Construction, mining and power generation equipment manufacturer Caterpillar is among a growing number of U.S. companies seeking to end the trade embargo in order to tap the Cuban consumer market.
The United States has made significant progress re-engaging with Cuba and trying to increase commercial cooperation in the one year since President Obama proposed normalizing relations with the Caribbean island nation, but much more should be done to stimulate two-way trade, according to a high-level representative at Caterpillar Inc.
The most notable step occurred last summer when the countries re-opened embassies in Washington and Havana after 54 years. President Obama used his executive authority to relax restrictions on cash remittances, exports and imports to help Cuban private entrepreneurs, telecommunications and family travel. In 2015, authorized travel by U.S. citizens to Cuba increased by more than 50 percent from the previous year, according to the State Department, and the Cuban government signed a cellular telephone roaming agreement with Sprint, helping to promote further information exchange.
By removing Cuba from its list of state sponsors of terror, the State Department paved the way for transactions with U.S. banks. And, in September, the U.S. government announced regulations that pave the way for certain U.S. exporters, carriers and logistics service providers to establish offices, retail outlets and warehouses in Cuba.
In November, the U.S. Chamber of Commerce initiated the U.S.-Cuba Business Council, which will provide a venue for companies to learn about trade opportunities and address bilateral concerns. During 2015, governors Andrew Cuomo of New York and Greg Abbott of Texas led trade missions to Cuba.
Earlier this month, the United States and Cuba reached an arrangement to establish scheduled air services for passenger and cargo operators between the two countries. Tourist travel to Cuba from the United States is still prohibited, but the new arrangement will allow for approved travelers to make online bookings, as well as utilize electronic ticketing and a number of other services. Work is underway to implement the arrangement.
Until now, only charter service flight services were available to and from Cuba. The U.S. Department of Transportation said it will invite applications from U.S. carriers interested in launching new scheduled service to Cuba and conduct a selection proceeding in the near future.
Officials have also agreed to start a pilot program to re-establish direct postal service to and from the Caribbean island nation. The plan provides for mail flights between the two countries several times a week, rather than routing mail through a third country as current regulations require. Direct mail service and commercial flights between the United States and Cuba have been suspended since the 1960s.
The potential to boost exports and help the Cuban economy grow, however, will remain largely untapped as long as the U.S. embargo remains in place, Bill Lane, Caterpillar’s director of global government relations, said in an interview. Analysts also say that Cuba needs to do more to give local entrepreneurs the freedom to grow.
“We believe if the U.S. was to lift the embargo and travel restrictions, and Cuba responded by embracing reforms, then Cuba could be a robust market and exports could far exceed what we are selling to Puerto Rico – which is currently the largest market in the Caribbean” for Caterpillar, said Lane.
With around 11 million residents, Cuba roughly resembles Ohio in terms of size and population.
Caterpillar, one of the world’s largest manufacturers of construction, mining and power generation equipment, has been calling for a new policy towards Cuba for almost two decades.
In April, a team of Caterpillar executives went on a reconnaissance mission to Cuba to get a better understanding of the country’s infrastructure, power generation and mining needs, and how it could participate in philanthropic initiatives to help the Cuban people, Lane said.
The company found Cuba needs to rebuild and build out its infrastructure, including old roads, airports, water systems, buildings and electrical power. As the number of American visitors grows demand for improved infrastructure will increase, said Lane.
“When we went down to Cuba, we found that the U.S. policy impact was to isolate America from the world,” he said. “The Europeans dominated the mining there, the Asians dominated the construction. Our goal is to end the isolation and focus on a policy of engagement that we think will be mutually beneficial.”
Several U.S. ports, including Houston, Norfolk, Miami and Tampa, hope to leverage existing ties, or their proximity to Cuba, to generate cargo business as trade restrictions ease.
Although there remains considerable opposition in Congress, mostly from Republicans, towards lifting the trade embargo, the political momentum for a full rapprochement with Cuba is growing, Lawrence Gutman, a research fellow at the Tinker Foundation wrote in a World Policy Institute blog post. Polling shows majority support for a change in U.S.-Cuba policy.
The fact that Gov. Abbott, a conservative Republican, “avoided accusations from his party of cozying up to the Castros is a testament to how uncontroversial normalized trade with Cuba has become,” wrote Gutman.
“Furthermore, the fact that a Cuba-related question has not been posed in a single presidential debate thus far further underscores the extent to which one of the most contentious issues in U.S. foreign policy has become uncontroversial,” he added. “Even staunchly pro-embargo (and Cuban-American) candidates like Sen. Marco Rubio and Sen. Ted Cruz refrain from injecting Cuba into their debate strategies. An issue that recently drove some of the most contentious and poisonous fights in U.S. foreign affairs now appears to be wholly passé on the campaign trail.”
Thaw in U.S.-Cuba relations increases prospects for future trade
