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US OK’s first factory in Cuba since revolution

APNewsBreak: US OK’s first factory in Cuba since revolution
By MICHAEL WEISSENSTEIN

HAVANA (AP) — The Obama administration has approved the first U.S.
factory in Cuba in more than half a century, allowing a two-man company
from Alabama to build a plant assembling as many as 1,000 small tractors
a year for sale to private farmers in Cuba.

The Treasury Department last week notified partners Horace Clemmons and
Saul Berenthal that they can legally build tractors and other heavy
equipment in a special economic zone started by the Cuban government to
attract foreign investment.

Cuban officials already have publicly and enthusiastically endorsed the
project. The partners said they expect to be building tractors in Cuba
by the first quarter of 2017.

“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. “It’s our belief that in the long run
we both win if we do things that are beneficial to both countries.”

The $5 million to $10 million plant would be the first significant U.S.
business investment on Cuban soil since Fidel Castro took power in 1959
and nationalized billions of dollars of U.S. corporate and private
property. That confiscation provoked a U.S. embargo on Cuba that
prohibited virtually all forms of commerce and fined non-U.S. companies
millions of dollars for doing business with the island.

Letting an American tractor company operate inside a Cuban government
facility would have been unimaginable before Presidents Barack Obama and
Raul Castro declared on Dec. 17, 2014, that they would restore
diplomatic relations and move to normalize trade, travel and other
aspects of the long-broken bilateral relationship.

Since then, Obama has been carving exceptions into the embargo through a
series of executive actions, and his administration now says they allow
U.S. manufacturing at the Mariel port and special economic zone about 30
miles west of Havana. One exception allows U.S. companies to export
products that benefit private and cooperative farmers in Cuba. Berenthal
and Clemmons say they will sell only to the private sector.

The Obama administration says it is eager to make the opening with Cuba
irreversible by any future administration. Since the start of the year,
U.S. and Cuba have made a series of announcements that appear designed
partly to create a sense of unstoppable momentum in their new relationship.

Cuba announced late last month that it would more than double the number
of public Wi-Fi access spots to more than 100 across the country this
year and bring broadband Internet to a small number of Cuban homes,
where it is currently illegal. Obama said in 2014 that Castro had
promised to increase Cubans’ access to the Internet as part of detente.

On Saturday, Cuba announced that it had returned a U.S. Hellfire missile
that it said was mistakenly shipped to Havana from Paris in 2014. On
Tuesday, Cuba’s Transport Minister and the U.S. Secretary of
Transportation will sign a deal authorizing the first regularly
scheduled commercial flights between the U.S. and Cuba since shortly
after the 1959 revolution.

The Oggun tractor plant, named after a god in Cuba’s syncretic Santeria
religion, will assemble commercially available components into a durable
and easy-to-maintain 25-horsepower tractor selling for less than
$10,000, Clemmons and Berenthal said. The men believe they can sell
hundreds of the tractors a year to Cuban farmers with financing from
relatives outside the country and to non-government organizations
seeking to help improve Cuban agriculture, which suffers from low
productivity due mostly to excessive control of both basic supplies and
prices by an inefficient, centrally planned state bureaucracy.

“I have two countries that for 60 years have been in the worst of terms,
anything I can do to bring to the two countries and the two people
together is tremendously satisfying,” said Berenthal, a Cuban-born
semi-retired software engineer who left the country at age 16.

He met Clemmons, who is from Paint Rock, Alabama, when they worked at
IBM in the 1970s. They left to form a successful cash-register software
company that grew to earn $30 million a year before they sold it in 1995
for a sum that Clemmons says was “enough that I don’t have to work.”

Between their own capital and commitments from private investors they
say they have enough cash in hand to build the Oggun factory as soon as
Cuba lets them proceed.

“Everything’s locked in,” Clemmons said.

Berenthal said they are optimistic that they will also be able to export
Oggun tractors to other Latin American countries, which have low or no
tariffs on Cuba products, making them competitive on price. The men
expect a 10-20 percent profit on each tractor.

For the project’s first three years, Clemmons and Berenthal say they
will export components from the United States for assembly in Cuba. They
hope to eventually begin manufacturing many of the parts themselves on
the island. They said they expect to start with 30 Cuban employees and,
if things go as planned, grow within five years to as many as 300.

Clemmons and Berenthal will publish all the schematics of their tractors
online in order to allow Cubans and other clients to more easily repair
their equipment and come up with designs for other heavy equipment based
on the same frame and motor that Cleber can then produce at their Mariel
factory.

The men already have plans to produce excavators, backhoes,
trench-diggers and forklifts, equipment that’s badly needed across Cuba,
where virtually all the infrastructure is crumbling after years of
neglect and mismanagement and a lack of cash that the government blames
on the embargo.

“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.

____

Michael Weissenstein on Twitter: twitter.com/mweissenstein

Source: APNewsBreak: US OK’s first factory in Cuba since revolution –
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