On September 23, 2013, Cuba enacted laws establishing the Special Development Zone of Mariel (MDZ).1 The MDZ is an area of 180 square miles, approximately 27 miles west of Havana wherein Cuba is building one of the largest commercial ports and foreign investment zones in the Caribbean. Raul Castro has called the MDZ "the most important work being done in the country."2
The MDZ is not a free-trade zone laying outside of Cuban customs. Rather, it is a special investment enterprise zone subject to a discreet regulatory scheme3 more favorable than found outside the zone and to which Cuba seeks to attract foreign investment, technological innovation and a concentration of industry.4 A central focus is the expansion of the Port of Mariel to accommodate the "New Panamax" size cargo ships able to traverse the Panama Canal post expansion.5 Per the official MDZ web site6, the container terminal will be administered by PSA de Singapore and it will have more than 700 meters of wharfs with a high degree of automation. The port is linked to Havana via a modern highway. An intermodal and other railway linkage is being built. Water and electrical power is in place as well as a connected fiber optic system with radio back-up for redundancy.
The regulatory scheme enacted for the MDZ addresses a wide range of issues including taxes, customs procedures, labor, financial, monetary, banking and compliance controls, insurance and conflict resolution. The MDZ is administered by a director general with wide-ranging responsibilities that include the zone's development and administration, participation in the analysis and approval process of proposed investments and monitoring and compliance oversight over projects in the MDZ.7 The Office of the Director General collects from investors, set-up in the MDZ, a percentage of their income to fund operations, development and maintenance.8 The director general is to be assisted by a commission composed of representatives of the central government and the various ministries with jurisdiction over economic, labor, finance, science and technology, environmental, justice, central bank and military matters.9
The Council of Ministers must approve all investments involving 100 percent foreign capital, real estate, non-renewable natural resources, renewable energy or involving any transfer of state property or rights. The Council of Ministers must also approve any investment in public works or services such as transportation, communications, electricity, health, education or defense and any investment from a foreign state.10
The Director General's Office will be the key link to the Ministry of Foreign Commence and Investments, and other ministries of the central and local governments to coordinate all matters related to the MDZ including the approval of projects.11 All investment proposals for the MDZ will be introduced through the director general's "one-stop-portal" set-up for this purpose.12 The "one-stop-portal" is intended to facilitate the process of obtaining all necessary licenses, permits and authorizations from the relevant regulatory bodies.13 The law's intent is to have projects approved or rejected within sixty-five (65) days of the acceptance of a fully compliant proposal by the MDZ's Director General.14
The statue details the documentation required when submitting a proposal to invest in the MDZ.15 The required documents include an application, corporate formation documents, financial documents, corporate registration in Cuba, powers of attorneys for project representatives, description of the proposed project to include details of objectives, feasibility study and licensing, permits, technology, infrastructure, human resource and other service requirements.16
The law divides investor types into two categories: concessionaires and users. Concessionaries will manage, provide and/or construct a public service, a public work or otherwise exploit a public right or public property. Concessions must be granted by the Council of Ministers.17 Concessions can be granted for a term of up to 50 years but are renewable.18 Users are involved in commercial, manufacturing or service sector projects.19 The Council of Ministers can delegate to the Zone's director general the authority to approve projects and investments by users.20 Both types of investments can be implemented through individual foreign natural persons, foreign corporate entities and Cuban corporate entities. The investment capital can be 100 percent foreign owned, 100 percent Cuban or a combination thereof.21
Concessionaires can carry on construction activities for offices, warehouses, factories, transportation systems, and other required infrastructure for life and business in the MDZ. In addition, concessionaires can set up training centers for users, lease property to users, build homes and hotels, operate airports, ports, wharfs, rail systems, etc.22 Users can engage in all activities not otherwise excluded which encompass production, commerce and/or services.23
Approved investments, once established in the MDZ, are subject to the special regulatory scheme.24 This includes no tax on profits for 10 years with the possibility of extensions. No tax on the use of labor. No custom duties on equipment and goods imported into the MDZ. No sales or service taxes during the first year and no contributions for local development.25 After the tax exempt periods end, the tax on profits is 12 percent and the tax on the sales of goods or services is 1 percent. The social security contributions for employees is 14 percent.26
Subject to approval by Cuban authorities, concessionaires and users are allowed to directly hire or contract with non-resident foreigners to manage their enterprises in the MDZ as well as for other technically designated positions.27 However, in general most workers are to be Cubans or foreign-permanent residents of Cuba.
Cuban workers will be employed through approved Cuban employment agencies.28 General Cuban labor laws will apply to Cuban nationals and permanent residents.29 Labor disputes or disputes over the work of an individual employee are resolved with the Cuban employment agency. Terminated employees in most cases will be entitled to severance payments the amounts of which will be based on length of service. The payments range from one month pay for workers employed less than nine months to five months' pay for a 30-year employee.30
The special regulatory scheme requires that concessionaires and users maintain risk insurance with Cuban insurers as a first option or approved foreign insures if competitive and reliable national insurers are not available.31
Concessionaires and users can transact business among themselves using convertible currencies as they agree among themselves.32 Business transactions with those operating in the domestic economy must be as required by law.33 Concessionaires and users can use any banks authorized and established in the MDZ.34
Concessionaires and users established in the MDZ shall have the right to transfer out of the country all net profits and dividends or invested capital without any further tax or fees through the National Banking System.35
Concessions, unless extended, end automatically at the end of their prescribed term.36 Concessions can also end due to insolvency, judicial termination or death of the concessionaire, breach of contract, state action to continue the activity under governmental authority, reasons of public order, national security or other causes expressly set forth in the act granting the concession.37 Likewise, user authorizations can be terminated for death or corporate judicial termination, insolvency of the user, breach of contract, reasons of public order or national security or any reason set forth in the documents authorizing the activity.38
Business conflicts between users and concessionaires, or between users and concessionaires and persons and entities in the domestic economy will be resolved as agreed to in the relevant contracts, submission to the Cuban Court of International Arbitration, or in the local courts.39 Administrative disputes among users, concessionaires or entities in the domestic economy are resolved by the Director General's Office with the right to appeal to the local courts.40