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Friday, February 19, 2016

US allows US-owned factory to be set up in Cuba

For the first time since the Cuban revolution the U.S. has approved the first American-owned factory to be set up in Cuba. The two-man company based in Alabama will assemble as many as 1,000 small tractors a year for sale to private Cuban farmers.

The partners, Horace Clemmons and Saul Berenthal, claim they will be able to legally build tractors and other equipment in a special economic zone set up by the Cuban government to attract foreign investment. Cuban officials have been enthusiastic about the project and fully endorse it. The two partners expect to be building tractors in Cuba by 2017.
Clemmons said: "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, It's our belief that in the long run we both win if we do things that are beneficial to both countries."
The plant will cost $5 to $10 million. This will be the first significant investment by the U.S. in Cuban since the revolution in 1959 which nationalized billions of dollars of US corporate and private property. This move provoked the embargo that prohibited almost all forms of commerce and even fined U.S. companies for doing business in Cuba.
On December 17, 2014 presidents Raul Castro and Barack Obama met and agreed to re-establish diplomatic relations and move also to normalize trade, travel, and other relationships. While the embargo still exists, Obama has used executive orders to carve out exceptions. The U.S. will now allow manufacturing at the Mariel port and special economic zone. The area is about 30 miles west of Havana. Another exception allows U.S. companies to export products that are of benefit to private and co-operative farmers in Cuba. However, Berenthal and Clemmons maintain they will sell their products only to the private sector.
A number of other moves indicate a lessening of tensions between the two countries and further liberalization in Cuba. The Cuban government intends to double the number of Wi-Fi access points to about 100 and also allow Cuban homes to have broadband. Formerly this was illegal. Soon regular flightsare planned between the U.S. and Cuba.
The new plant will be called the Oggun tractor plant. It will assemble parts into a durable and easily maintainable 25 horsepower tractor that will cost less than $10,000. The company believes it can sell hundreds of the tractors.
Berenethal was born in Cuba but left when he was 16. He met Clemmons from Alabama in the 1970s when both worked for IBM. They left and formed a successful cash register company that they sold at a considerable profit and Clemmons went into semi-retirement. They already have sufficient financial backing to begin the operation. The two believe they will be able to export the tractors to other Latin American countries that have no tariffs on Cuban products. They expect to earn between 10 and 20 percent on each tractor. Their company, Cleber LLC, based in Alabama already builds tractors for small farms. The company's attorney is already in Havana finalizing the agreement with the Cuban government. Berenthal said:"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,..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,
While at first many of the components will be exported from the U.S. they hope to eventually manufacture many of the parts in Cuba. At the start, they plan to have 30 Cuban employees, but within five years they hope to have a many as 300. The men are already planning to expand into the production of backhoes, trench-diggers, and forklifts. Cuba is badly in need of such equipment. It is estimated that small private farmers now account for almost 70 percent of Cuba's agricultural production. Caterpillar is already selling earth-moving equipment through a distributor in Puerto Rico.


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