Caterpillar has long supported an end to the Cuban ban and with the US flag now waving over the embassy, how long will it be before the iconic yellow machines begin the re-construction of Cuba’s infrastructure?
Caterpillar has been calling for a new policy towards Cuba since 1998. But now with full diplomatic relations being restored between Cuba and the United States, as symbolized by the opening of embassies in both nations, Caterpillar executives emphasize that now is the time to reexamine opportunities in Cuba.
The company, known for its deep yellow construction and mining equipment, diesel and natural gas engines, industrial gas turbines, launched a media campaign to call for the formal end to the US-Cuba trade embargo.
Statutes, Amendments
That embargo was first imposed by the United States on Cuba in 1960 to prohibit exports to Cuba with the exception of food and medicine. In 1962 the embargo was extended to include almost all imports.
Since then, other statutes were added, including the Helms-Burton Act of 1996, signed into law by President Clinton, to restrict US citizens from doing business in or with Cuba, and mandated restrictions on giving public or private assistance to any successor government in Havana unless and until certain claims against the Cuban government were met. In 1999, President Clinton expanded the trade embargo by also disallowing foreign subsidiaries of US companies to trade with Cuba. In 2000, Clinton authorized the sale of “humanitarian” US products to Cuba.
Some of the measures detailed by President Obama in restoring diplomatic relations with Cuba that are receiving immediate attention include: establishing generalized licenses for travel; enabling direct debit and credit card processing relationships (important because it will benefit travel to Cuba; facilitate easier payment for goods, ease in the registration of trademarks, and protect intellectual property rights); and permitting US-owned and controlled entities to provide services and engage in financial transactions with Cubans living in third countries.
“This last item has been a sour point for businesses around the world, particularly banks since they have been prohibited from dealing with Cubans who don’t even live in Cuba, i.e. those living in Spain,” says Jake Colvin, vice president, Global Trade Issues, National Foreign Trade Council (NFTC).
Additionally, with normalized relations, the US president will be authorized to license imports and exports to and from Cuba beyond what is currently licensed. Products mentioned are certain building materials for private residential construction, goods for use by private sector entrepreneurs, and agricultural equipment for small farmers, as well as products made by Cuban entrepreneurs for export to the United States.
“Long term investment will depend on economic development in Cuba and Cuban government policies,” says Colvin. “The Cuban government does not always score high on trade facilitation, customs procedures and port facilities.”
Other developments continue to take place. In July, the Senate Appropriations Committee approved three amendments to the unilateral US embargo against Cuba. Specifically, the amendments would 1) lift the travel ban to Cuba for one year; 2) end the requirement that ships having docked in Cuba wait 180 days before unloading in the United States; and 3) allow private financing of agricultural exports to Cuba.
Today a limited number of steamship lines operate between the United States and Cuba. Jacksonville, Florida-based Crowley Maritime Corp. - the first US carrier to re-enter Cuba - has been approved by the US government to do some business in Cuba since December 2001. The carrier sails to Havana from Port Everglades carrying US government approved humanitarian and agriculture goods that are paid for up front before export – cash only. It also sails from Jacksonville as an alternative port every week.
Other ships that dock in Cuba cannot enter the United States for six months.
Crowley indicates that the company would benefit from normalized relations because the steamship line is already in the market and understands the Cuban port systems and customs.
Competitor Seaboard Marine is also licensed to ship to Cuba, but may continue to opt out for now due to the fact Cuban exiles and/or people with Cuban heritage work for the company. They do not want to do business with Cuba.
Meanwhile, seaports in the Caribbean are vying for transshipment opportunities that will no doubt arrive once the expanded Panama Canal begins operations in early 2016.
More Can Be Done
While change in Cuba is moving rapidly, Bill Lane, director of Caterpillar Global Government Affairs, contends that more could be done to accelerate growth. For one, multi-development banks need to take a more aggressive role in Cuba. Cubans also need to embrace reform that allows foreign direct investment to be successful.
An example of where Cuba appears to be doing it right is that nation’s marketing of its economic zone at the state-of-the-art Port of Mariel. That zone, which benefits from financial support from Brazil, is Cuba’s biggest construction in decades. Mariel Port, which began operation in January 2014, is 45 kilometers west of Havana. Construction was financed by Brazil, which is also helping to pay for new terminals, highways and railways connecting the port with the rest of Cuba, and a communication infrastructure.
Ironically, the first ship to dock at Mariel Port brought food for Cuba from the United States. Inter Press Service News Agency reports that during its first six months of operation, Muriel Port received 57 ships and some 15,000 containers – small numbers compared to the terminal’s warehouse capacity of 822,000 containers.
The container terminal is run by Global Ports Management Limited of Singapore, which IPS reports has been working with the Cuban firm Almacenes Universales S.A.—owner and user of the terminal.
“The Cubans are marketing Muriel almost to the same level the State of New York economic development arm is marketing New York,” Lane says. “When you talk to Cuban representatives, they mention a 10 year tax holiday. It’s a similar presentation you hear all over the world.”
Lane and eight Caterpillar executives visited Cuba in late April as part of an official company trip to learn about market and philanthropic opportunities.
“We met with representatives in the construction, mining, and power generation industries and checked out philanthropic endeavors to help reinforce the Caterpillar brand and help the Cuban people,” Lane reveals. “We felt it was time to start sorting out opportunities in Cuba and moving forward with a plan so we can get a first move advantage when change takes place as far as US and Cuban restrictions being lifted.”
Caterpillar executives see competition in Cuba: Volvo for Cuba’s mining sector and Komatsu in construction. “The Chinese are trying to make some inroads,” he says.
But Lane maintains: the US has the home field advantage. “Location is important,” he says. “Cubans know American brands and they like them.”
To be successful, company officials realize Caterpillar will have to make its own capital investment in Cuba in infrastructure. “Muriel is very usable,” he says.
While American tourists who have made their way to Cuba enjoy looking at the 60-year old cars, Lane emphasizes that Caterpillar executives spend their time looking at the 60-year-old roads. “Everything we make is needed in Cuba,” he comments.
