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One Man Against A Tide Of Foreign Investment (Int'l Edition)


International -- Intl' Business: CUBA

ONE MAN AGAINST A TIDE OF FOREIGN INVESTMENT (int'l edition)

Just when Fidel Castro starts attracting some badly needed foreign investment, along comes Jesse A. Helms (R-N.C.). He's pushing to turn off the investment flow that's helping to prop up the island's economy and Castro's government. As head of the Senate Foreign Relations Committee, he will start hearings on May 22 on the Cuban Liberty & Democratic Solidarity Act, a bill he introduced with Representative Dan Burton (R-Ind.). Its aim is to tighten U.S. sanctions against Castro by scaring Europeans, Canadians, and others away from Cuba. "We're sending a very clear message to businessmen abroad: If you want to do business in both the Cuban and American economy, you have to make a choice," says Helms spokesman Mark Thiessen.

The bill is stirring up a hornet's nest. After warnings from the European Union and Canada that it could severely strain relations, the Clinton Administration is already lobbying to soften the bill's terms. Its toughest provision could unleash a flood of lawsuits in U.S. courts against foreigners that do business with Cuban companies that operate properties confiscated by Castro. Cuban-Americans could file suits to win compensation for their lost properties even though they were not citizens of the U.S. when their assets were seized. Most vulnerable would be foreign companies with assets in the U.S. that could be attached under court-ordered settlements.

What worries Helms is the end run around U.S. sanctions by foreign companies that are flocking to Cuba, attracted by Castro's steps toward a freer market (table). In Havana's historic Old Town, for example, Spain's state-run banking group, Argentaria, is spending $18 million with a Cuban partner to convert the ornate former Exchange Building into office space. Its purpose: to provide modern quarters for Havana's fast-growing foreign-business community. "It will be a success," predicts Manuel Bueno, communications director for Madrid-based Argentaria. His reasoning: A building solely for offices hasn't been built in Havana since 1952.

DILUTED CLAIMS. The biggest foreign venture is that of Italian state-run telecommunications company STET and a Mexican partner, Grupo Domos. They plan to spend at least $700 million over the next three years to upgrade Cuba's phone system and set up plants to make telecommunications equipment. STET acquired its stake in Cuba last month by paying at least $500 million, sources close to the deal say, for a 25% interest in a Domos subsidiary that purchased a 49% share in Cuba's phone system.

And Dutch bank ING is putting up $30 million to help finance the sugar harvest that will start next November. Credits from ING and other foreign lenders, which may total $200 million, will pay for imports such as fertilizers to revive sagging sugar output.

American companies that still hope to be compensated for $1.8 billion worth of property seized by Castro in 1960 have mixed feelings about the senator's bill. They fear that their claims, which have been certified by a Justice Dept. commission, could become diluted--and any settlement delayed for years, even after a change of government in Cuba--if Cuban-Americans also bring suits for additional tens of billions of dollars in compensation.

ANGRY MESSAGE. Nevertheless, "Senator Helms is on the right track," says David W. Wallace, chairman of Connecticut-based Lone Star Industries Inc., which claims $24.9 million in compensation plus 6% interest since 1960 for a cement plant. The hearings will refresh memories, Wallace hopes, of "what was done" in the expropriation and "what was proven" in the process of certifying claims.

Wallace is chairman of the Joint Corporate Committee on Cuban Claims, representing 100-odd U.S. companies such as Boise Cascade, ITT, and Texaco. He particularly wants to send an angry message to Cementos Mexicanos, the Mexican cement giant that handles exports for the Cuban operator of Lone Star's former plant. "They are making use of our stolen property," Wallace fumes.

But Ian W. Delaney, CEO of Alberta-based Sherritt Inc., a major investor in Cuba, expects little impact from the bill. "We don't have any operations in the U.S." that could be affected by court suits, he reasons. Sherritt and a Cuban partner are spending $100 million to nearly double the island's nickel output.

So far, the bill hasn't done much to discourage foreign investments in Cuba. ING has a five-year agreement to finance Cuban sugar crops, and Argentaria is eyeing other ventures. The bill "doesn't affect our perspectives at all," says Argentaria real estate director Jose Mara Fernndez Rico. With 453 foreign companies already established in their own Havana offices, it's a little late for Helms to shut the door.

Tiptoeing Toward A Market Economy

-- Foreign companies are being allowed to invest in office buildings in joint ventures with Cuban state-run partners

-- Up to 500,000 unneeded workers will be shifted to other jobs or laid off to "rationalize" the workforce

-- A law being debated would expand the system of licensing individual

self-employment to allow small businesses as well

DATA: BUSINESS WEEKBy Stan Crock in Washington, with Gail Reed in Havana and Antonio Fins in Miami


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