Port executive Charles Baker has a high-profile job in Cuba, running the container port terminal TC Mariel inside the Mariel Special Economic Development Zone east of Havana. The three-year-old port, already key for Cuba’s imports and exports, aims to become a hub for containers transiting between Asia and the Americas, in particular for those passing through the Panama Canal.
The son of a British port manager and 25-year veteran in ports, Baker came to Cuba in 2012 when the nearly $1 billion Mariel port project was still under construction. He started with a staff of 24 and now oversees 525 people. Baker works for Singapore’s ports giant PSA, which operates 40 ports worldwide. Mariel is the only port that PSA runs without an equity stake. The port is owned by Cuba’s government.
In late 2017, Cuba Trade spoke with Baker in Havana about the status of TC Mariel, expansion plans, and how operations differ from other countries – like the need to provide bus routes for staff to get back and forth to the terminal for three shifts a day. In other countries where workers have their own vehicles, port managers worry instead about providing enough parking, said Baker.
How does TC Mariel compare to other container terminals in modernity and volume?
When we opened in January 2014, the terminal was one of the most modern in the Americas, with the same state-of-the-art equipment we buy and use anywhere in the world. Last year , we handled 325,000 TEUs (20-foot-container equivalent units), and we’ll do about the same this year . We have installed capacity for 800,000 TEUs, so there’s plenty of room for growth.
What kind of goods do you handle and from where?
Today, we’re handling 90 percent of Cuba’s containerized cargo, with the rest going mainly through Santiago and Moa for those regions. Imports are everything from household goods to what you find at hotels and supplies for factories. About 40 percent of imports come from Asia, and a lot from the Mediterranean, the east coast of Latin America and northern Europe. Exports are very low – maybe 20,000 to 25,000 containers a year. They’re bagged charcoal made from the marabu plant, some coffee, honey, rum, tobacco, frozen seafood, and frozen fish. About 85 percent of containers head out empty.
Compared to neighbors like Costa Rica and Dominican Republic, the volume of imported goods per capita may be as little as one-third, probably because of the low level of consumer goods.
How much of the container trade is linked to the nearby Mariel Special Economic Development Zone, where Cuba is offering tax breaks and other perks to lure factories and other businesses?
It’s still not very high, as the Zone is young. For a huge development like the Mariel Zone, you have to build infrastructure and do a global marketing campaign. Once a project is landed, you have a construction period of six to 18 months before production begins. We’re starting to see production now. The link to the port is two-fold: Materials that go to the Zone to be made into finished products for the Cuban market, plus limited exports of goods sold to islands around us. We hope in the future there will be larger factories and the ability to sell into much larger markets like the United States.
Is Mariel ready to accept the biggest ships that can now cross the expanded Panama Canal and require deeper channels?
Not yet. Dredging is underway to take the channel from 15.3 meters [50 feet] to about 16 meters [52 feet] next year and later to 18 meters [59 feet] probably in 2019. So, we will try to penetrate the transshipment market initially for non-U.S. markets in Central America and the Caribbean. Our competitors for transshipment in the region are Freeport in the Bahamas, Kingston in Jamaica, Caucedo in the Dominican Republic, and, further south, Panama.
The terminal plans to eventually reach 3 million TEUs capacity. What is the timetable?
There are no fixed dates. The plan is to kick off each expansion phase two to three years before you need it, because it’s not a quick project… We have 700 meters [almost 2,300 feet] of pier now. We’d probably go next to 950 to 1,000 meters [more than 3,100 feet], which would push us to about 1.1 million TEUs capacity. There’s no hurry to reach 3 million TEUs.
Expansion really depends on three factors. First is Cuba’s national economy and growth in import-export volumes. Second is if we can penetrate the trans-shipment market, where we’re quite hindered because we’re not allowed by U.S. legislation to handle U.S. origin/destination transshipments. We’d like large vessels to dock in Mariel and rather than go to multiple U.S. ports, and load containers onto smaller ships for those U.S. ports. The same would happen in reverse for U.S. exports: Containers would be loaded onto small ships at U.S. ports and then loaded onto bigger ships in Mariel. We have a wonderful geographic location for that type of traffic, with a view to U.S. Gulf and South Atlantic seaboard ports.
The third factor concerns the U.S. embargo itself. If U.S.-Cuba trade is loosened and banks become more liberated in financing Cuba, we would expect larger volumes and a review of expansion plans.
How does operating a port in Cuba differ from operating elsewhere?
The level of enthusiasm, interest and commitment from the staff at all levels here has been incredible. They see this as a project of national importance and strategic interest, and they’ve thrown themselves into a steep learning curve. We’re running a very, very stable operation at levels of productivity and efficiency commensurate with competitors in the region and with our global standards as a company. There’s Cuban national pride involved, and we’re glad the staff are proud of what they are doing.
How does hiring work?
All of our staff are hired through contracts with a [government] agency. For us, the agency is an aid. It receives thousands of CVs from applicants and then filters them down to the ones we’d be interested in, based on skills sets, prior experience, and the like. But you don’t necessarily have to take from those. If I see someone with a strong CV, I ask the agency to do the necessary background and medical checks so we can employ them.
What are the biggest challenges for operations?
We had a challenge to get some needed supplies, but Cuba has reacted and given us the opportunity to import directly. We now have approvals to buy select goods we need – like tires, lubricants and spare parts – from approved suppliers, which cuts the cycle time to receive supplies.
In logistics, we received two gantry cranes last year that let us increase capacity at the on-dock rail terminal. The Ministry of Transport is investing in rail stock and locomotives to move more containers by rail, which is environmentally friendly and more efficient to get goods to the provinces on this long, thin island. They’ve also brought in more trucks to move containers, and built or renovated warehousing to accommodate greater cargo demand.
If the embargo were lifted, what would it mean for the port and Cuba trade?
Additional growth. But bear in mind Cuba has established long-term relations with European and Asian suppliers, who will defend their market share.
Before the embargo, people tell me Cuba didn’t have many warehouses, because importers would buy from the United States, and goods would be shipped in overnight and direct to stores. If I look at trade between Great Britain and continental Europe, you have a plethora of ferries, a tunnel and even a train handling cargo back and forth. So, we may need to construct facilities to let trucks come across the Florida Straits and then drive off to where they are needed in Cuba. And obviously, the transit time for cargo into Cuba would be greatly reduced.