By Doreen Hemlock
A year ago, it seemed like a dream ready to come true.
U.S.-based entrepreneurs Horace Clemmons and Saul Berenthal had the green light from Cuban authorities to develop the first U.S. manufacturing operation in Cuba in half a century, and they were hopeful that U.S. officials would give the go-ahead too. Their tractor-production company Cleber LLC, named for a mashup of their last names, was heralded as a model for budding U.S. business in Cuba.
But now, their Cuban production is off, and Cleber instead is starting tractor assembly in the United States, aiming to sell domestically and develop a distribution network in South America and beyond.
“We will look to exporting to Cuba, when approved,” Berenthal told Cuba Standard.
This fall, Cuban authorities nixed Cleber’s manufacturing proposal, citing environmental and safety concerns, according to Berenthal. “They said we did not meet requirements for operator safety, that the tractors could be dangerous, and that the manufacturing process did not sufficiently observe environmental protections,” he said. Cleber’s small tractors are based on a 1940s design.
“We’re a startup without a record, and that was not the kind of a business they were looking for at Mariel,” added Berenthal.
To address those concerns, Cleber now is launching U.S. production by subcontracting at an existing factory in Alabama. The company also is setting up distribution for its tractors in Peru and Mexico and talking to potential importers in Angola and elsewhere, he said.
In Cuba, Cleber aims to work with authorities to meet requirements for sales on the island and to start a factory there later. “We’re going to follow their advice and work with the government agencies to try to bring the tractors to the people who need them. Cuban farmers keep telling us that they want them,” said Berenthal, who was born in Havana. “It is a question of going through the process.”
But that process may be lengthy because of politics, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council, who has been working on Cuba business issues for more than 20 years.
“No rational person is going to believe that the only reason the Cubans said “No” is because of appropriate technology, when one of the companies approved to operate in Mariel is assembling automotive parts,” said Kavulich. “There clearly are issues about competition, relations with other countries and the optics of an older Jewish Cuban operating a company on the island.”
Kavulich believes there are different constituencies inside Cuba dealing with the island’s shift from a centrally-planned to a mixed economy. Some last year liked the idea of letting Cleber in, figuring that the approval would be good publicity for Cuba: “It’s great to get the interest of other U.S. companies, and it’s bait to attract more companies from overseas,” said Kavulich.
But as other countries took that bait and even renegotiated Cuba’s debt, new options opened for the island. In agriculture, for example, more countries now finance equipment sales to Cuba, while the United States still does not. Kavulich believes some Cubans reasoned: “Cleber doesn’t bring any financing, and we need to keep the relationship with these other countries. So, they stopped the project.”
Cleber had planned to invest at least $5 million in a Cuban assembly operation, and Berenthal said the company instead has pumped about $3 million into U.S. production. It expects to produce 20 to 100 tractors per month in Alabama, depending on orders and the ability to get components. The diesel- or gas-powered tractors – each slightly larger than a lawn-mover – will sell for about $10,000 each, he said.
“We’re still ready to take all that and bring it to Cuba when the time comes,” said Berenthal, eager to contribute to the land of his birth.
What lessons can be drawn from the dream deferred? Berenthal believes that “until the U.S. embargo on Cuba is lifted, there is very little opportunity to make significant investments in manufacturing in Cuba…Cuba is open for business with the rest of the world. We, the United States, are the ones isolated from the opportunity, and it is, in my mind, self-inflicted, because we can change it.”
As a Donald Trump prepares to become U.S. president and grapple with Cuba issues, Berenthal suggests first, do no harm. Leave existing regulations in place and then, in six months or a year, evaluate and take the next step, “which, in my mind,” said Berenthal, “is to proceed to have Congress take up lifting the embargo.”