Informacion economica sobre Cuba

Mariel port head outlines Cuba’s long-term shipping prospects
Greg Miller, Special Correspondent | Sep 05, 2016 7:00AM EDT

Within maritime circles, there is tremendous interest in the promise of
Cuban trade and how shipping can navigate the political minefield of the
US embargo and the 180-day rule, which bars a vessel that calls in Cuba
from visiting the United States for six months.

To obtain an insider’s perspective on current conditions and future
prospects, special correspondent Greg Miller interviewed Charles Baker,
the general director of the PSA International-operated container
terminal in Mariel, Cuba, on August 30.

Greg Miller: Let’s start with how the port is performing now and then
move on to your big plans for the future. You did around 160,000
twenty-foot-equivalent units in fiscal year 2014, the first year of
operations for Mariel, then 330,000 TEUs in 2015, which equated to an
increase of 35 percent to 40 percent when you subtract out the volumes
that were simply shifted over from Havana. Back in May, you were
predicting that your throughput for this year would rise to around
360,000–370,000 TEUs. Is that still your forecast today?

Charles Baker: “Unfortunately, no. After a very, very good start, the
situation that the country faces economically has become much more
challenging. What we saw in the second quarter was a slowing down of
traffic. What we’re now predicting is that our figures for this year
will be close to last year’s. It’s not the end of the world, but it’s
not as exciting as it looked at the beginning of this year.”

You’re now in your third year of port operations in Cuba, so you must
have a strong view on the quality of Cuban labor. I’ve heard the theory
that because Cuban workers were brought up in a Communist society, they
won’t be productive workers, so terminal operations in Cuba would be at
a disadvantage. How would you describe your workforce?

“What I would say is that if you could bottle the spirit of our
workforce and sell it, you’d have the next Red Bull on your hands. Now
that the terminal is doing good business and making a profit, we’ve
increased salaries significantly, but back before the terminal opened,
the salaries we were offering were in line with the country’s general
averages, which are probably around $25–30 per month. Even so, we would
be working on some aspect of the development and would ask, ‘Is anyone
willing to come in on Saturday and Sunday?’ And people were always
willing to come in on Saturday and Sunday, for no additional money.

“Also remember, a lot of our workers live in Havana and it’s a pretty
arduous journey to Mariel, about an hour and a half there and an hour
and a half back at the end of the shift. So we take our hats off to
these workers and sometimes we look on in awe of their tenacity. They’ve
also got a very, very good handle on the technology. The average crane
rates are around 27 moves per hour, so we’re very happy with their

One of the issues you’ve faced is long dwell times for containers on
your property, driven by factors outside the port. How are you dealing
with this?

“There have been a number of elements involved. One of them was that
last year, there was a lack of truck availability on the island and this
has been addressed by the arrival of approximately 200 new trucks, with
the last batch just coming onto the roads recently. There have also been
new warehouses opening up in the Mariel area, so containers don’t need
to be trucked all the way to Havana.

“I’d also say that some aspects of Cuban logistics are pretty
antiquated. Warehouses are not open even 16 hours, let alone 24 hours a
day. They also do a lot of cargo inspections — there are probably not
enough inspectors and too many inspections. There is also the fact that
we are obliged to offer 15 days of free storage, and in my experience,
anywhere in the world, if you offer it, people will take it. There is a
program to reduce the amount of free time over the course of the next
two years and bring it down to seven days.

“All of these things are going to take time to get sorted out. We’re
talking about a wide modernization process for the whole logistics and
supply chain system in the country.”

What about your rail connection? How is that affecting port operations?

“We’ve got two new rail-mounted gantry cranes arriving at the beginning
of September from Shanghai and that will give us more than enough rail
capacity for the foreseeable future. We’re handling an average of one
train a day and there is more demand for rail. This is a very long, thin
island, so it lends itself to rail transport. The challenges involve the
efficiency of the country’s rail network: how quickly those trains can
be discharged and reloaded and how quickly the trains can get back here.
There is also a need for more investments in wagons and locomotives.
That is under way, so there should be additional wagons and locomotives
arriving in 2017.”

Who are the main shipping lines serving the port besides Melfi (the
Cuban government-owned carrier)?

“Melfi is the main customer. It has about 30 percent of the business.
Then following them, roughly in order, would be Maersk Line,
Mediterranean Shipping Co., CMA CGM, Hamburg Sud, Cosco Container Lines
– and now China Shipping after the merger – and then Hapag-Lloyd, Zim
Integrated Shipping Services, Evergreen Line, Nirint and Crowley.

How much of this is coming to Mariel through mainline services and how
much through feeders?

“Melfi has mainline services. Maersk has a mainline service coming from
North Europe that started in May. Hapag-Lloyd runs services from Mexico.
The rest are bringing in cargo by feeders, from Panama and Kingston and
the Bahamas and a little from Caucedo, much of it through Isla Bonita
Shipping.” (Editor’s note: Panamanian corporate records indicate that
the directors of Island Bonita Shipping are executives of X-Press Feeders)

Mariel currently has a capacity of 800,000 TEUs per year, with four
cranes and 700 meters (2,296 feet) of quay. You’ve previously indicated
that the next phase will be the development of an additional 300 meters
of quay. What’s the timetable for that?

“We are in the process of talking about that right now with the Cuban
authorities and the partners we’re working with. That means it wouldn’t
be (coming online) until sometime in 2019. The ‘crystal ball gazing’
element we’ve got to consider is how quickly and far-reaching any
changes to US legislation vis-à-vis the embargo and the 180-day rule
will be. If those rules disappear, then we’re in the game and very well
positioned geographically, so we may want more than another 300 meters.”

You also have an additional 1,400 meters that’s possible to develop,
bringing the total potential quay length to 2.4 kilometers (1.5 miles)
and the total future capacity potential to 3 million TEUs per year. I’m
assuming that this additional 1,400-meter stretch is earmarked for the
post-embargo era?

“Yeah, that’s a long-term project.”

It has only been a few months since the expanded Panama Canal has come
online and we’re already seeing 10,000 TEUs neo-Panamaxes in the
Caribbean. Where are you now with dredging and what’s the schedule for
further deepening?

“At the moment, we have a Panamax access channel. The maritime authority
has literally just published new navigational regulations for Mariel
that represent the culmination of the investments in dredging that have
taken place through today. These regulations allow for vessels of up to
295 meters length overall, 32.3 meter beam, and up to 12.1 meter draft.
There’s probably about 15 meters of actual water depth in the channel
and the channel itself is somewhat wider than it would need to be under
international guidelines for a Panamax vessel, so they’re also now
reviewing whether or not that (vessel allowance) can be increased.
Dredging is ongoing with a view to completing a neo-Panamax-dimension
channel sometime in 2017.”

The big potential for the future of Mariel is transshipment. Even with
the embargo and the 180-day rule, couldn’t you start up an international
transshipment business serving mainliners on, for example, a
Europe-South America route, and transshipping to the Caribbean but not
touching the US?

“There is a possibility, but it’s very challenging for a number of
reasons. First, all of the different shipping lines in these alliances
need to agree that they will include Mariel in their route and some of
them have a greater degree of difficulty in making that decision.
Earlier, I gave you the list of our customers and you might ask, ‘Where
are NYK Line, “K” Line, MOL, and the Koreans?’ The answer is that some
shipping lines have purposefully decided not to do business with Cuba so
they don’t jeopardize their interests in the United States.

“Another aspect is that you have to consider who owns the ships. If half
of the ships are chartered, then who are they chartered from? If it’s
from a company listed on the US stock exchange, that ship cannot
participate. Another question is: who insures the vessel? If an owner is
using an American-based insurance plan, there’s another difficulty.

“And finally, if you have ships in a service that comes to Mariel and
for whatever reason you need to change the configuration of your
service, those ships cannot be deployed into a service that touches the
US for 180 days. You have black-listed your ships from US service for
six months after your call in Cuba.”

From what you’re saying, it sounds like the challenge to your
transshipment potential is not just the 180-day rule, it’s also the
embargo, even in cases where the transshipment doesn’t touch the US.

“Yes, it’s a mixture of the two.”

I know you’ve been to Washington and lobbied for repealing the 180-day
rule prior to the end of the embargo. I’m trying to understand why
Congress would be interested in doing that. I can see how it would
benefit European and Asian carriers, a Singaporean terminal operator and
the Cuban economy, but wouldn’t it create direct competition for
US-based carriers operating out of US ports and carrying US exports to
Caribbean buyers? What’s in it for US voters, which is what Congress
cares about?

“We believe that as far as international transhipment, the US is not in
that business. We’re talking about doing transhipment in Mariel as
opposed to a place like Kingston, Jamaica. We also believe that if we
can provide a more efficient system (than other hubs), US-based
importers and exporters could reduce their transportation costs — and
that is favourable to US companies and therefore US voters.

“Another aspect we think is very interesting is that if you allow
transshipment to take place from Mariel to US ports, you could open up
service to Tampa, which is the closest port to Orlando, which is of
course a huge area for distribution centers serving the state of
Florida. Supply chain costs would be reduced and you’d also get the
cargo closer to the distribution centers, so you could reduce emissions
from trucks that would otherwise have to run the cargo up from Miami or
Ft. Lauderdale.

“The final consideration is that you’ve got a lot of federal and state
budgets under discussion for dredging projects to increase the
vessel-size capabilities of ports along the US Gulf and Eastern
Seaboard. If you create a transshipment hub in Mariel, where we’re
already putting the capital expenditures into the ground and into the
channel to receive the bigger vessels, US ports could receive goods in a
timely and efficient fashion without having to spend hundreds of
millions of dollars on their channels. We would argue that you could
actually save capital investment dollars in US ports by handling
transshipment in Mariel.”

I thought the potential for Mariel was transshipping to non-US ports if
the 180-day rule was lifted prior to the end of the embargo, but I’m
hearing you talk a lot about the potential for transshipment involving
US ports. Wouldn’t a box from Asia that was transhipped from Mariel to
Florida be considered a Cuban export and therefore illegal under the

“No, it would be transit cargo and not covered under the embargo. Our
interpretation is that if you remove the 180-day rule and the Torricelli
Act (the Cuban Democracy Act of 1992] that goes with it, you could
perform international transhipment in Mariel for US import and export
cargoes. You still couldn’t trade freely between Cuba and the US, so you
wouldn’t be exporting US goods to Cuba or Cuban goods to the US, but you
could create a transshipment network for international transshipment cargo.

“On whether or not this is feasible, I’d point out that there’s a lot
going on politically and I think we can read between the lines of some
of the recent developments outside the shipping industry. The first
development is the advent of cruises by Carnival from Miami to Havana
and then to Cienfuegos and Santiago de Cuba. These cruises are taking
place even while the 180-day rule is in place and US tourists are not
permitted to visit the island. The second development is that starting
tomorrow, we have the first scheduled airline flights from the US into
Cuba in 55 years and within the next three months there will over 25
such flights per day, even though we are still in the same situation
where US citizens are not free to travel to Cuba as tourists. So why are
the airlines putting so many flights into the island?

“If exceptions are being made for those types of industries, is it
really so unrealistic to think that if we lobby in the right corners, we
might be able to find a similar solution for the 180-day rule and
container ships? I don’t know the answer, but we’re certainly going to
keep trying.”

OK, final question: what is your thinking on the timing of the lifting
of the trade embargo? What I’ve been told is that even with a new US
president coming in and a new Congress convening in January 2017, any
action will effectively have to wait until February 2018, when Cuban
president Raul Castro retires. So we should really be looking not to
next year but to the year after. Does that make sense?

“It does. And if you look at the Helms-Burton Act (the Cuban Liberty and
Democratic Solidarity Act of 1996), it actually names Fidel and Raul
Castro and specifically states that the US will not do business with a
government that involves these individuals. So if Raul retires in early
2018 as he says he will, it will be easier for Congress to get rid of
the embargo.

“I am not a betting man, so I would not bet on it, but if I was a
betting man, I would bet on 2018.”

Contact Greg Miller at and follow him on
Twitter: @GMJournalist.

A version of this story originally appeared on IHS Fairplay, a sister
product of within IHS.

Source: Mariel port head outlines Cuba’s long-term shipping prospects –

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