In the event that U.S. restrictions on trade with Cuba are lifted, Cuban demand for construction and agricultural machinery is likely to provide U.S. producers of such machinery with significant export opportunities in the near term.
Cuba is currently upgrading its infrastructure in most areas and is working to increase the country’s agricultural productivity. Cuban demand for construction machinery is expected to be strong because of Cuba’s plans to expand its tourism industry and revitalize urban core areas, which will require significant construction of buildings and underlying infrastructure, as well as conservation of historic structures and neighborhoods.
Further, aged roads and airports will require upgrading. Cuban demand for agricultural machinery will be driven by Cuba’s desire to reduce its dependence on imported food and to boost export crops as a source of foreign exchange. Moreover, Cuba is in need of modern equipment to replace its antiquated fleet.
Construction Machinery – Cuba
In 2014, U.S. exports of construction machinery to the Dominican Republic totaled $28.9 million, down from a peak of $84.5 million in 2008. There were no U.S. exports of construction machinery to Cuba during 2005–14.932 In 2015, U.S. exports to Cuba totaled $222,250 and consisted of one bulldozer and one front-end shovel loader.
Cuba has no commercial production of construction machinery, and the current fleet of construction machines in Cuba is reportedly obsolete. However, there may be limited production of components and parts for such machinery. During 2005–14, Cuba exported construction machinery valued at $9.6 million, of which $5.3 million was exported to Mexico in 2006 and $2.3 million to Venezuela during 2010–11. These were likely exports of used construction equipment.
With no domestic industry, Cuba relies on imports for its construction machinery needs. Cuban demand stems from the country’s need to upgrade as well as construct new infrastructure. This ranges from improving Cuba’s airports and seaports to constructing tourist facilities, as well as renovating its city cores and improving its road system. In addition, certain construction equipment may be used for mining—for example, for use in Cuba’s nickel industry. Cuban construction activity has increased in recent years, and housing shortages, decades of underinvestment in infrastructure, the government’s push for foreign direct investment (FDI), and the priority placed on developing tourism suggest that such activity will continue to grow.
Cuban imports of construction machinery rose from $37.3 million in 2005 to a high of $118.7 million in 2008, before falling to $53.8 million in 2014. Over one-half of total imports during the period were comprised of parts for construction machinery (18%), machines with a 360-degree revolving superstructure (13%), bulldozers (12%), and front-end shovels (11%). Off-highway dumpers, mobile cranes and drilling derricks, backhoes and trenchers, and miscellaneous other machinery made up the remainder of Cuban imports during 2005–14.
During 2005–13, the EU was the principal source of Cuba’s imports of construction machinery, being surpassed in 2014 by China. In 2014, Cuba’s imports of these goods from China totaled $27.9 million (52%), compared with imports from the EU, valued at $22.8 million (42%). Spain has generally been the leading supplier of EU machinery to Cuba; in 2014, Spain accounted for 19% ($10.4 million) of Cuba’s imports of construction machinery and 46% of all construction equipment supplied to Cuba by the EU. However, in certain years during the 2005–14 period, Italy, the Netherlands, or Germany surpassed Spain as the top-ranked EU supplier.
The variability of Cuban imports of construction equipment during the period reflects both the specific construction projects undertaken in Cuba at any particular time and government-to-government agreements that often involve financing for Cuba’s purchases of such machinery. For example, in 2013 and 2014, some Cuban imports of construction machinery were the result of a contract with a Chinese equipment producer that was partially financed by the Export-Import Bank of China. Cuba’s imports from Brazil in 2010 and 2011 correspond to Brazil’s involvement in constructing the Mariel Special Economic Development Zone (ZED Mariel), a project into which Brazil injected significant funding. Cuba’s imports from Russia totaled $61.6 million during 2009–13, with Russia and Cuba signing agreements for Russia to provide $150 million in grants for Cuba to purchase construction and agricultural machinery. Such agreements complicate the landscape for U.S. suppliers, as Cuba reportedly prefers to deal with government-owned companies and do business under bilateral relationships, including barter deals with countries sharing Cuba’s socialist-communist values.
Agricultural Machinery – Cuba
Cuba has a small agricultural machinery industry focused on equipment and tools for cultivation, agricultural trailers, tillage tools, and plows. Cuba’s Grupo Industrial Maquinaria Agrícola y Construcción (GIMAC) is likely responsible for most production of agricultural machinery. Cuba’s exports of agricultural machinery totaled $2.6 million in 2014, down from a peak of $3.6 million in 2011, but up significantly from $423,885 in 2005.949 During 2005–14, 93% of Cuba’s exports of these goods went to Venezuela.
As with construction equipment, 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.
Like imports of construction equipment, import trends for these goods tend to be driven by the specific needs of Cuba’s agricultural sector for machinery suited to particular crops, irrigation, or pesticide and fertilizer application, as well as by favorable financing terms and bilateral agreements.
One example is Cuban imports of irrigation machinery. Imports of sprayers, dusters, and irrigation machinery accounted for 34% of total imports of agricultural machinery during 2005–14. These imports followed implementation in mid-2003 of the government’s 10-year plan to electrify the Cuban irrigation system, a project co-funded with a $10 million loan from the OPEC Fund for International Development.
Another example is the recent growth in Cuban imports from Brazil. These reflect both Brazilian investment in Cuba’s sugar industry and Brazil’s position as one of the few global suppliers of sugarcane harvesting machinery – which Cuba needed in order to modernize the sugar sector. Brazil also granted Cuba credits to purchase agricultural equipment and other inputs. In fact, Cuba has completed a number of deals in this sector with other countries, involving either attractive financing or non-traditional, quid pro quo transactions.
Effects of the Removal of U.S. Restrictions
U.S. manufacturers view Cuba as a potential market for U.S.-made construction and agricultural equipment, and Cuban government officials report that U.S. machinery is likely to be well received in Cuba if U.S. export restrictions are lifted. Industry representatives indicate that the desire for U.S.-branded equipment, the size of the Cuban market, and the robustness of the sector suggest that there could be immediate business and excellent export potential for U.S. machinery producers.
Credit, however, may be an important factor in realizing this potential. Cuban government officials indicate that access to credit will be necessary for them to be able to purchase U.S. machinery. Therefore, growth of U.S. exports could be affected by U.S. exporters’ willingness to offer favorable financing and credit terms to Cuban purchasers. This is because suppliers such as Brazil and China typically provide government financial support and easy credit terms. Further, producers from Brazil, China, and the EU have developed business relationships with Cuban purchasers, and competing against suppliers with entrenched relationships may prove challenging. At the same time, many U.S. manufacturers, particularly larger firms that have their own financial arms, are reportedly in a position to provide good financing terms for equipment and machinery sales to Cuba.
If U.S. restrictions are lifted, Cuban government officials have indicated that they would likely import agricultural machinery, including rice harvesting machinery and irrigation equipment, noting the quality of U.S. machinery. One U.S. source familiar with Cuban agriculture states that Cuba’s large sugar farms could use large U.S.-built tractors and sugar harvesting machinery.
Likewise, Cuba’s citrus groves, in spite of the decline in numbers resulting from citrus greening disease, are large enough that they would benefit from using U.S.-built agricultural machinery. Regarding prospects for U.S. exports of construction machinery, a representative of Caterpillar, Inc., stated that Cuba needs and would like to buy many of the types of products that the company produces. The company will likely begin by marketing diesel generator sets, which provide continuous or backup electrical power, and will follow that up with marketing mining machinery and then construction machinery.
Recent developments between the United States and Cuba in this sector could lay the groundwork for U.S. exports of construction equipment parts in the very near term. In anticipation of the lifting of U.S. restrictions on Cuba, an Alabama startup company, Cleber LLC, is working to establish an agricultural tractor assembly operation in ZED Mariel. This facility would initially use U.S.-made parts (fabricated in Alabama and shipped to Cuba), with the eventual goal of transferring production to the proposed Mariel facility.