Friday, April 15, 2016

The Mariel Overruns

The Mariel Overruns
PABLO PASCUAL MÉNDEZ PIÑA | La Habana | 12 Abr 2016 - 10:12 pm.

From the town of Mariel, in the distance one can make out the giant
cranes at the container terminal, like specters beckoning us over to
hear their confessions, while Marcello, the character from the
Shakespearean tragedy Hamlet, bursts into our imagination with his
famous line: "Something is rotten in Denmark."

The maritime facility [See location on the DDC News Map] built by the
Brazilian multinational Odebrecht, a company tarnished by corruption
scandals and with ties to the state monopoly Petrobras, the
investigation of which led to an earthquake that shook a major number of
business, banking and political structures in the South American giant,
is also enshrouded in suspicions of irregular practices.

Two years after its inauguration by the presidents Dilma Rousseff and
Raúl Castro, and despite the serious suspicions uncovered by the Lava
Jato anti-corruption operation, neither the Cuban nor the Brazilian side
have published a master plan breaking down the container terminal's
construction costs, or the contractual contents of the project carried
out by Odebrecht and the Cuban-Venezuelan joint entity Quality S.A.

The big question is how to explain the $957 million price tag for a
wharf facility that, according to official sources, covers an area of ​​
just 28 hectares, has a 700-meter mooring line, 4 super post-Panamax STS
cranes, four Rubber Tire Gantry Cranes (RTGs), 22 tractor trailers, two
tugs, and a maneuvering dock measuring 520 meters in diameter, and with
just 9.75 meters of draft. This, in addition to the renovation of just
over 30 kilometers of roads, the construction of only 18 kilometers of
motorways, and almost 13 kilometers of railway lines; plus a limited set
of civil works and the manpower provided by the over 6,000 Cuban workers
who participated in the construction, for a paltry total of $20 million
for three years of work.

So, where did the 957 million figure come from?

The figure of $957 million was taken from an article by the Brazilian
portal Spotniks, dated October 20, 2014 and entitled: "20 obras que o
BNDES financiou em outros countries" ( "20 works that BNDES financed in
other countries"), authored by Felippe Hermes, which reveals the
Brazilian financial contribution towards the construction of the Mariel
Container Terminal (TCM), coming to $682 million, or 71 % of the total.

The source used by Hermes was the request filed by the representative
Vanderlei Macris with Brazil's Minister of Development, Industry and
Foreign Trade to clarify before the Executive Branch the data and
constitutionality of said contribution.

However, information from the Master Plan for the Limón / Moín (Costa
Rica) complex, drafted by Filip Augustyns and approved by Ronald Moor,
with project number 9R4672.21, studied several offers that, when
examined in relation to the cost of TCM, arouse suspicions of a serious
cost overrun on the already controversial megaport.

Comparing the list with the costs

In said document one can find an offer featuring Anglo-Canadian
financing that the American Gateway Development Group (AMEGA) proposed
to its Costa Rican counterpart for the construction, to the west of the
city of Moín, of a container terminal to receive megacarriers (with a
capacity for 5,000 to 12,500 TEUs, and drafts of 14 to 15 meters,
respectively), in order to use the central American nation as a transfer
and distribution center, with one eye on the expansion of the Panama
canal. The proposal would feature a dock long enough for five berths,
with 10 super post-Panamax cranes, an 800-meter breakwater, a 40-hectare
embankment zone, gained from the sea; a 300-meter access channel with a
depth of 19 meters, and infrastructure including warehouses, roads and
railways, at a total cost of $650 million – representing 67% of the
total cost of the Mariel Terminal.

The breakdown of expenses – according to the above-named master plan –
would be: $370 million for civil works and infrastructure; 170 million
USD for equipment; and another $110 million for additional items.

The proposal was rejected by the experts because it did not meet the
nautical, port, economic, social and environmental demands called for by
the tender.

The controversy over Mariel's costs intensified when in a press release
from the Inter-American Development Bank (IDB) Jean-Paul Rodríguez, a
PhD in Transport Geography at the University of Montreal, stated that
the funding for the Moín/Limón project came to $992 million, exceeding
the cost of Mariel by a narrow 4% margin.

According to Rodríguez, in the project's first stage a ​​40-hectare
island was built 500 meters from the coast, to feature a 600-meter
multipurpose dock with 14.5-meters of draft. Another pier was also
built for a 1,500-meter container terminal, duplicating the length of
the Mariel Terminal, with six super post-Panamax STS cranes and a draft
of 16 meters at the berths, to operate with vessels ranging up to 15,000

To complement the information, according to the Master Plan for the
Limón/Moín Complex, added to the list of work elements was another dock
for conventional cargo and bulk liquids (fuel); the renovation of the
dock for bananas and refrigerated goods - as Costa Rica is the world's
leading exporter of fruit, a maneuvering dock measuring 600 meters
across; the retrofitting of the Limón port to accommodate cruise ships;
the construction of a breakwater; the relocation of the mouth of the
Moín River; the construction of warehouses, socio-administrative
facilities, buildings, workshops, paving, dredging, etc. It is worth
mentioning that the dredging involved a 1.5-m elevation of the subsoil
as the result of an earthquake in 1991.

The cost of all this infrastructure work was estimated at $500 million.

The FOB prices in USD of the equipment, by unit, were: super
post-Panamax STS cranes: 9 million; RTG cranes: 1.6 million; tractor
trucks: 150,000; reach stacker: 600,000; forklifts: 300,000; reefer
connections: 3,000; tugs: 7 million; and piloting vessels: 1.5 million,
among others.

A bad deal or the scam of the century

The Brazilian National Bank for Economic and Social Development (BNDES)
granted funding for the Mariel project in the amount of $682 million,
with interest ranging from 4.44% to 6.91%, payable in 25 years, while
the International Economic Association (AEI) contributed the remaining
capital (275 million USD), according to the EcuRed encyclopedia.

In order to grant funding for construction abroad the BNDES requires
that 85% of the equipment be built in Brazil, in order to guarantee jobs
for its citizens. Although it grants funding to purchase equipment that
the work requires that is not manufactured by its industries.

According to the official Cuban press, the largest ship that the Mariel
megaport has received is the Chinese freighter Zhen Hua 10, measuring
244 meters, 39 across and with a draft of 8.5 meters, which transported
the four super post-Panamax STS cranes installed in the spring. The
post-Panamax category was due to its beam, exceeding 32.5 meters.

The payment of $957 million for a port that does not even meet the draft
requirements to accommodate post-Panamax and super post-Panamax
megavessels means that the master plan for Mariel container terminal
ought to be published for the public's consideration.

Taking as a reference the costs of the Moín / Limón master plan and its
constructive complexities, we estimate that, conservatively – with the
help of specialists who requested anonymity – the cost of the
infrastructure and civil works for the Port of Mariel should not have
exceeded $300 million. To this number we can add 150 million for
equipment and another 100 million for additional items, which would
yield a total amount of 550 million – an estimate aggravating suspicions
of a cost overrun, to the tune of $400 million.

If this concern were to be substantiated we could state that the Port of
Mariel was either a terrible business deal or, in the worst-case
scenario, a transaction concealing criminal activity.

Source: The Mariel Overruns | Diario de Cuba -

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