Cuba grants Mexican company 100% control

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General Paint's main offices near Mexico City

General Paint’s main offices near Mexico City

CUBA STANDARD — The Cuban government allowed a small Mexican paint manufacturer to establish operations at the Mariel Special Development Zone as a fully foreign-owned company, the Mexican foreign ministry announced in a press release.

General Paint S.A. de C.V., a company whose home base is a small but high-tech plant in Lerma near Mexico City with 100 employees, obtained approval from Cuba’s Council of Ministers to set up Devox Caribe S.A. Devox will build a highy automatized plant to manufacture industrial anti-corrosives and paint for residential use, both for the Cuban market and export.

Small company, high profile

This is the highest-profile case in more than a decade of the Cuban government granting permission to form a 100% foreign-owned company in the island. In the late 1990s, the government granted a Panamanian company full ownership to build a strategically important power plant on the Isla de Juventud.

Only 4% of the 200-plus foreign businesses in Cuba are 100% foreign-owned, according to the investment portfolio published by the government last fall.

A new foreign investment law that became effective last year specifically allows the creation of fully foreign-owned companies in Cuba, and the Mariel Zone emphasizes that option.

According to company President Jaime Murow, General Paint was up against European competitors in the Mariel project. Working in his favor was his company’s presence in Cuba of many years, and its expertise with tropical environments, he says.

“We’re not new in Cuba,” Murow told Cuba Standard. “We have exported there for more than 20 years, and we have an office in Havana. We’ve worked on nickel mining projects, on rum plants, on hotel construction, and we started the technological shift in Cuba from vinyl-based to acrylic paint.”

“We’re a company that has thoroughly complied with our contracts, with training, and with technology transfer.”

Also, the General Paint project fits into Cuba’s priorities of technology transfer, exports, and providing construction supplies to prop up the crumbling housing stock and for the fast-growing number of hotels and resorts.

Murow, who became the controlling shareholder of General Paint in 1996, was assisted in the Mariel project by the Mexican embassy in Havana and by state export and foreign investment promotion agency ProMéxico. However, the only outside funding he receives for the project is from private banks in Mexico, he says.

Setting up operations at Mariel is a big step for the small company. While it exports 25% of its Mexican production to Cuba, Costa Rica, Panama, and other Central American markets, General Paint has been essentially a midsize Mexican business.

“We do have a small facility in Panama, but it’s much smaller than our Cuban operations,” Murow says.

The four-stage application process at Mariel took 18 months, between submitting the first form and receiving green light from the Council of Ministers. Murow says the Mariel Zone administrators — whom he describes as “super professional” — shifted the location of his future plant twice or three times, to locate it where services and infrastructure have already been established. He expects to launch production six months after construction start.

Exports to the United States from Mariel have not figured into his profit calculation, Murow says.

“We never considered that factor,” he says. “Lifting the embargo is just not in our hands. But if it happens, we’ll be there.”

The plant at Mariel will first supply the Cuban market, where it will compete with state manufacturer Vitral and European importers. Eventually, the Mariel plant will export to nearby Mexican markets, such as Yucatán and the tourism hubs in Quintana Roo, according to Murow.

State hiring

Asked about a Cuban provision that forces foreign employers to contract local workers through a state agency, Murow said that he had already begun the hiring process and that this was not a problem.

“Like any country, Cuba has its hiring regulations,” he said. “We respect that, and we can work with that. They will either suggest employees, based on the profile you give them, or — if you know someone, like we do, thanks to our presence of many years here — you can suggest that person. All our Cuban employees have been top quality. But even if you don’t know anyone, the Cubans are very skilled and educated people.”

In the case of his company, he is using a mix of both. He adds that while the state employment agency sometimes takes longer than desired, it usually delivers.

General Paint is the second Mexican investment project at Mariel. In March, the Mexican foreign ministry announced that Richmeat México S.A. de C.V. will build a meatpacking plant.

In April, Mariel Zone General Director Ana Teresa Igarza said that there were more than 300 applications for projects at Mariel. In May, Mariel officials announced that five companies had been approved. The probably biggest commitment so far is from French shipping company CMA CGM, which announced it will build a 17-hectare logistics center in a joint venture with Almacenes Universales S.A., a state company affiliated with the armed forces. Devox General Paint logo

 

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