The U.S. and Cuba reopened their embassies yesterday, closing one of the final chapters of the Cold War. Calling it a “historic day,” Secretary of State John Kerry said “the interests of both countries are better served by engagement than by estrangement.” U.S. industrial giant Caterpillar (IW 500/23) has been making that same pitch for two decades.
“For almost 20 years, Caterpillar has strongly advocated for engagement rather than isolation in Cuba,” said Caterpillar Chairman and CEO Doug Oberhelman. “We’ve also called on the U.S. government to lift the trade embargo because, in our view, the current isolationist policy hasn’t worked.”
Caterpillar had thought that President Clinton would attempt to normalize relations with Cuba in 1998, recalled Bill Lane, Caterpillar’s senior director, Global Government & Corporate Affairs. Pope John Paul II had visited the island in January of that year, the first time a pope had visited the island, and company officials thought it would have an effect similar to President Nixon visiting China. A huge throng of reporters was on hand when the pope landed in Cuba.
“By noon, most of them were back in Washington and that was because a bigger story broke that day – the Monica Lewinsky story,” said Lane. “So much for the greatest example of engagement since Nixon.”
On that 1998 trip to Cuba, Caterpillar officials visited some hospitals and recognized the need for more reliable power generation. The company donated some diesel generators to the hospitals. But company officials realized that the Bush administration would not act on normalizing relations, a situation that continued until the recent thaw.
In a statement, Oberhelman urged Obama and Congress to work together to end “the 54-year embargo that has made the 90 miles separating our nations an insurmountable barrier. It is now time to unleash the full power of engagement by fully normalizing relations. Fully integrating Cuba into the global economy will improve the everyday lives of the Cuban people.”
Cuba is the largest island in the Caribbean, with a land mass about the size of Ohio and a similar population of just over 11 million. But Cuba’s economy is estimated at about $128.5 billion, just one-fourth of Ohio’s GDP. That could change quickly if Cuba embraces foreign investment and more tourism. Lane noted that a million Canadians now visit the island annually but only about 100,000 Americans.
“If 2 million Americans start going, particularly in the winter months, it means there is going to be a significant building boom as far as hotels, power and all the other activities that go with a very labor-intensive industry called tourism,” he said.
Now is the time for U.S. manufacturers to explore opportunities in Cuba, recommends Lane. He was a member of a group of eight Caterpillar executives who visited Cuba for a week in late April.
“We started to get a feel for the territory in Cuba and figure out what the business opportunities are,” Lane told IndustryWeek. They met with Cuban representatives from the construction, mining and power generation industries – all areas where Caterpillar has significant equipment lines. At present, he said, those industries are being served by companies based in Europe, Japan and, to a lesser extent, China.
“Everything we make is needed in Cuba,” said Lane. “There is a good brand recognition going back to the Fifties and before. And now that there is diplomatic recognition, the development banks may get more involved if Cuba actually reforms and starts embracing foreign capital. You could start seeing robust growth.”
“Our feeling was that the Cubans are excited about the change that is coming,” Lane observed, adding, “There is a huge desire for American products. There is a first mover advantage if you move quickly. And this is one place where the U.S. has a home field advantage.”