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Cuban investments from Qatar, OPEC Fund and Dubai Ports World in Mariel

Posted October 07, 2008 by publisher in Cuba Business.
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Written by Hans de Salas del Valle. He is a Research Associate at the Cuba Transition Project, Institute for Cuban and Cuban-American Studies, University of Miami.

    The reach of Cuban diplomacy in today’s Middle East transcends Havana’s historic alliances with fellow archenemies of the United States and the West. Since Fidel Castro’s first foray into Middle Eastern affairs in the early 1960s (1), an eclectic array of anti-American regimes from North Africa to the Persian Gulf, among them Saddam Hussein’s Iraq, Qaddafi’s Libya, and the Iran of the Ayatollahs, have all found a friend in Castro’s Cuba.

    The island’s longstanding political alignment with Iran, for instance, has expanded into a billion-dollar financial lifeline from Tehran to Havana. (2) Yet, the best measure of Havana’s recent diplomatic triumphs in the region lies in its rising profile as a pragmatic geostrategic partner and safe haven for Islamic interests in the Western hemisphere. The fact that even allies of the U.S., including the moderate Persian Gulf states of Qatar and the United Arab Emirates, are investing in Cuba and collaborating with the government of General Raúl Castro is itself indicative of the Cuban regime’s remarkable ability to continue to circumvent and outmaneuver Washington around the world.

Qatar

    In April 2008, Qatar’s real estate development fund Qatari Diar announced that it will invest $70 million in a joint venture with Cuba’s state-run Gran Caribe hotel group to build a 200-room five-star hotel and an accompanying 60 luxury villas on Cayo Largo, an exclusive island resort off the Cuban mainland. (3) The commitment of Qatari capital in Cuba is the culmination of many years of political courting by Fidel Castro, who in September 2000 bestowed Cuba’s highest honor, the Order of José Martí, on Qatar’s ruling emir Sheikh Hamad bin Khalifa al-Thani. At $70 million, the investment by Qatar surpasses in value the declining number of new business deals with Spain and other European nations, which have dominated Cuba’s hospitality sector since the Castro regime opened the island to foreign investment in the early 1990s. Moreover, such a large infusion of capital by Qatari Diar, a government-funded subsidiary of the Qatar Investment Authority, suggests a high degree of trust in the stability of the Castro regime as well as confidence in the longer-term economic value of the island.

    Indeed, Qatar has also signed an accord with Havana for the services of Cuban public health professionals to establish and operate a new comprehensive hospital, staffed and supervised by Cuban physicians and specialists, in the Qatari town of Dukhan. (4) While the details of the deal have not been released, the contract with the wealthy Gulf emirate will undoubtedly generate a substantial stream of hard-currency revenue for the Cuban government. Qatar is a potentially very lucrative market for the export of Cuban medical services as Havana increasingly relies on hiring out physicians and other highly-skilled Cuban workers to developing countries in order to compensate for the low productivity of the Cuban economy. (5)

OPEC Fund

    The Organization of Petroleum Exporting Countries (OPEC) has emerged as one of the island’s largest aid donors since 2003, when Cuba ended all official cooperation with the European Union (EU) and rejected further bilateral assistance from most EU member states. Through the Vienna-based OPEC Fund for International Development, the oil cartel has funneled more than $50 million in low-interest development loans to the Cuban government for major investments in electrical infrastructure, water sanitation, and agricultural production. (6) And unlike the aid provided by European and other Western governments, which publicly reprimanded the Castro regime following the widespread repression of Cuban dissidents in 2003, the OPEC Fund does not exert any pressure on Cuba to democratize its political system or liberalize its economy.

    It is undoubtedly for this reason, as well as for the magnitude of the aid itself, that Cuban vice president Carlos Lage has praised the OPEC Fund as “one of the few institutions left in the world that offer[s] such concessional and untied aid,” (7) i.e., with no reform conditions attached. Considering that grants and other assistance from Spain, the island’s leading European investor which at times has sought to use its economic presence as leverage to influence the direction of a post-Fidel Cuba, totaled 44 million euros (about US$56 million) over a three-year period from 2004 through 2006 (8), aid from the OPEC Fund and other alternative sources has enabled the Cuban government to break its post-Soviet dependency on Western donors and in the process largely nullify Spanish and EU political pressure on the Castro regime, especially at times of crisis.

Dubai Ports: Mariel v. Miami

    After Congress forced the United Arab Emirates-based Dubai Ports World (DP World) to sell its operations at six U.S. ports, including New York and Miami, to a U.S. company in response to the perceived security implications of an Islamic firm running major American ports, the Dubai-owned marine terminal operator found an alternative to Miami in the Cuban seaport of Mariel. In what may be the single most ambitious foreign financed project in Cuba since the collapse of the Soviet Union, DP World, which is backed by the sovereign wealth fund of the emirate of Dubai, revealed in October 2007 that it will commit some US$250 million in a joint venture with the Cuban government to transform Mariel, about 30 miles to the west of Havana, into a world-class transshipment center. The flow of Arab capital into an undervalued but strategic asset like Mariel could transform Cuba once again into a major entrepôt at the crossroads of the global economy.

    A prescient analysis in The Economist argues that by the time DP World completes its planned modernization and expansion of the Cuban port’s facilities in 2012, “Mariel…would be a well-positioned hub” with the potential to compete for international business. (9) East Asian container lines (DP World, currently the third largest international shipping terminal operator, manages several ports in China) might be willing to reroute their vessels via Cuba for both economic and political reasons. How? Assuming that Washington’s trade sanctions against Cuba have been lifted or relaxed sufficiently so as to allow merchandise imports from the island to enter the U.S. market, by the end of the next administration in the White House both Cuban and multinational “goods could be transferred from the big container ships arriving at the port to smaller vessels which could then reach dozens of harbours in the southern United States.” (10) The possibility that a DP World-run Mariel could eventually challenge Miami’s dominance as the preferred commercial port along the Florida Straits has already been acknowledged by the current director of the Port of Miami with “great concern” at what lies “right around the corner” in 2012. (11)

Cuba, 2012: Islamic Island?

      It is not likely that a substantial segment of the island’s population will convert to Islam in the near future or that the fundamentally secular nature of Cuban society will be altered by recent contacts with the Muslim cultures. Nevertheless, the emerging economic ties with Islamic nations do suggest that Cuba is seen as a secure and stable country for Islamic capital and as a reliable political partner to Islamic regimes.

    The immediate concerns of most Western observers with respect to Cuba, particularly in light of the catastrophic costs to the island’s economy and infrastructure by hurricanes of recent memory, tend to be short-sighted. While the danger of short-term social upheaval must always be taken into account, it is unlikely that Havana’s allies will allow the strategically located island to sink into chaos simply for a lack of resources, which they are able and willing to provide as a long-term investment in Raúl’s regime. Instead of short-term apocalyptic fears, Islamic investors have demonstrated confidence in Raúl’s vision of a Beijing in the tropics.

    By 2012, the island could very well become a leading financial and logistics center for Islamic firms seeking proximity to the United States while remaining beyond the reach of Washington’s policies and regulations. Only Cuba could offer such a safe haven for Islamic capital and interests.

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Notes

(1) Cf. Piero Gleijeses, “Cuba’s First Venture in Africa: Algeria, 1961-1965,” Journal of Latin American Studies, Vol. 28, No. 1 (Feb. 1996), pp. 159-195.

(2) See “Islamic Investment in Cuba,” Cuba Focus, August 11, 2008, http://ctp.iccas.miami.edu/FOCUS_Web/Issue99.htm.

(3) Amy Glass, “Qatar to build $70 mn Cuba resort,” ArabianBusiness.com, April 29, 2008, http://www.arabianbusiness.com/517917-qatar-investment-authority-signed-70mln-deal-with-cuban-republic (accessed September 2008).

(4) “Qatar, Cuba sign deal on medical services,” Doha, The Peninsula, April 23, 2008.

(5) Cf. Marc Frank, “Cuban service exports continue dramatic rise,” Havana, Reuters, January 10, 2008, http://in.reuters.com/article/asiaCompanyAndMarkets/idINN1016624020080110.

(6) Cf. OPEC Fund for International Development, “Country Profiles, Cuba,” http://www.ofid.org/projects_operations/latamerica/cuba.html, (accessed September 2008).

(7) OPEC Fund for International Development, “Cuban Vice-President visits OFID,” Press release, Vienna, May 17, 2006.

(8) “España reactiva la cooperación con Cuba,” El Mundo (Spain), September 30, 2007. The approximate value of euros to U.S. dollars is based on October 2006 exchange rates.

(9) “Foreign investment in Cuba: Bye-bye embargo?” The Economist, November 22, 2007.

(10) Ibid.

(11) “Port Director Expresses Concern Over Cuba’s Mariel,” Miami, Local 10.com, April 14, 2008, http://www.local10.com/news/15875315/detail.html.

This is part 2. Read part 1 here

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