The problem: the embargo is still in place. The embargo on Cuba is still an issue in the efforts to normalize trade relations with Cuba.
Last May, Caterpillar Inc. CEO Doug Oberhelman led a delegation of Caterpillar executives and representatives of RIMCO, the Cat dealer serving Puerto Rico, to Cuba.
The context of the visit was interesting, because the main event was held at the Cuban home of the late U.S. author Ernest Hemingway, where the Caterpillar Foundation announced that it will add to its previous $500,000 to support the construction of an on-site conservation laboratory with archival storage facility.
Companies like Caterpillar are champing at the bit, waiting to do business in Cuba. The presence of RIMCO in May’s delegation was interesting, as it was named the company’s distributor in Cuba, once business can get underway.
But the fact remains that for all the progress in the relationship between the United States and its island neighbor—and for all the many but limited steps taken by the Obama administration to jump-start business connections—full-blown business relationships are still prohibited under the embargo that was enacted in the 1960s. Only Congress can undo that state of affairs and that body appears to be in no rush to do so.
That’s why Caterpillar’s activities in Cuba are still confined to the philanthropic. The company has been supporting Cuban hospitals since 1998, and has been involved with the project to preserve Hemingway House since last March.
“We believe in the power of engagement, and our goal is to be both a business and cultural partner in Cuba for many years to come,” said Oberhelman. “For nearly 20 years, Caterpillar has called for an end to the unilateral embargo.”
In a nutshell, the easing of sanctions that has taken place so far has involved allowing companies providing approved services to Cuba—such as telecommunications, mail, cargo, travel, and carrier services—to establish and maintain a business presence on the island. In support of those activities, certain banking connections and transactions have also been allowed. Limited sales of food to Cuba have been allowed since 2000. On the travel front, people authorized to travel to Cuba—such as for cultural, educational, or business purposes—no longer need a special license to do so. But travel for tourism—or even for the business of tourism—is still strictly prohibited.
Caterpillar is not the only company seeking entry to the Cuban market. Agricultural exporters are anxious to get in and the National Association of Manufacturers is on record calling for an end to the embargo. The energy sector could also benefit from the growing movement toward renewables on the island. State and local government officials are also moving to position their constituents favorably for an eventual lifting of the embargo.
USACC Looks to Plant Seed for Cuban Business
Several trade groups representing grain farmers and agricultural equipment manufacturers in the U.S. are eager to restore trade with Cuba. To advance their agenda, the groups have formed a U.S. Agriculture Coalition for Cuba (USACC) “to advance trade relations between the U.S. and Cuba by re-establishing Cuba as a market for U.S. food and agriculture exports.”
The USACC “believes that normalizing trade relations between the U.S. and Cuba will provide the U.S. farm and business community with new market access opportunities, drive enhanced growth in both countries and allow U.S. farmers, ranchers and food companies to efficiently address Cuban citizen’s food security needs,” the organization’s statement read.
Speaking at a trade event in New Orleans, the new group’s co-chair, Paul Johnson, stated, “Our message to the administration and Congress is simple: let us compete. This not only helps U.S. ag producers, but also the Cuban people.”
Under current sanctions, U.S. food and agriculture companies can legally export to Cuba, but financing and trade restrictions limit their ability to serve the market competitively.
The National Association of Manufacturers is supporting efforts to achieve normal trade relations with Cuba, according to Linda Dempsey, the organization’s vice president of International Economic Affairs.
“Eliminating the trade embargo on Cuba will allow for increased economic activity between the two nations and provide manufacturers with new access to a market less than 100 miles from our shores,” she said.
The NAM recently formed the Cuba Policy Working Group to look into legislative solutions, including lifting current trade and travel bans between the two countries.
Forging ties between the United States and Cuba in the energy sector would benefit both countries, according to David Sandalow, a Columbia University fellow and a former State Department and Department of Energy official. Cuba has long been dependent upon discounted oil from Venezuela, a deal which may not be available for much longer, he noted. At the same time, Cuba has made progress in the area of alternative energy, boasting its own factory that sells photovoltaic panels to solar power projects, which provide a growing proportion of the island’s electricity.
“Cuba’s domestic oil and gas resources are substantial,” said Sandalow. “Many billions of barrels are believed to lie beneath deep water off Cuban’s north coast. Onshore, Cuba produces roughly 50,000 barrels per day of heavy crude oil, which supplies roughly a third of Cuba’s oil demand.”
Cuba’s renewable energy resources come in the form of abundant sunshine, prevailing winds, flowing rivers, and fertile soil that produce biomasses that can be used in energy production. “The Cuban government aims to expand renewable energy from roughly five percent of electricity generation today to 24 percent by 2030,” said Sandalow. “New wind farms, solar plants, and bioelectric stations are all under construction.”
All of this presents opportunities for U.S. businesses. “U.S. vendors could supply equipment, U.S. engineers could offer expertise, and U.S. banks could offer capital to help Cuba’s renewable energy industry grow quickly,” said Sandalow. “U.S. utilities and national laboratories could offer technical assistance on integrating variable renewable energy into power grids. A U.S.-Cuba clean energy partnership could build bridges between the two countries and help modernize Cuba’s electric grid.” Cuba could also become a market destination for U.S. natural gas. “Converting Cuba’s oil-fired power plants to natural gas would cut air pollution and diversify the island’s fuel sources,” said Sandalow. “Although the conversions would be expensive, fuel costs would likely to be lower over the long-term.”
Of course, the biggest barrier to bringing all this to fruition is the same as hamstringing the rest of U.S. industry: the continued existence of the trade embargo.