US-Cuba relations
Tourists on a hotel balcony in HavanaReutersEUTERS/Alexandre Meneghini

In the latest sign of warming relations between the US and Cuba, the Obama administration has given a green light to the construction of an American factory in the island nation. It will be the first in Cuba since the revolution.

A two-man company from Alabama will build a $10m (£6.9m) plant assembling as many as 1,000 small tractors a year for sale to private farmers in Cuba.

The Treasury Department last week notified partners Horace Clemmons and Saul Berenthal that they can legally build tractors and other heavy equipment within a special economic zone started by the Cuban government to attract foreign investment, reports Associated Press.

Clemmons and Berenthal hope to be churning out tractors by early 2017. "Everybody wants to go to Cuba to sell something and that's not what we're trying to do," Clemmons told AP.

"We're looking at the problem and how do we help Cuba solve the problems that they consider are the most important problems for them to solve. It's our belief that in the long run we both win if we do things that are beneficial to both countries."

The tractor plant will be the first significant American business investment on Cuban soil since Fidel Castro took power in 1959 and nationalized billions of dollars of US corporate and private property. That triggered an American embargo that barred commerce between the nations.

Presidents Obama and Raul Castro declared in late 2014 that they would restore diplomatic relations and move to normalize trade and travel.

Since then, Obama has been carving exceptions into the embargo, including allowing American manufacturing at the Mariel port and within a special economic zone west of Havana.