba’s natural friend: Latin America and Russia have expressed interest in contributing to this economic zone. Cuba has also received positive response from Spain, Japan and Germany.
China’s export dominated market is finding Cuba an exceptional place for taking its business and trade with western hemisphere to a new level.
“The Chinese companies that today produce in China and bring their goods here could produce here in Cuba, in this special zone … with many incentives,” Rodrigo Malmierca told China’s Xinhua news agency. He further added, “by setting up their operations in the special zone, Chinese companies would be well-positioned to supply the rest of Caribbean, Central America and Mexico.”
There is no doubt China can trust Cuba more than any other country in the west. While there are governments and economies in this world resisting Chinese aggression, Cuba will be delighted to gain investments from an inspirational communist partner.
With these new efforts by Raúl Castro, we need to see how far Cuba is able to make it. There are doubts that investors will see Cuba as an attractive site for establishing manufacturing plants and make it an export hub. It is because Cuba does not have that much skilled and experienced force in the field of assembly plants, electronics and computers. On the other hand, Dominican Republic offer lower labour costs and experience in manufacturing. Sophisticated industries that can change the entire scenario in Cuba like information technology, electronics and computers engineering, biotechnology and heavy machinery may not come immediately.
On the other hand, Cuba is a good source of doctors and provides doctors to Venezuela and now Brazil. Many analysts agree that the new Cuban special economic zone may be soon rolling out medical devices and pharmaceuticals that could interest foreign investors. In addition, we should not forget Cuban cigars and rum enjoys popularity all over the world, though few have tried them.