Obama’s Cuba Visit Raises Construction Firms’ Hopes
President Obama’s trip to Cuba has given a lift—though no big signed contracts—to construction firms and equipment makers hoping to do business in the country, which has major infrastructure needs.
Nevertheless, U.S. firms realize that significant U.S. exports to Cuba of construction equipment and engineering services hinge on loosening or lifting a 55-year-old trade embargo against that country—something the current Congress isn’t likely to do.
Obama wants the embargo ended. “It is an outdated burden on the Cuban people,” he said in a March 22 speech in Havana. “It's a burden on the Americans who want to work and do business or invest here in Cuba. It's time to lift the embargo.”
That appears to be, at best, a long shot on Capitol Hill this year. House Speaker Paul Ryan (R-Wis.) told reporters on March 17 that the embargo “is still intact and enforceable.” Ryan added, “Despite the president’s attempts to undermine this embargo by executive action, he is ultimately bound by it.”
Sofia Berger, vice president and division manager for Latin America and the Caribbean at engineering firm Louis Berger, says, “I don’t think anyone expects anything fundamental to happen with the embargo until after the elections in the U.S.—that depends massively on who gets elected and what their agenda will be and who the Congress will be.”
Although Obama’s March 20-22 trip didn’t produce concrete trade breakthroughs between the two countries, the historic nature of his trip—the first visit to Cuba by a U.S. president since 1928—put a spotlight on U.S.-Cuba relations.
The Commerce Dept. also took the opportunity to list recent steps that some U.S. companies are taking to position themselves to do business in Cuba.
For example, Caterpillar Inc., which has been pushing since the late 1990s to open U.S. trade with Cuba, announced on March 14 that it would contribute $500,000 to a U.S. nonprofit organization to help construct a conservation laboratory at the Hemingway Museum in Havana. The company said it would be the first facility in Cuba to be built using modern U.S. construction materials since 1961, when the U.S. trade embargo began.
In February, the Peoria, Ill.-based company announced it had named a dealer for Cuba, Puerto Rico-based Rimco. Caterpillar has worked with Rimco for more than 30 years.
But Matt Lavoie, a Caterpillar spokesman, notes that the dealership arrangement would “operate under the letter of U.S. and Cuba law.” However, with the embargo still in place, Caterpillar cannot sell products in Cuba.
Lavoie says, “The big obstacle still remains the embargo, and we’re continuing to work very hard with Congress and the administration to get that policy changed.”
In the meantime, “this is setting the groundwork," he adds. “And, hopefully, it’s a message to policymakers that Caterpillar is ready to go when we’re allowed to do business there.”
General Electric Co. said it has signed memorandums of understanding with the Cuban government “that express our joint interest in exploring potential opportunities in the aviation, health-care and energy sectors,” GE spokesman Josef Skoldeberg said in an email.
He also noted that the memorandums state that any business activity would abide by U.S. policy and licensing requirements.
Skoldeberg added, “While we are at the early stages of evaluating the market potential, we believe that Cuba has needs in areas where GE has solutions, particularly in health care and infrastructure.”
Michael O’Brien, an Association of Equipment Manufacturers spokesman, said via email that “some of our members are already beginning to scope out the market for opportunities.”
O’Brien added that, although federal agencies’ Cuba-related actions so far have not sparked exports of heavy equipment, “the steps the administration is taking now are certainly moving in the right direction and making a down payment on future productive action.”
Louis Berger last worked on projects in Cuba in the 1950s, before the embargo. Today, the firm is investigating possibilities there. Berger says, “It’s not often that a country has been totally off the radar—that’s it’s not even one that you’ve been able to consider—and then, all of a sudden, it opens up as a possibility.”
Like Caterpillar and GE, Louis Berger sees infrastructure needs in Cuba. The sectors that seem promising for outside firms include aviation, renewable energy and wastewater treatment, observes Sofia Berger.
With air travel to Cuba expected to climb, Javier Gonzalez, vice president for global aviation at Louis Berger, says airport infrastructure improvements are needed. “Capacity is the main issue at the moment,” he says.
Last December, U.S. and Cuba agreed to reestablish scheduled airline service between the two countries. One provision would permit U.S. airlines to have as many as 110 daily round-trip flights between the two countries.
The U.S. Dept. of Transportation is reviewing applications from 13 U.S. airlines seeking to fly to Havana from 23 U.S. cities. Seven U.S. airlines are seeking to fly to Cuba’s nine other international airports.
Gonzalez notes that other countries also are expanding service to Cuba, citing China, which last year began direct flights there three times a week from Beijing.
Berger says another option for a company to work in Cuba is to get a project-specific license from the Treasury Dept.’s Office of Foreign Assets Control, an agency that was formed in 1950. “That’s what we will have to pursue right now until the embargo is changed,” she adds. “We are in the process of putting together our applications.”
If the embargo against Cuba were lifted, U.S. engineering firms would by no means have a clear field. Sofia Berger says engineering firms from other countries—such as Canada, Spain, France, Brazil and China—have worked in Cuba during the U.S. embargo period.
“There is a decent amount of competition from those countries,” she acknowledges. “And those countries have kind of stepped it up ever since the announcement because they know that the U.S. is coming, and so they want to try and grab as much as they can.”
Another U.S. trade observer says, “But the one thing that’s clear is, American firms will quickly get a home-field advantage because of location. And they’ll be playing catch-up, [but] they’re well positioned to catch up.”
Looking ahead, the trade source says the next step will be encouraging multi-national lenders, particularly the World Bank and the Inter-American Development Bank, “to generate the resources for the big construction projects which Cuba definitely needs.”
Such action also would require participation from the Organization of American States and the International Monetary Fund, the source observes, adding, “There are hurdles, but that’s where the really big construction projects are going to come into play.”
Obama’s trip is one of a series of actions that the administration has taken since December 2014, when Obama made the surprise announcement that he planned to move toward normalized relations with Cuba.
That was followed by other steps, including the reopening of the U.S. Embassy in Havana last summer, the December aviation agreement, and a variety of Treasury and Commerce department regulatory changes affecting finance, business and trade.