The missing business boom for U.S. companies in Cuba

HAVANA - For a while Saul Berenthal and Horace Clemmons were the 70-something poster boys of U.S.-Cuba detente.

The retired software entrepreneurs made worldwide headlines by winning Obama administration permission to build the first U.S. factory in Cuba since 1959. Cuban officials lauded their plans to build small tractors in the Mariel free-trade zone west of Havana. But after more than a year of courtship, the Cuban government told Berenthal and Clemmons to drop their plans to build tractors in Cuba, without explanation, Berenthal said Monday.

A month-and-a-half ago, their first tractors started rolling off the assembly line -- in the town of Fyffe, Alabama, population about 1,000.

“Producing the tractors in Mariel was not going to happen,” Berenthal said.

He said the company is already selling tractors to customers in the U.S. and Australia, and has had inquiries from Peru, Mexico and Ethiopia. He also still hopes to sell to Cuba.

Two years into President Barack Obama’s campaign to normalize relations with Cuba, his push to expand economic ties is showing few results. Apart from a few marquee deals for big U.S. brands, formal trade between the two countries remains at a trickle.

The mood was subdued among U.S. companies exhibiting Monday at the International Fair of Havana, the island’s biggest general-interest trade fair. As Cuba trumpeted new deals with Russia and Japan, U.S. corporate representatives staffing stands at a pavilion shared with Puerto Rico said they saw little immediate prospect for doing business with Cuba.

“We know we have to be here, to show our willingness to be here,” said Diego Aldunate, Latin America director for Illinois-based Rust-Oleum paints.

He and a colleague, Oscar Rubio, said they were waiting for potential clients from Cuba’s small worker-owned cooperative sector to stop by their stand, but by midafternoon no one had appeared.

The Cuban government maintains a monopoly on importing, exporting and on virtually all sales of products inside the country, making the state bureaucracy the final arbiter of what business gets done.

“The complicated thing is that the distributor is the government, and we don’t know how that will work,” Rubio said.

Obama has enacted six rounds of regulations punching holes in the half-century-old U.S. trade embargo on Cuba, allowing imports and exports, sales to the socialist government and limited U.S. investment on the island. Cuba has allowed Airbnb, Starwood (HOT) hotels and 10 U.S. airlines to set up operations.

Cuban officials blame the remaining provisions of the embargo as the true obstacle to greater trade with the U.S., placing constant and heavy emphasis on what they call “the blockade.”

“The blockade remains in force, the absurd commercial and financial blockade,” Cuban Commerce Secretary Rodrigo Malmierca said at the ceremony opening the fair Monday. “This is causing great damage to the Cuban people, and it’s the principal obstacle to the normalization of relations between Cuba and the United States.”

Observers note that Cuba’s small but growing private sector has been able to flourish and produce tens of thousands of new jobs despite the strictures of the embargo. Untold millions of dollars have flowed into Cuba over the last two years, funding thousands of new private bed-and-breakfasts and dozens of new restaurants in the capital as detente with the U.S. sets off a boom in tourism to the island.

Some see the stagnant state of official trade with the U.S. as a conscious decision by the Cuban government to limit commerce to a few high-profile bites of the apple while funneling most business toward European and Asian companies, in order to keep the U.S. business community hungry for more and pushing Congress to do away with the embargo.

“The Cuban government is using the interest by U.S. companies as bait to entice the interest of companies in other countries,” said John Kavulich of the U.S.-Cuba Trade and Economic Council, a private group that produces mostly skeptical analyses of the prospects of U.S.-Cuba trade. “The Cuban government is saying, ‘Let’s not give any more than absolutely necessary to U.S. companies,’ so that the companies will continue to salivate toward illusory potential opportunities. There’s far more inspiration and aspiration than reality.”