Obama administration approves first US factory in Cuba since 1959
The Cuban government has created a special economic zone 30 miles west of Havana specifically to attract foreign investment, and business partners Saul Berenthal, who is Cuban-born, and Horace Clemmons sought to capitalize on this. The Treasury Department told the businessmen last week that they are allowed to build the $5-10 million factory that produces heavy farm equipment.
“Everybody wants to go to Cuba to sell something and that's not what we're trying to do. We're looking at the problem and how do we help Cuba solve the problems that they consider are the most important problems for them to solve,” Clemmons said, according to AP. “It's our belief that in the long run we both win if we do things that are beneficial to both countries.”
Cuban authorities have already endorsed the project, and Berenthal and Clemmons have said that they plan to start producing tractors by early 2017. This would mark the significant first business investment in Cuba since Fidel Castro and the Communist Party took power in the 1959 Cuban Revolution, and confiscated billions of dollars of US property on the island. In response to that mass nationalization, the US government slapped the island nation with a strict embargo that prohibited just about all forms of commerce.
More than five decades later, Barack Obama has started loosening the restrictions on trade with Cuba toward the end of his second term. US companies are now allowed to export products to sell to private farmers in Cuba, where most economic activity is under strict state control. The Obama administration plans to continue such measures, in order to repair the relationship between the United States and Cuba.
The new “Oggun” tractor plant will build 25-horsepower tractors that sell for under $10,000, Berenthal and Clemmons said, according to AP. The partners believe that they can sell hundreds of tractors a year to Cuban farmers with help from relatives abroad sending back remittances. Cuba suffers from low agricultural output in part due to the lack of farming equipment. A government bureaucracy tightly controls the price of supplies and produce.
In addition to selling to Cuba, Berenthal and Clemons say that they will export tractors produced at Oggun to other nations in Latin America, which have lower tariffs on Cuban products than on US-made merchandise. The partners also said that they will begin importing components from the United States, but they eventually hope to begin manufacturing many of the parts locally.
Oggun will begin with only 30 Cuban employees, but this number could grow to as many as 300 within five years.
"I think it'll have a tremendous impact on their ability not only to help their economy but to set an example across the Caribbean and Latin America," Berenthal said.
The United States and Cuba are thawing relations that have been icy for over 55 years. On Saturday, Cuba said that it had returned an American Hellfire missile that was mistakenly shipped from Paris to Havana in 2014. On Tuesday, the US’s Secretary of Transportation and Cuba’s Transport Minister are set to sign an agreement authorizing the first regular commercial flights between the countries since the 1959 revolution.