Tag Archives: Agriculture

CUBA’S ECONOMY WAS HURTING. THE PANDEMIC BROUGHT A FOOD CRISIS.

The island was able to control the coronavirus, but the dearth of tourists in the pandemic’s wake strangled an economy already damaged by mismanagement and U.S. sanctions.

By Ed Agustin and Frances Robles

New York Times, September 20, 2020

Original Article: Cuba’s Economy Was Hurting….

HAVANA — It was a lucky day for the unemployed tourism guide in Havana.  The line to get into the government-run supermarket, which can mean a wait of eight or 10 hours, was short, just two hours long. And better yet, the guide, Rainer Companioni Sánchez, scored toothpaste — a rare find — and splurged $3 on canned meat.

“It’s the first time we have seen toothpaste in a long time,” he said, sharing the victory with his girlfriend. “The meat in that can is very, very expensive, but we each bought one simply because sometimes in an emergency there is no meat anywhere.”

Cuba, a police state with a strong public health care system, was able to quickly control the coronavirus, even as the pandemic threw wealthier nations into crisis. But its economy, already hurting from crippling U.S. sanctions and mismanagement, was particularly vulnerable to the economic devastation that followed.

As nations closed airports and locked down borders to combat the spread of the virus, tourist travel to Cuba plummeted and the island lost an important source of hard currency, plunging it into one of the worst food shortages in nearly 25 years.

What food is available is often found only in government-run stores that are stocked with imports and charge in dollars. The strategy, also used in the 1990s, during the economic depression known as the “special period,” is used by the government to gather hard currency from Cubans who have savings or get money from friends or relatives abroad.

Even in these stores, goods are scarce and prices can be exorbitant: That day, Mr. Companioni couldn’t find chicken or cooking oil, but there was 17-pound ham going for $230 and a seven-pound block of manchego cheese with a $149 price tag.  And the reliance on dollar stores, a move intended to prop up the socialist revolution in a country that prides itself on egalitarianism, has exacerbated economic inequality, some Cubans say.

“This is a store that charges in a currency Cubans do not earn,” said Lazaro Manuel Domínguez Hernández, 31, a doctor who gets cash from a friend in the United States to spend at one of the 72 new dollar stores. “It kind of marks the difference in classes, because not everyone can buy here.”

He left the Puntilla supermarket with a cart full of fruit cocktail, cheese and chocolate biscuits that he loaded into a 1950s Dodge taxi.

Cuba’s economy was struggling before the coronavirus. The Trump administration has worked hard to strengthen the decades-old trade embargo, going after Cuba’s sources of currency. It also imposed sanctions on tanker companies that delivered petroleum to Cuba from Venezuela and cut back on the commercial flights from the United States to the island.

Last month, Secretary of State Mike Pompeo announced an end to charter flights, too. After the Cuban state energy company Corporación Panamericana faced sanctions, even cooking gas rations had to be reduced.  Then Covid-19 put a stop to tourism. Remittances sent by Cubans who live abroad began to dry up as the illness led to huge job losses in the United States.

That left the Cuban government with far fewer sources of revenue to buy the products it sells in state-run stores, leading to shortages of basic goods throughout the island. Earlier this year, the government warned that personal hygiene products would be hard to come by.

Cuba is facing “the triple threat of Trump, Venezuela and then Covid,” said Ted A. Henken, a professor at Baruch College and a co-author with A. Ritter of the book “Entrepreneurial Cuba.”   “Covid was the thing that pushed them over the edge.”

The pandemic, and the recession that followed, pushed the government to announce that, after years of promises, it would make good on a series of economic reforms intended to stimulate the private sector.

The Communist Party said in 2016 that it would legalize small and medium-size private businesses, but no mechanism was ever set up to do so, thus business owners are still unable to get financing, sign contracts as a legal entity or import goods. Now, that is expected to change, and more lines of work are expected to be legalized, although details have not been announced.

Cuba also has a history of offering reforms only to rescind them months or years later, entrepreneurs said.  “They go back, go forward, then back again,” said Marta Deus, the co-founder of a business magazine who owns a delivery company. “They need to trust the private sector for all its capacity to provide for the future of the economy. We have big ideas.”

The government puts the blame for the current situation squarely on Washington.  “Why can’t we export what we want? Because every time we export to someone, they try to cut off that export,” President Miguel Díaz-Canel said of the United States in a speech this summer. “Every time we are trying to manage a credit, they try to take away our credit. They try to prevent fuel from reaching Cuba. And then we have to buy in third markets, at higher prices. Why is it not talked about?”

Mr. Díaz-Canel stressed that despite the hardships, Cuba still managed a successful battle against the coronavirus: The health system did not collapse, and, he said, no children or medical professionals died of the disease.

With 11.2 million people, Cuba had just over 5,000 coronavirus cases and 115 deaths by Friday, one of the lowest mortality rates in the world. By comparison, Puerto Rico, with 3.2 million people, had five times as many deaths.

People who tested positive in Cuba were whisked away to the hospital for two weeks — even if they were asymptomatic — and their exposed contacts were sent to isolation for two weeks. Apartment buildings, and even entire city blocks, that saw clusters were closed to visitors.

Anyone flying in after March also had to isolate in quarantine centers, and medical students went door to door to screen millions of people daily. Masks are mandatory, and the fines for being caught without one are stiff.

With international flights at a virtual standstill, immigration officers are now assigned to stand guard outside quarantined apartment buildings, making sure no one goes in or out 24 hours a day.

At a quarantined building in Boyeros, a neighborhood near the Havana airport, an immigration officer sat in the shade while messengers and family members of those inside dropped off food. Daniela Llanes López, 21, left vegetables for her grandfather, who was stuck inside because five people in his building had tested positive.

“In Cuba, I don’t know anyone who knows anyone who got the coronavirus,” said Ms. Llanes, who studies German at the University of Havana, noting that she does know people in Germany who contracted the illness.

The strategies worked, although when the authorities started lifting restrictions in July, opening beaches, bars and public transportation, the nation’s capital saw an uptick in cases and a curfew was imposed there.

“Cuba is good in crisis and good in preventive health care,” said Katrin Hansing, a professor at Baruch College who spent the peak of the pandemic in lockdown in Cuba. Support for the government was notable, she said; even if the store lines were long, people felt safe from the virus.

Many Cubans are now hoping the economic reforms will stimulate the private sector and allow independent business operators to kick-start the economy.

Camilo Condis, an electrical contractor who has been out of work for months, said the changes must come quickly, and must allow Cuba to function, whether the United States is under a second Trump presidency, or under Joe Biden.  “Like we private business owners say here: ‘All I want is for them to let me work,’” he said.

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TOWARDS SUSTAINABLE FAMILY FARMING AND INDEPENDENT FOOD CO-OPERATIVES IN CUBA? POSSIBLE LESSONS FROM NORWAY

TOWARDS SUSTAINABLE FAMILY FARMING AND INDEPENDENT FOOD CO-OPERATIVES IN CUBA?  POSSIBLE LESSONS FROM NORWAY

Published in International Journal of International Agriculture and Food

Vegard Bye, Affiliated researcher, Chr. Michelsen Institute

ABSTRACT

In the Nordic countries, agricultural co-operatives were important when family farmers organised to get access to the quickly developing markets during industrialisation in the late 1800s and early 1900s. These co-operatives were organised both as credit, insurance, processing and marketing co-operatives. Spreading at first from Denmark to the rest of Northern Europe and later reaching the new settler continent in North America, farmers’ co-operatives soon became a key element in private farming in market economies. As many co-operatives became large companies in the capitalist economies, they either became ordinary share companies, or retained their farmer-owned co-operative status like in Norway. After Marxist-inspired revolutions in Russia, China, Eastern Europe and later Vietnam and Cuba, state organised and government-controlled co-operatives were set up in socialist countries. Many of the old forms of agricultural co-operatives in the former Soviet Union and Eastern Europe collapsed when the centrally planned economies were abolished in the early 1990s. However, new forms of food production and distribution cooperation have emerged both in the capitalist and former socialist countries. These co-operatives were organised both among producers and consumers in order to meet the common needs of direct access to foods. While it is assumed that family farming and food markets will have to play a more important role in the Cuban food economy in the future, it will be interesting to see if small farmers in collaboration with wholesale co-operatives will be allowed to develop short and sustainable supply food chains, which could be competitive against state socialist and multinational capitalist agriculture. Cuban agricultural policy must be able to evolve along two strategies: a volume agriculture that delivers high-quality, durable basic foods to the predominantly urban population, but also delivers local traditional food with craftsmanship to tourists and a growing middle class. Both strategies will be necessary in order to address a historic challenge of the Cuban socio-economic development: to produce sufficient food and make it available to consumers at affordable prices, thus also saving scarce currency today spent on food imports.

Continue Reading: Cuban_cooperatives_lessons_from_Norway

Durham Integrated Growers
Organic Agricultural Cooperative in Urban Cuba
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ASCE (ASSOCIATION FOR THE STUDY OF THE CUBAN ECONOMY), A Selection of Papers from the 2018 Annual Conference

The complete set of papers is here:  ASCE Conference Proceedings for 2018.

A complete set of all the papers from the annual ASCE conferences can be found here:  ASCE Conference Proceedings

Cuba: Los Retos Económicos del Gobierno de Miguel Díaz-Canel Omar Everleny Pérez Villanueva PDF version
Cuba 2018: Entre la Continuidad y la Oportunidad Dagoberto Valdés Hernández PDF version
Cuban Peso Unification: Managed Rate and Monetary Analysis Luis R. Luis PDF version
La Agricultura en Cuba: Transformaciones, Resultados y Retos Armando Nova González PDF version
Principal Elements of Agricultural Reforms in Transition Economies: Implications For Cuba? Mario A. González-Corzo PDF version
Cuba’s Economic Liberalization and The Perils to Security and Legality Vidal Romero PDF version
Growth and Policy-Induced Distortions in The Cuban Economy: an Econometric Approach Ernesto Hernández-Catá PDF version
Comparing The Quality of Education in Pre- and Post-Revolutionary Cuba Using U.S. Labor Market Outcomes Luis Locay and John Devereux PDF version
The Global Economy and Cuba: Stasis and Hard Choices Larry Catá Backer PDF version
Five Keys to Presidential Change in Cuba Arturo López-Levy and Rolf Otto Niederstrasser PDF version
Cuba’s Political and Economic Arteriosclerosis – It Is Not Just The Castros Gary H. Maybarduk PDF version
Cuban Tourism Industry in The Eye of The Storm Emilio Morales PDF version
Experiencias de Cuentapropistas Ted A. Henken PDF version
Cuban Demography and Economic Consequences Humberto Barreto PDF version
     
“The Revenge of The Jealous Bureaucrat”: A Critical Analysis of Cuba’s New Rules For Cuentapropistas Ted A. Henken PDF version

 

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DISASTROUS CUBAN SUGAR HARVEST MAY FORCE IMPORTS – AND REFORM

Marc Frank

HAVANA, May 24 (Reuters) – Rainfall has shuttered all but a few of Cuba’s 54 sugar mills, with output down nearly 40 percent to the lowest level in more than a century, which could force the island to import, official media and industry sources say.

While inclement weather played a big role in this season’s disastrous performance, local experts and officials also blamed inadequate reforms and decapitalization, reflecting more broadly the socialist country’s struggle to update its economy.

The Communist Party has already tasked President Miguel Diaz-Canel, who replaced Raul Castro last month, with carrying out a series of reforms aimed at making the state-dominated economy more efficient, according to party insiders.

The Cuban sugar ministry was eliminated in 2011 and Azcuba, a state-run monopoly, formed after output declined to a similar low comparable only to the first decade of the 1900s. Production is far below the 8 million tonnes produced in 1990 before the collapse of the Soviet Union, Cuba’s former benefactor.

The Caribbean island nation, where sugar was once synonymous with its name, planned to produce 1.6 million tonnes of raw sugar this season, compared with 1.8 million the previous harvest due to damage from Hurricane Irma in September.  It then reduced that figure to 1.3 million tonnes due to rainfall as the harvest began, but production is now pegged at 1.1 million tonnes of raw sugar.

The decline is more bad news for Cuba, which is struggling with a cash shortage due to ally Venezuela’s economic collapse, a hostile and sanctions-wielding Trump administration, a drop in tourism and its own inertia.

The sugar industry also contributes to electricity production and derivatives such as rum and animal feed.  Cuba consumes between 600,000 and 700,000 tonnes of sugar a year and has an agreement to sell China 400,000 tonne

Not quite the 10 million tons of sugar that Fidel attempted to produce by 1970.

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WHY OXEN REMAIN VITAL TO CUBA’S ECONOMY

Cuba Standard, February 10, 2017
Original Article: OXEN

The collapse of the Soviet Union hit the Cuban economy severely. The island nation lost approximately 80% of its imports, 80% of its exports and its Gross Domestic Product dropped by a third, virtually overnight.

Entirely dependent on fossil fuels to operate, the major buttresses of Cuban society – its transport, industrial and agricultural systems – were frozen. There were extensive losses of productivity in both Cuban agriculture – which was dominated by Soviet modern industrial tractors, combines, and harvesters, all of which required petroleum to run – and in Cuban industrial capacity.

As a result, animals returned to the agriculture scene, and ox, in particular, carried most of the farming burden in the slow recovery that lasted until the last 1990s. After the hurricanes of 2008 (Hurricane Ike, Hurricane Gustav, Tropical Storm Fay), Raul Castro cited ox as essential for recovery. “For this program we should forget about tractors and fuel, even if we had enough. The idea is to work basically with oxen,” Castro told parliament August 1, 2008.  “An increasing number of growers have been doing exactly this with excellent results.”

Cuba imports most of its agricultural machinery and is in need of high ­quality, consistent machinery and spare parts. Cuban imports of agricultural machinery rose from $11.4 million in 2005 to a peak of $92.8 million in 2013 before falling to $57.5 million in 2014. In 2014, Brazil was the leading supplier of agricultural machinery to Cuba, followed by the EU (largely Spain and Italy).

The Cuban drivers for increased imports of agricultural machinery have been the need to improve agricultural performance and reduce reliance on imported agricultural products. Nonetheless, any attempts by Cuba’s agricultural sector to replace its old and obsolete agricultural machinery are making slow progress. In 2013, approximately 1% of Cuba’s 66,128 tractors were less than five years old, nearly 12 percent were between 6 and 30 years old, and 87% were more than three decades old.

 

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CUBA BACKTRACKS ON FOOD REFORMS AS CONSERVATIVES RESIST CHANGE

Reuters, HAVANA, Fri Apr 29, 2016 5:56pm EDT

By Marc Frank

 Original Article: Cuba backtracks on food reform

Cuba decided at a secretive Communist Party congress last week to reverse market reforms in food distribution and pricing, according to reports in official media, reflecting tensions within the party about the pace of economic change.

President Raul Castro unveiled an ambitious market reform agenda in one of the world’s last Soviet-style command economies after he took office a decade ago, but the reforms moved slowly in the face of resistance from conservatives and bureaucrats.  At the April 16-19 congress, Castro railed against an “obsolete mentality” that was holding back modernization of Cuba’s socialist economy. But he also said the leadership needed to respond quickly to problems like inflation unleashed by greater demand as a result of reforms in other sectors.

In response, delegates voted to eliminate licenses for private wholesale food distribution, according to reports over the past week in the Communist Party daily, Granma, and state television. Delegates said the state would contract, distribute and regulate prices for 80 to 90 percent of farm output this year, compared to 51 percent in 2014, according to debates broadcast in edited form days after the event.  Reuters reported in January that Cuba had begun a similar rollback in some provinces, increasing its role in distribution again and regulating prices. The decision at the congress will extend that program.

Data released in March showed that Cuba’s farm output has barely risen since 2008, when Castro formally took over from his brother Fidel, contributing to a spike in food prices blamed on supply-demand mismatch.

Cuba imports more than 60 percent of the food it consumes.

The Union of Young Communists’ newspaper, Juventud Rebelde, reported late last year that the price of a basket of the most common foods increased 49 percent between 2010 and early 2015.  There are no government statistics on food inflation.

While hurricanes and drought have played a part in poor farm output, some experts and farmers say Cuba did not go far enough in allowing farmers freer access to seeds and fertilizers to increase production.

BACKTRACKING

But demand is rising fast. Relaxation of restrictions on self-employment has led to a boom in small restaurants, at a time when Cuba’s detente with the West is leading to record numbers of tourists and an emerging consumer class.

According to the reports, there was no discussion at the congress of moving ahead with plans to allow farmers to buy supplies from wholesale outlets, instead of having them assigned by the state.  Nor was there mention of another reform, also adopted five years ago and never implemented, to have cooperatives join forces to perform tasks currently in state hands, for example ploughing fields.

The state owns nearly 80 percent of arable land in Cuba, leasing most of it to cooperatives and individual farmers. It has a monopoly on imports and their distribution.

“They never fully carried out the reforms and gave them time to work. They stopped half way and appear unable to come up with any other solution than backtracking,” said a local agriculture expert, who asked to remain anonymous.  He said farmers often had no equipment and few supplies such as seed.

The government reported leafy and root vegetable output at 5 million tonnes in 2015, similar to 2008, and unprocessed rice and bean production of 418,000 tonnes and 118,000 tonnes, compared with 436,000 tonnes and 117,000 tonnes eight years ago. Cuba produced 363,000 tonnes of corn last year, just 3,000 more than when Castro took office.

 Cuba April 2015 044Still the Best Cigar Tobacco in the World:Vinales, above and a Tobacco Farmer near Vinales.  (Photo by A. Ritter, April 2015)
Cuba April 2015 053

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ALABAMA COMPANY SAYS CUBA NEEDS ITS TRACTORS, BUT APPROVAL POCESS IS SLOW

By Mimi Whitefield, Miami Herald, 26 April 2016

Original Article: Alabama Tractors in Cuba?

An Alabama tractor company angling to become the first American business in more than a half century to set up manufacturing operations in Cuba is about midway through the approval process.

Cleber, based in Paint Rock, Alabama, outside Huntsville, wants to assemble small tractors in Cuba’s Mariel Special Economic Development Zone for use in Cuba and beyond. The simple tractor model that Cleber wants to produce is called Oggún in homage to the Santeria god of iron, tools and weapons, and it’s designed for small-scale farming.

Cleber is the first U.S. company to receive permission from the U.S. Office of Foreign Assets Control and the Commerce Department for a manufacturing project on the island since the Dec. 17, 2014 rapprochement between the two countries.

When President Barack Obama visited Cuba in March, he said that Cleber “will be the first U.S. company to build a factory here in more than 50 years.”

But Saul Berenthal, a Cuban-American who is a co-founder of the company and its chief operating officer, said it’s not a done deal yet. The Cubans still haven’t given final approval for the project. “I’d say we’re in the middle of the process,” Berenthal said. “Nothing is done until the fat lady sings.” I’d say we’re in the middle of the process. Nothing is done until the fat lady sings.

As overtures to Cuba by American businesses have picked up since the thaw, Berenthal said, “There are a lot of people in Cuba who are very busy and that tends to slow things down.” All documents and manuals also must be translated into Spanish, he said, and there’s plenty of other red tape.

But Berenthal, who was in Cuba two weeks ago for more talks, said he’s hopeful Cuban approval could come within the next 90 days. Cleber has been told it will take about six months to get a factory up and running. Initially, Cleber plans to have 10 employees and expects to add two more people annually as production ramps up.

From just serving the Cuban market, Cleber would like to eventually expand and export to other Central American and South American markets covered by Cuban trade agreements.

Berenthal and co-founder Horace Clemmons set up Cleber shortly after the rapprochement was announced with the idea of producing small-scale tractors particularly suited for the Cuban market.

Many Cuban campesinos still use livestock in the fields or aging tractors, Berenthal said. There are about 60,000 tractors in use in Cuba today, but many of them are from the 1980s, and 500 to 1,000 are lost every year because they are cannibalized for parts or simply stop working, he said.

The simple design of the Oggún, which uses parts that are widely available, also is in keeping with more sustainable agriculture.Cuba began a transition to more sustainable agricultural practices in the 1990s because it didn’t have much choice after the collapse of its benefactor, the old Soviet Union. With supplies of pesticides, fertilizers and oil scarce, Cuba began breaking up large state farms and Cuban producers began turning to organic farming techniques. But production has fallen.

Getting food production back on track is a Cuban priority. “Cuba’s mission is to be able to replace $2 billion in agricultural imports,” Berenthal said. “There’s also the pressure for more food from the tourism industry, which is increasing tremendously.”

“Not often in life do we get the opportunity, through simple efforts on our part, to make a difference in the lives of many. This venture represents that opportunity, to show the Cuban people the benefits of expanded commerce opportunities with the United States,” Clemmons said.

Even though new rules by the Obama administration make it easier to trade with and do business with Cuba, the embargo is still in effect and some U.S. projects require special approvals.

“There will be opportunities in Cuba. There are few places in the world with a real white space,” said Maguerite Fitzgerald, a partner at The Boston Consulting Group. But doing business with Cuba, she added, “isn’t a fast game or one that’s played with traditional rules.”

Berenthal said Cleber is prepared to let the Cuban approval process run its course. But if it drags on too long, Cleber plans to begin assembling Oggún tractors in Alabama and taking orders.

“We’re going to build tractors. We’d like to do it in Cuba,” he said. Cleber thinks Cuba’s Special Economic Development Zone, a 180-square-mile complex under development 28 miles west of Havana, is the place to do it. The Mariel zone wants to attract foreign investment in clean, sustainable projects with export potential.

Farmer Ploughing Field with Oxen

The Original Plowing Systemzz04.Braley_20091111_HighRes.previewSoviet Tractor

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The New Tractor: Appropriately Small-scale for Small Farms?

 

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UNITED STATES INTERNATIONAL TRADE COMMISSION, OVERVIEW OF CUBAN IMPORTS OF GOODS AND SERVICES AND EFFECTS OF U.S. RESTRICTIONS

March 2016 Publication Number: 4597 Investigation Number: 332-552

Complete document is here:  US Exports to Cuba after the Embargo is Lifted

 

TABLE OF CONTENTS

Executive Summary

Chapter 1 Introduction

Chapter 2 Cuban Imports of Goods and Services

Chapter 3 Current U.S. Restrictions on Trade with and Travel to Cuba and Their Effects on Cuban Imports of U.S. Goods and Services

Chapter 4 Possible Cuban Barriers to U.S. Exports and Investment in the Absence of U.S. Restrictions .

Chapter 5 Agricultural Products

Chapter 6 Manufactured Products

Chapter 7 Services

Chapter 8 Modeling the Effects of U.S. Restrictions and Cuban Barriers on U.S. Exports to Cuba

 Appendix A Request Letters

Appendix B Federal Register Notices

Appendix C Hearing Calendar

Appendix D Written Submissions

Appendix E List of Authorized Cuentapropistas

Appendix F Regulatory and Legislative Framework of the U.S. Restrictions on Trade with and Travel to Cuba

Appendix G Cuban Intellectual Property Laws

Appendix H HS Codes Contained in Each Sector

Appendix I Description of Empirical Methodology

Appendix J Tables to Support Figures

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CUBA’S FIRST U.S. FACTORY IN 56 YEARS

Forbes, Feb 16, 2016

Original Article : CUBA’S FIRST U.S. FACTORY

Susan Adams, Forbes Staff

Horace Clemmons and Saul Berenthal, both 72-year-old retired software engineers, are slated to become the first Americans since 1959 to set up a manufacturing plant in Cuba. Their plan: produce small, easily maintained tractors for use by family farmers. Under new regulations issued by the Obama administration, the U.S. Treasury Department’s Office of Foreign Assets Control gave the Paint Rock, AL-based partners the go-ahead last week. Once they get final approval from the Cubans, they anticipate that in early 2017, they’ll start building a factory in a special economic zone set up by the Cuban government in the port city of Mariel. In this condensed and edited interview, Berenthal describes his transition from software entrepreneur to Cuban manufacturing pioneer.

zzzxzzSusan Adams: Tell me about your personal connection to Cuba.

Saul Berenthal: I was born and raised in Cuba. I came to the U.S. in 1960 right after the revolution. First I came and then my parents. My family in Cuba is in the cemetery. But I have lots of friends there and I’ve been traveling back and forth since 2007.

Adams: How did you get the idea to build tractors?

Berenthal: I understood the needs of the Cuban economy. Cuba has to import more than 70% of what people eat. They’re still using oxen to farm the land. Our motivation really is to help the Cuban farmer be more productive.

Adams: But you and Mr. Clemmons are software engineers. How did you know the first thing about farm equipment?

Berenthal: Horace was born and raised on a farm in Alabama. He’s the farming expert and I’m the Cuba expert.

Adams: Just because he was raised on a farm wouldn’t mean he would know how to make tractors.

Berenthal: We hired an engineering company in Alabama that helped us pick up an existing design that was appropriate for what we wanted to do. We brought in state-of-the-art technology and produced the tractors. We have a tractor in Cuba already that’s going to be shown at an agricultural fair in March.

Adams: It sounds like you were motivated less by profit than by a desire to help the Cuban economy and Cuban-American relations.

Berenthal: Yes, our motivation is really to help Cuban farmers be more productive. Through commerce and trade, we can bring Cuban and American people closer together.

Adams: What about making money?

Berenthal: Our business model says we are investing in Cuba and reinvesting any profits we make. We’ll do what we did with our other businesses. We’ll create value and then sell the company.

Adams: What profit margins do you project for your tractors?

Berenthal: We’re aiming for 20%.

Adams: How many tractors do you need to sell before you’re profitable?

Berenthal: We believe we’ll sell 300 tractors in the first year and then we’ll ramp up to 5,000. That includes other light equipment we’ll sell for construction as well. The facility will have the capacity to produce up to 1,000 tractors a year. I think the profitability will come after the first or second year when we start to do production and not just assembly in Cuba.

Adams: But Cuba is plagued by shortages of the most basic products. How will you get tractor parts?

Berenthal: They’re all going to be sourced and shipped from the U.S. The current state of the embargo makes it so we can’t buy parts there. But we think that within the next three years the embargo will be lifted and we’ll be able to source from Cuba, if not sooner.

Adams: Your factory will be in a special economic zone?

Berenthal: It’s called ZED, for Zona Especial de Mariel. It’s built around one of Cuba’s biggest ports and it has a whole bunch of sections dedicated to foreign investment. They provide for a bunch of tax and investment incentives. We’re also taking advantage of Cuba’s commercial treaties with the rest of Latin America, where we’ll be able to ship and provide better pricing than for tractors built in the U.S.

Adams: What kind of tax incentive is Cuba offering?

Berenthal: For the first 10 years we don’t pay any taxes.

Adams: How many local people will you employ?

Berenthal: We’ll start with five and ramp up to 30 within the first year and then probably go up to 300.

Adams: You want to sell the tractors for $8,000-$10,000. How can a Cuban farmer with an ox possibly afford that?

Berenthal: There are a couple of ways. There is financing by the Cuban government and by third countries like Spain, France and the Netherlands. We also count on Cuban-Americans who live in the U.S. who have relatives and friends that run farms. We think they would be happy to contribute to Cubans owning a tractor. We’re also counting on NGOs that help Cuban farmers, like religious groups.

Adams: How much is your initial investment?

Berenthal: We project a $5 million investment and then it will go up to $10 million.

Adams: Where are you getting the money?

Berenthal: It’s private money. We have a couple of investors but we have also sold a couple of companies.

Adams: What did you find when you went to Cuba?

Berenthal: I started meeting with people and I had a lot of contacts in the economics department at the University of Havana. I learned what the Cuban government was proposing to do about readjusting the economy. In 2014, when the opportunity for trade arose, we decided to pursue farming and tractors.

Adams: How difficult was it to get U.S. government approval?

Berenthal: In all honesty it was tedious rather than difficult. We had to wait for the regulations to change so that the proposal we made was covered by the regulations implemented over the last nine months.

Adams: Were you competing with other U.S. companies?

Berenthal: We certainly believe we’re going to compete with the Chinese and Byelorussians, who are the current suppliers of tractors to the Cuban government.

Adams: Where did you get the names for your company, Cleber, and product, Oggun.

Berenthal: Cleber is from our names, Clemmons and Berenthal. It’s clever! Oggun is the name of the deity for iron in the Santeria religion. Santeria is the most popular religion in Cuba. It’s a mixture of Catholic and African religions.

Adams: Do you practice Santeria?

Berenthal: No ma’am. I’m Jewish. We’re called Jewbans

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U.S. APPROVES FIRST FACTORY IN CUBA SINCE 1959

MICHAEL WEISSENSTEIN

HAVANA — The Associated Press

Original Article: U.S. Tractor Factory in Cuba

Globe and Mail, Toronto. Published Monday, Feb. 15, 2016 5:23PM EST

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 U.S. 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,” Mr. 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 (U.S.) 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 country.

Farm Worker Plowing Field with a Team of OxenSome Competition for the Oxen. (Ploughing a field at Vinales)

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, Mr. 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 48 kilometres west of Havana. One exception allows U.S. companies to export products that benefit private and co-operative farmers in Cuba. Mr. Berenthal and Mr. 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, the United States 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 WiFi 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. Mr. Obama said in 2014 that Mr. Castro had promised to increase Cubans’ access to the Internet as part of détente.

On Saturday, Cuba announced it had returned a U.S. Hellfire missile 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 United States 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, Mr. Clemmons and Mr. 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 Mr. Berenthal, a Cuban-born semi-retired software engineer who left the country at age 16.

He met Mr. Clemmons, who is from Paint Rock, Ala., 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 Mr. 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,” Mr. Clemmons said.

Mr. Berenthal said they are optimistic 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-per-cent to 20-per-cent profit on each tractor.

For the project’s first three years, Mr. Clemmons and Mr. 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.

Mr. Clemmons and Mr. Berenthal will publish all the schematics of their tractors online 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 the company, Cleber, can then produce at its Mariel factory.

The men already have plans to produce excavators, backhoes, trench diggers and forklifts, equipment badly needed across Cuba, where virtually all the infrastructure is crumbling after years of neglect and mismanagement and a lack of cash 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,” Mr. Berenthal said.

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 Case – International Harvester sugar cane harvester, made in Brazil. The next step for Cuban agricultural machinery assembly?

z Cane-Harvester-October-1993-002Cuban-manufactured Sugar Cane Harvester Pausing on the Highway, November 1994.  Was this the last Cuban-made  cane harvester?Photo by Arch Ritter.

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