New OFAC rulings worry food exporters as U.S. sales to Alimport

Vol. 12, No. 12
December 2004
www.cubanews.com
In the News
Making up with Europe
Cuba’s release of six top dissidents paves
way for better ties with EU ..........Page 2
After Tampa
Embargo foes speaking at recent Cuba
summit plot their next move ........Page 4
China calling
State visit of Hu Jintao to Havana leads to
16 Sino-Cuban agreements ...........Page 6
Herzfeld Fund up
Closed-end fund tied to embargo’s end is
doing remarkably well ..................Page 7
Newsmakers
Veteran Cuba consultant Kirby Jones offers advice on how to do business in this
often confusing market .................Page 8
New OFAC rulings worry food exporters
as U.S. sales to Alimport pass $1 billion
BY LARRY LUXNER
T
he Bush administration is on the verge of
issuing “clarifications” that might restrict
the ability of U.S. companies to sell food
to Cuba under the 2000 Trade Sanctions Reform
and Export Enhancement Act (TSRA).
Coincidentally, or perhaps not, the new rules
could be announced this week — just as 300
U.S. food executives prepare to visit Havana for
a Dec. 15-17 round of negotiations with Alimport, Cuba’s state food purchasing agency.
Both TSRA and the Treasury Department’s
Office of Foreign Assets Control (OFAC) require “payment in advance” for sales of U.S.
farm commodities, though in practice, Alimport
generally directs a third-country bank such as
BNP Paribas to credit the U.S. bank account of
an exporter once a ship has been loaded and
begun its 72-hour voyage to Cuba.
Since late 2001, OFAC has let U.S. exporters
comply with the “cash in advance” provision by
shipping the goods, and then transferring title
and control of the goods to the buyer only after
payment has been received.
But now, say industry sources, OFAC will demand payment for food before vessels carrying
the goods even leave U.S. shores — a requirement that could doom future food sales to Cuba.
Treasury spokeswoman Molly Millerwise
said OFAC began reviewing the 2000 law after
some U.S. financial institutions handling Cuban
purchases asked Treasury to clarify its policy.
“OFAC at this point is working directly with
exporters to issue specific licenses to unblock
their payments,” she told Reuters. “At the same
time, Treasury will be issuing guidance shortly
on the payment policy itself.”
John Kavulich, head of the U.S.-Cuba Trade
& Economic Council, told CubaNews that “in the
past, supporters of TSRA have found that when
they stir up a storm quickly, the Bush administration tends to mitigate whatever it was hoping
to do. So far, that’s been a successful strategy.”
See TSRA, page 2
The drought crippling eastern Cuba will
severely hurt 2004-05 crop .........Page 10
Castro’s withdrawal of U.S. dollar could
help Canadian money transfer services
Unhappy yachtsmen
BY VITO ECHEVARRÍA
Florida boating executives bitter over fact
they can’t sail to Cuba .................Page 11
N
Sugar in trouble
Business briefs
Israel’s Habas has 15% stake in office project; U.K. eyes oil potential .........Page 12
Brainwashed kids?
As young pioneros attend UJC Congress,
Cubans wonder whether political activism
is good for their children ............Page 14
CubaNews (ISSN 1073-7715) is published monthly
by Luxner News Inc. © 2004. All rights reserved.
Subscriptions: $429/year. For subscription or editorial inquiries, call us at (301) 365-1745, send a fax to
(301) 365-1829 or e-mail us at larry@luxner.com.
ow that the Cuban government has
removed U.S. dollars from circulation,
many Cuban-Americans are wondering
how they’re going to send money to their families on the island. Some are concerned whether
they’ll even be able to continue using U.S.
money transfer services like Western Union
and MoneyGram.
The short answer: no problem, for now.
According to these companies, they’re not
directly affected, since the new decree — which
took effect Nov. 15 — only bars use of the dollar
in everyday transactions, not the actual possession of dollars.
“Western Union has offered its services to
Cuba since 1999,” company spokeswoman Danielle Pereira told CubaNews. “For now, service is
normal. We continue to send money to Cuba.”
When asked how much in Cuba-bound wire
transactions WU handles annually, Pereira de-
clined to cite figures “for competitive reasons,”
saying only that according to the Inter-American Development Bank, overseas relatives send
$1 billion a year to their families in Cuba.
Patricia Phillips, a spokeswoman for MoneyGram, says her firm has a system in place which
uses Transcard International, a debit-card company in Canada, to transfer funds to cardholders
in Cuba. As a result, MoneyGram will probably
not be hurt by the new currency law.
“We estimate minimal effect on our business.
My understanding is that most transactions to
Cuba are largely card-based — i.e., the receiver’s card is credited — and therefore not affected by the dollar ban,” she said.
Other independent operations in South
Florida, like Va Cuba in Miami and Hialeah, also
say they’re continuing to offer U.S. dollar-based
money transfers to Cuba.
Even so, the fact is that Cuban citizens receivSee Money, page 3
2
TSRA — FROM PAGE 1
“Clearly, financial institutions reacted to a
perceived threat from the Treasury Department,” Kavulich said. “They reacted to overt
policy statements to the effect that although
TSRA transactions are permitted, no one
should engage in them.”
The payment issue is so sensitive that the
spokesman for the Cuban Interests Section in
Washington declined comment, pending further analysis.
So did Bank of America, which along with
other U.S. financial institutions has been prevented by OFAC in the past few weeks from
processing Cuban payments for U.S. farm
goods on the grounds that those sales may be
violating the “cash in advance” requirement.
DORGAN LASHES OUT AT OFAC’S TACTICS
In fact, nearly everyone contacted by
CubaNews for this story asked not to be quoted by name, for fear of retribution from White
House officials.
Said one Washington-based Cuba expert:
“With the results of the election, the extremists in the administration have begun looking
for an opening to mess with and disrupt U.S.Cuba trade, which has been very successful.
“Regretfully, OFAC is allowing itself to
become the policy playground for right-wing
Cuban-American congressmen, and it’s
shameful that these people would hurt U.S.
businesses and jobs.”
The expert claimed that zealots in the Bush
administration “want to create an air of uncertainty. They want everyone who’s going [to
the Alimport conference] to have doubts that
this will continue. Ultimately, while TSRA is
the law, their objective is to find every possible way to frustrate it.”
A Texas food executive told CubaNews that
“this is the beginning of the end,” while Alabama Agriculture Commissioner Ron Sparks
said “such a reinterpretation of this law would
be a reckless act at the expense of Alabama’s
CubaNews ❖ December 2004
poultry farmers and producers.” In 2003, U.S.
sales of frozen turkey and chicken came to
$61 million, double the previous year’s total.
Sen. Byron Dorgan (D-ND) said “it’s clear
the administration wants to shut down agricultural trade with Cuba.”
Dorgan, who sponsored the original TSRA
legislation, said he’d ask Treasury’s inspector-general to investigate whether OFAC is
Entities protesting OFAC rule
Ag BioTech Inc.
American Farm Bureau Federation
Crowley Maritime Corp.
Louis Dreyfus Corp.
National Association of Wheat Growers
National Chicken Council
National Corn Growers Association
National Foreign Trade Council
National Milk Producers Federation
National Turkey Federation
U.S. Dairy Export Council
U.S. Rice Producers Association
U.S. Wheat Associates
United Egg Producers
USA*Engage
USA Poultry and Egg Export Council
USA Rice Federation
Wheat Export Trade Education Committee
exceeding its legal authority by using its
resources to block Cuba food sales.
“With our trade deficit soaring, you would
think the administration would be working to
boost exports,” Dorgan fumed in a Dec. 2
statement. “Instead, OFAC is using resources
that could fight terrorists to thwart the cash
sales of hundreds of millions of dollars in
farm products to Cuba. Those sales would
mean more income for family farmers in
North Dakota and across the nation.”
Dorgan said this new tactic by OFAC is
Dissident release to boost Cuba-EU ties
T
hanks to prodding from Spain, the Castro government has released six prominent dissidents from long jail terms.
The development coincides with a decision
by the European Union to renew official contacts with Cuba for the first time in 17 months.
“As you know, there is an entire process begun by Spain to create a more normal situation in EU-Cuban relations,” said Spanish envoy Carlos Alonso Zaldivar, after meeting with
Cuba’s foreign minister, Felipe Pérez Roque.
The EU slapped sanctions on Cuba in June
2003, two months after the dissident crackdown and the execution of three Cubans for
attempting to flee to the United States.
The six who have been released are:
■ Raúl Rivero, 59. Sentenced to 20 years.
Suffers from emphysema and cysts on a kidney. A journalist and poet, Rivero worked for
Cuban state media in Moscow before the Soviet collapse, but later broke with the govern-
ment and published several volumes of independent writings.
■ Osvaldo Alfonso Valdes, 39. Sentenced
to 18 years. An active member of the opposition Liberal Party.
■ Oscar Espinosa Chepe, 64. Sentenced to
20 years. Hospitalized behind bars for months
with a liver ailment. The economist’s writings
were widely distributed outside Cuba.
■ Marcelo López, 40. Sentenced to 15
years. Suffers from a neurological disorder.
López was spokesman for the Cuban Commission on Human Rights and Reconciliation
headed by veteran activist Elizardo Sánchez.
■ Margarito Broche, 47. Sentenced to 25
years. Suffered a heart attack behind bars in
August. Broche represented a group of
balseros from the province of Villa Clara.
■ Edel José García Díaz, 59. Sentenced to
15 years. Independent journalist and former
linguist. Hopes to emigrate to United States.
another attempt to make food sales to Cuba
virtually impossible by increasing red tape
and raising shipping times and costs, making
U.S. farm products uncompetitive.
OFAC has still not publicly announced the
moves, and farm exporters are learning of the
new tactics only when told by their banks.
In a Dec. 2 letter to House and Senate members, 18 industry associations note that “Cuba
has become our 21st-largest agricultural market valued at $400 million per year, and one
we cannot afford to lose” (see box at left).
“This serious and alarming consequence of
any reinterpretation of ‘cash in advance’
would force Cuba to pre-pay for goods prior to
shipment: Cuban-owned goods would be sitting in a U.S. warehouse at a U.S. port until
payment has been received,” the letter said.
“Cuban goods on U.S. property are subject to
court-ordered seizures that could result from
legal claims against Cuba. Neither U.S.
exporters nor Cuban buyers are in a position
to accept such extraordinary legal risks.”
NOT EVERYBODY IS NERVOUS
At present, 15 companies account for over
90% of the $1.04 billion in cumulative U.S.
food sales to Alimport since 2001, with only
three of them — ADM, Cargill and FCStone
— accounting for 60-70% of the total.
“What made companies livid was the fact
this was done without notification,” Kavulich
said. “It’s the sneakiness which is malicious,
because in essence, the Treasury Department equated the exporters with terrorists.”
Yet not all food executives are complaining
about OFAC’s proposed revisions.
Craig Jacobs, VP of Splash Tropical Drinks
in Fort Lauderdale, Fla., said his company has
already sold $600,000 worth of frozen daiquiri
and piña colada mix to Alimport.
“I don’t think these changes will affect us,”
Jacobs told CubaNews. “The only thing we
worry about is how Cuba will view these
changes. Whether we lose sales to other
countries as a result remains to be seen.”
Another wild card is President Bush’s selection last week of Cuban-born Carlos Gutiérrez as secretary of commerce.
Gutiérrez, whose family fled the island in
1960 when he was 6 years old, went on to
become CEO of Kellogg Co. Despite the fact
that Kellogg showed some interest in exporting breakfast cereals to Cuba at a 2002 trade
show in Havana, Gutiérrez is known to be
solidly pro-embargo.
In June, he donated $4,000 to the U.S.-Cuba
Democracy PAC, an anti-Castro organization.
Asked what kind of impact Gutiérrez could
have on future U.S. food sales to Cuba,
Kavulich was pessimistic.
“The question is not how they’ll be impacted, but how negatively,” he said. “Gutiérrez
will be as fully engaged [in anti-Cuba policy]
as the White House wants him to be. With
Mel Martínez in the Senate, Condi Rice as
secretary of state and Lincoln Díaz-Balart and
Ileana Ros-Lehtinen moving up in seniority,
there may be changes in U.S. policy toward
Cuba, but not the kind of changes people in
the U.S. business community want.”
3
December 2004 ❖ CubaNews
ing U.S. dollars now incur a 10% surcharge
when they exchange their dollars into convertible pesos. In effect, this means they have
10% less money to spend, leading their overseas relatives to look for cheaper means of
sending money to Cuba in the future.
One possibility is to wire money in currencies other than the greenback, such as euros
or Canadian dollars, thus cutting into Western Union’s and MoneyGram’s business.
Yet WU’s Pereira said her company has no
plans to change the currency of its transactions to Canadian dollars, despite the savings
it would mean for those on the receiving end.
In late October, Fidel Castro announced
that beginning in early November, the dollar
would no longer be accepted in stores,
restaurants, hotels or anywhere else in Cuba,
although dollar bank accounts would still be
allowed. The regime also said it would charge
a 10% fee to exchange dollars for pesos after
Nov. 15, encouraging citizens to turn in their
dollars or deposit them in the bank.
According to the New York Times, the convertible pesos — bright with etchings memorializing heroes like Che Guevara and Jose
Martí — were actually printed in the mid-90’s
as part of a plan to cover occasional shortfalls
of dollars, but it wasn’t until November that
they went into wide circulation.
all beneficiaries of the electronic trail blazed
Francisco Soberón, president of the Central by Toronto businessman Robert Sajo, who
Bank, wouldn’t say how many dollars the started the first online credit card-based
bank had collected in exchange for convert- money transfer operation, QuickCash, in the
ible pesos, though economists put the num- mid-1990s, to circumvent the U.S. embargo.
ber as high as $500 million.
“We are in an economic war,
and when you’re at war, you
don’t tell your enemy how
many bullets you have left,”
Soberón said in an interview
with Reuters, estimating that
at least 2.5 million Cubans had
lined up to get rid of their dollars since the decree was
announced Oct. 25.
Hundreds of thousands of
Cubans have also opened bank
accounts with the dollars they
had been hoarding at home,
putting them in interest-bearing accounts at state banks.
“It exceeded all our hopes,” Storefront of a Miami agency that wires money to Cuba for a fee.
Soberón told the news agency,
noting that Cuba’s international reserves
Quickcash was eventually sold to fellow
have risen and its credit risk standing has Canadian entrepreneur Enzo Ruberto and reimproved, which should help reduce the high named Cash2Cuba.com during the last days
interest rates it has to pay.
of the Clinton administration, which allowed
The Party newspaper Granma reports that WU and MoneyGram to begin wiring funds
the annual interest rate on fixed-rate deposit directly from the United States to Cuba.
accounts has been set at 2% for U.S. dollar
None of the executives from these three
accounts, 4% for accounts in convertible pesos companies would talk to CubaNews, for fear
and 6% for those in non-convertible pesos.
they would come under increasing scrutiny
by the Treasury Department’s Office of
DOLLAR BAN IS GOOD NEWS FOR CANADA
Foreign Assets Control.
On Oct. 25, OFAC placed online money
Meanwhile, money-transfer operations in
Canada are likely to benefit from Cuba’s transfer company Sercuba on its blacklist, a
restrictions against the U.S. dollar. Such serv- move that requires U.S. banks to block finanices include Transcard International, Duales cial transactions if any of their customers tries
to conduct business via Sercuba’s website.
Inc., Cash2Cuba.com and Antillas Express.
However, Montreal-based Antillas Express,
Transcard, Duales and Cash2Cuba.com are
which doesn’t depend on online credit-card
transactions for its Cuba wire business, was
candid about its service — and its hopes of
increased business from Cuban exiles.
of the two-part exchange at the Bank of
“At this point, the law is fairly new,” said
America branch inside Miami International
spokeswoman Marie Louise Miró. “There is
Airport, which handles the vast majority of
some confusion, since the Canadian dollar
U.S. charter flights to Cuba (flights also
isn’t equal to the U.S. dollar. People are holdoriginate from New York JFK and Los
ing back on sending money [to Cuba].”
Angeles International Airport).
Miró said Antillas Express usually does 700
He says costs are lower there than online,
Cuba-related transactions a week, rising to
but it’s wise to call the bank first. And online
1,500 a week during the holiday season. She
currency-exchange services generally resaid her company wires $12-13 million a year
quire two days to process.
to Cuba. That’s not a big slice of the pie at all,
In Cuba, Guild recommends sticking with
but is quite respectable considering the momthe more widely used sites — a bank, hotel
and-pop nature of its business.
Unlike more high-tech wire firms, Antillas
or cadeca (exchange house) — and avoiding
Express does business the “old school” way
currency exchanges with people on the
— by receiving international money orders
street who may try to trade regular pesos,
from Cuban-Americans, as well as cash paywhich are worth far less but resemble conments from Cubans walking into the office to
vertible pesos, for U.S. dollars.
order funds wired into Cuba. The company
Convertible bills say pesos convertibles on
also accepts payment via credit card.
them (see photo of banknote above), but
According to Miró, such practices won’t
coins are less easily distinguished: Convertslow down her business. For the time being,
ible coins depict a place, while nonconvertthough, Antillas Express has to do some iniible ones have images of people on the front.
tial legwork in order to keep its clients happy.
There’s no charge to exchange convert“We’re talking with customers now. It’s a lot
ible pesos to U.S. dollars when leaving
of work to educate people on the changes,”
Cuba, but in the United States, pesos cannot
she said, “but in the long term, it’s going to be
be converted.
better for Cubans.”
If you’re flying to Cuba, change money before you go
U
.S. citizens traveling to Cuba should
convert their U.S. currency into
Canadian dollars, euros or some other
stable foreign currency, advises Bob Guild,
program director of Marazul Charters, a
Miami-based company that takes about
7,000 people to Cuba annually under government-licensed programs.
Guild, quoted in a New York Times travel
advisory, said that “someone has to figure
out the U.S. exchange rate for the euro and
Canadian dollar, but as it is today, if you are
going to exchange more than $200, it would
be wise to do it before you go.”
Based on recent exchange rates and
transaction fees, the dollar-to-euro-to-peso
conversion makes $200 worth 185-191 pesos
convertibles. Direct conversion of the same
dollar amount to Cuban currency, with the
new 10% penalty on U.S. dollars, yields 180
pesos convertibles.
The conversion is even costlier for foreign
traveler’s checks, which Cuban hotels
charge 3% to cash. U.S.-issued credit cards
are not accepted in Cuba.
Guild recommends making the first step
LARRY LUXNER
Money — FROM PAGE 1
4
CubaNews ❖ December 2004
POLITICS
At National Summit on Cuba, speakers push for change
BY LARRY LUXNER
B
usiness and political leaders who favor
an end to the embargo against Cuba recently made their case in Tampa,
against a backdrop of ever-increasing White
House hostility toward the Castro regime.
The National Summit on Cuba, held Oct. 8
at the University of Tampa, attracted over 250
academics, politicians, executives and others
ranging from Tampa Mayor Pam Iorio to Ret.
Gen. Jon Sheehan, former supreme allied
commander of NATO’s Atlantic Command.
In addition, two members of the House,
Rep. Jeff Flake (R-AZ) and Rep. Bill Delahunt
(D-MA), as well as Sen. Larry Craig (R-ID)
addressed delegates by phone from Washington to share their views on the likelihood of a
travel ban getting through Congress in 2005.
“Progress will not occur overnight,” Delahunt said. “I think we will see incremental
change over the course of the next legislative
session. Much of it is being driven by the
changing dynamics in South Florida. There
clearly seems to be the emergence of a new
realization that if change is to occur in Cuba,
we have to change the policy.”
Flake agreed, telling delegates that “people
in Arizona and everywhere realize this is an
issue of freedom, and these sanctions are not
doing much to curtail Castro from putting
people in jail and doing what he’s always
done. This debate isn’t just restricted to South
Florida or the Cuban-American community. It
implicates every single American citizen, and
it’s our responsibility that we protect our constitutional rights.”
Added Craig: “We will pass a bill [lifting the
travel ban] in 2005, and it will be put on the
president’s desk. That will be a watershed
event,” he said. “Our record of success
around the world with former and existing
communist governments was to engage, not
to isolate, because isolation, unless it is total,
doesn’t benefit anyone, and tragically damages those who are the victims of it.”
NEARLY ALL DELEGATES OPPOSE U.S. POLICY
The summit was the third of its kind — previous summits having been held in Washington (2002) and Miami (2003). It was co-sponsored by the Alliance For Responsible Cuba
Policy Foundation, Americans For Humanitarian Trade With Cuba, the Florida-Cuba Business Council and the World Policy Institute.
The WPI also co-sponsored a Washington
conference in 2000 entitled “The Domestic
Impact of Unilateral Food and Medical Sanctions: Case Study Cuba.”
Nearly all the speakers at the Tampa event
advocated a relaxation of current U.S. policy
toward Cuba, though a handful argued for
even greater restrictions.
Frank Calzón, founder of the Washingtonbased Center for a Free Cuba, aroused passions when he attacked previous speakers for
encouraging U.S. travel to Cuba at the expense of the Cuban people.
“The whole issue of political rights is irrelevant,” he said. “When an American tourist
stays in a hotel where only tourists are
allowed, that American is subsidizing tourism
apartheid. Cubans get paid only $15 a month.
If a Cuban whispers a word about forming a
labor union, he’s fired and goes to prison.
That should also be part of the discussion.”
MEMOS OF UNDERSTANDING A SORE POINT
Calzón also criticized U.S. executives for
signing memos of understanding (MOUs)
with Cuban food purchasing entity Alimport.
deal of patience. If it’s not worth the effort,
your company will simply not support you.”
One entity that has signed an MOU with
Alimport is the Alabama State Port Authority,
based in Mobile. Cuban-born María Conchita
Méndez, the agency’s director for Latin
America, said the entire Gulf Coast would
benefit from an end to the embargo.
“Castro is a given, but you have to put him
aside and ignore him, and look at the Cuban
people,” said Méndez, whose uncle spent 26
years in a Cuban jail. “They’re dying to determine their own destiny. By opening up the
door, change will come about. Our policy for
the last 40 years has gotten us nowhere.”
“Progress will not occur overnight. I think we will see incremental
change over the course of the next legislative session, and much of
it is being driven by the changing dynamics in South Florida.”
— REP. BILL DELAHUNT (D-MA), CO-CHAIR OF THE HOUSE CUBA WORKING GROUP
“In order to do business with Castro, you
have to sign an agreement saying you will
become an apologist for his regime. Sysco
just cancelled a $500,000 contract because
they refused to go along with that.”
Yet Cuba consultant Kirby Jones countered
that argument, telling Calzón that “about 20
MOUs have been signed between Cuba and
various states, ports and agencies, and there
has never been a conversation which has tied
the signing of a MOU to doing trade. The
facts speak to that. One state did sign a MOU
for $50 million, and not a single product has
been sold from that state. There are states
which have refused to sign, whose companies
are selling to Cuba. It just so happens that it’s
in their interest to have trade with Cuba.”
CROWLEY EXECUTIVE OFFERS ADVICE
Jay Brickman, vice-president for Cuban and
Mexican services at Crowley Liner Services
in Jacksonville, Fla., said his company, which
has been sailing to Cuba since 1954, began to
restudy the Cuban market in 1978.
“We made a conscious commitment, we did
studies, we made contacts,” he said. “In December 2001, when transportation was necessary, Crowley was at the forefront. Persistence is imperative. It’s really important to be
flexible. Things don’t always work the way
you want them. That’s true in Cuba, it’s true
in Brazil, and it’s true in the United States.”
Brickman told summit participants that
Cuba isn’t an easy place to do business.
“If it’s not important to you or your company to be there, then it’s probably not where
you want to invest your efforts. It takes time
and money to make the contacts, and a good
Yet much of the information in her presentation was inaccurate.
For one thing, Méndez told her audience
that Cuba is the world’s largest nickel producer (it is not), and that if the embargo were lifted, the island would come to represent a
potential market of $40-50 billion. This is preposterous, because for that to happen, Cuba
would need a per-capita income of at least
$35,000 — currently higher than that of any
other Caribbean island.
She also said that if tourists were allowed to
visit Cuba, “the Bahamas would become a
ghost town, and Puerto Rico would be seriously affected because a lot of the island’s
pharmaceutical industry would shift to Cuba.”
This is extremely unlikely, because nearly
all the drugs manufactured in Puerto Rico are
exported to the U.S. mainland, and therefore
must be produced under strict supervision by
the Food and Drug Administration.
Also, since the production of medicines is
capital-intensive rather than labor-intensive,
there would be little incentive for large U.S.
drug companies to close their billion-dollar
factories in Puerto Rico — just to take advantage of Cuba’s lower wages.
So where will the next National Summit on
Cuba take place?
John Loggia, WPI’s associate project director, said that in 2005, rather than do one big
summit, several conferences will likely take
place, focusing on various themes such as
agriculture, ports and international issues.
“We have discussions underway with a
number of different places,” he said. “Sometimes that’s dictated by the political events of
the year. Right now, it’s too early to say.”
5
December 2004 ❖ CubaNews
POLITICAL BRIEFS
SMITH URGES CUBA’S REMOVAL FROM BLACKLIST
Cuba should be stricken from the State Department’s list of terrorist-sponsoring countries,
argues Wayne Smith, an outspoken critic of U.S.
policy toward Cuba.
The issue was the focus of an Oct. 21 conference organized by the Center for International
Policy (CIP), where Smith is a senior fellow.
According to Smith, former chief of the U.S.
Interests Section in Havana, Cuba was put on the
terrorist list in March 1982, on “bogus” grounds.
“Twenty-two years later, the State Department’s
reasons for keeping it there do not withstand the
most elementary scrutiny,” he said. “Cuba does
not, for example, endorse terrorism as a policy.
“On the contrary, it has condemned it in all its
manifestations, has signed all 12 UN anti-terrorist
resolutions and offered to sign agreements with
the U.S. to cooperate in combating terrorism, an
offer the Bush administration ignores.”
Nor, says Smith, is Cuba harboring Basque or
Colombian terrorists, one of the State Department’s justifications for keeping Cuba on the list.
In March 2004, Under Secretary of State John
Bolton accused Cuba of moving ahead with a
plan to produce biological weapons. Cuba heatedly denies the charge, said Smith, noting that “various U.S. delegations to Cuba have seen no evidence at all to suggest that Cuba is in fact developing biological weapons. The charge seems to
be an invention of Mr. Bolton, nothing more.”
Conference organizers invited Bolton and other
State Department officials to defend their positions, but Smith says “they declined to do so.”
N. KOREAN TOP BRASS MEETS WITH RAÚL CASTRO
Cuban Defense Minister Raúl Castro met with
a North Korean military delegation headed by
Vice Marshal King Yong Chun, a Havana radio
station reported in late November.
The broadcast said that in a “friendly atmosphere that characterizes relations” between Havana and Pyongyang, Fidel Castro’s youngest
brother and other Cuban and North Korean
high-ranking officers briefed each other on their
efforts to strengthen national defense.
During their stay in Cuba, the North Koreans
also visited an antiaircraft military base and the
headquarters of the Western Army in Havana.
RSF: CUBA SECOND TO LAST IN PRESS FREEDOM
Cuba ranks 166th among 167 countries in the
latest Reporters Without Borders (RSF) worldwide press freedom index.
Only North Korea has a more tightly controlled press than Cuba, said the organization. In
a press statement, RSF hailed the Nov. 30 release
of well-known journalist and poet Raúl Rivero and
said “we hope 24 other journalists still in prison
will soon be freed as well.”
Despite the difficult conditions in Cuba, Colombia, which ranks 134th on the list, remains the
most dangerous place in Latin America for journalists to work in. Other Latin countries not particularly noted for their press freedom are Venezuela (90th), Mexico (96th) and Peru (123rd).
Details: Press Office, Reporters Without Borders,
Paris. URL: www.rsf.org.
In their own words …
“We have a solid base on which to deepen our relations, thanks to our many
shared common politics. We both choose a socialist path to our development.”
— Chinese President Hu Jintao, appearing at a ceremony in Havana
with Cuban President Fidel Castro at his side.
“Socialism will remain in the end the only real hope for peace and the survival of our species.”
— Fidel Castro, lavishing praise upon his Chinese guest at the same ceremony.
“Every nation has its own money. The Europeans have the euro, the British
have the pound, the Americans have the dollar. Why shouldn’t Cuba have its
own money?”
— Bank teller in Santa Clara, who asked not to be named, commenting on Fidel
Castro’s recent decision to end the circulation of U.S. dollars in Cuba.
“Cubans have not managed to survive Castro’s tyranny all these years without employing boundless creativity. It won’t take long for a thriving black market — rife with corruption on the part of state employees — to develop in
response to Castro’s latest gambit.”
— Marcela Sánchez, in a Nov. 11 op-ed piece for the Washington Post.
“The survival strategy is simple. Keep your head down, don’t make waves
and await the biological solution.”
— James Cason, chief of the U.S. Interests Section in Havana, speaking Nov. 9 at
a conference in Miami about life under communism.
“It is truly objectionable that your distinguished institution affords legitimacy to officials who only represent a brutal tyranny and offers to serve as
instruments of their senseless propaganda.”
— Maria Werlau, director of the Free Society Project, in a letter to David Levy,
president of Washington’s Corcoran Gallery of Art, which was forced to shelve a
cultural program it had planned to sponsor together with Cuban diplomats.
“Only the unity of Palestinians will lead them to the final victory and we are,
moreover, absolutely certain that the Palestinian people and leadership will
make real the dream for which Arafat fought until the final day of his fertile
life: the dignity and independence of Palestine.”
— Ricardo Alarcón, president of Cuba’s National Assembly, eulogizing PLO Chief
Yasser Arafat, whose death was marked by three days of mourning in Cuba.
“What I really need is a vacation. I haven’t been able to travel outside Cuba
for almost 15 years.”
— Writer Raúl Rivero, in an interview with Associated Press on Dec. 3, two
days after he was released, having served two years of a 20-year prison sentence.
“Cuba’s release of these political prisoners is a welcome move, but many
more remain incarcerated in violation of their fundamental rights. We call on
the Cuban authorities to release all of them.”
— José Miguel Vivanco, Americas director at Human Rights Watch.
“She is very proud to be the daughter of her father and honor him in this
way Her long struggle to publish the truth about what happened to him has
come to fruition.”
— Leon Patricios, a lawyer for Janet Weininger, who was awarded $86 million in
damages by a Miami judge. Weininger’s father, Alabama National Guard pilot
Thomas Ray, was executed by Cubans during the 1961 Bay of Pigs invasion.
“The simple truth is, I don’t have in my hands the mechanisms to solve the
problems of my country. I am old, alone and tired.”
— Independent journalist Manuel Vázquez Portal, who was freed from
prison in June and last month allowed to seek asylum in the U.S.
6
CubaNews ❖ December 2004
DIPLOMACY
Hu’s state visit results in 16 Cuban-Chinese agreements
C
hinese President Hu Jintao visited Cuba
late last month — at the tail end of a twoweek Latin American tour — and left
after pledging to “work with our Cuban comrades to create a bright future of friendship
and cooperation.”
Hu and his host, Fidel Castro, signed 16
agreements, the most important by far being
a commitment to boost China’s investment in
the nickel sector. Other bilateral accords deal
with financing, health care, telecommunications, biotech and meteorology.
China's Minmetals will form a venture with
state-run Cubaniquel to produce ferronickel
at an unfinished plant in Holguín province.
Minmetals President Miao Gengshu said
$500 million would be invested in the project,
with production beginning in 28 months and
financing coming from the China Development Bank and guarantees from Sinosure, the
Chinese Export and Credit Insurance Corp.
Gengshu added that 50% of China’s nickel
imports come from Cuba, and that Minmetals
would import 4,000 tons of nickel sinter annually up through 2009.
The state-owned China International Trust
and Investment Corp. (CITIC) signed a separate memorandum to explore more recently
discovered nickel reserves at San Felipe, in
the central province of Camagüey, where
some 300 million tons of nickel reserves are
located. Industry sources said more than $1
billion is needed for development there.
Both ventures give Cuba 51% of the shares
and Chinese partners 49%.
The Holguín plant, Las Camariocas, was
60% finished when abandoned by the Soviets.
By signing on with the Chinese, the Cuban
government effectively ended a venture with
Australia’s BHP Billiton Ltd. and suspended
talks with a British company, Fleming Family
and Partners, to develop the mine.
According to Reuters, Billiton had explored
PRENSA LATINA
BY OUR HAVANA CORRESPONDENT
Hu Jintao and Fidel talk as translator listens in.
the San Felipe nickel deposit for nearly a
decade, while Fleming was negotiating to produce ferronickel at Las Camariocas. Both
companies were seeking 60% of shares in any
development project, industry sources said.
The three-phase project is worth $600 million and could eventually produce 90,000 tons
of nickel and iron a year.
“You are talking about hundreds of millions
of dollars for the nickel projects,” a Havanabased consultant for a European brokerage
firm told Reuters. “If the investment materializes, it would mark a change in Chinese companies’ very cautious approach here.”
To date, China has provided about $400 million in soft credits for Cuba to buy Chinesemade electronics and telecom equipment.
Direct investment amounted to less than $40
million in 2003, according to Beijing officials.
An executive of Minmetals Corp.’s nonferrous unit said China was interested in other
projects in Cuba’s nickel industry located in
Moa, Holguin province, where Cuba has a
joint venture to produce nickel with Canada’s
Sherritt International.
“We’ll be very active in Moa,” said Pen Pu
Gang, vice-president of China Minmetals
Nonferrous Metals Co. “China needs the resources. It is good for both countries.”
China’s vice-minister of commerce, Ma
Xiuhong, said bilateral trade in the first 11
months of 2004 hit $401 million, 36% more
than in all of 2003. China is now Cuba’s No. 3
trading partner after Venezuela and Spain.
To date, 13 Chinese firms operate in Cuba,
representing a total $50 million in investment.
Seven Cuban companies are working in
China, with investments of $15 million.
“This reflects the disposition of Chinese
business people to strengthen relations with
Cuba,” said Ma.
It certainly looks like the opening of a new
chapter in Sino-Cuban ties, though China is a
long way from replacing the former Soviet
Union as Castro’s chief benefactor.
“China is no Soviet Union. Their agenda is
to gradually increase economic relations on a
purely profitable basis and undercut Taiwan
without antagonizing Washington,” an Asian
diplomat in Cuba said. “There is no evidence
of military or intelligence cooperation.”
Mexico: One more hurdle on the road to normal relations
BY DOMINGO AMUCHASTEGUI
M
exican President Vicente Fox and his
Partido de Acción Nacional (PAN)
are opposing a Brazilian initiative that
seeks dialogue between the eight-nation
Grupo de Rio and the Cuban government.
Fox’s decision — which runs contrary to
current efforts being conducted by Spain’s
new Zapatero government — complicates a
previous understanding between Spain and
Mexico to work out a new and more constructive approach to Cuba. It could also threaten
efforts to restore Cuban and Mexican ambassadors to their posts after a huge diplomatic
spat earlier this year.
Mexico’s ambassador to Cuba, Roberta Lajous — who will be replaced this month by
Foreign Ministry official Melba Pría — said
relations have come a long way since then.
“I have the great satisfaction of having contributed to reconstructing relations to a great
extent,” Lajous told AFP. “Of course, there’s a
lot to be done, but we have to go ahead.”
At present, five key issues dominate relations between the two countries:
1. Cuba’s debt with Bancomext, currently
about $400 million. Cuban and Mexican officials both insist a negotiated settlement is
around the corner. More recently, Bancomext
official Carlos Sánchez Lara made it clear that
his bank would very soon resume funding
Mexican exports to Cuba.
2. The decline in bilateral trade. In 1995,
Mexican exports to Cuba reached $249 million; during the first half of 2004, trade came
to only only $74 million. According to Mexico’s Cámara Nacional de la Industria de la
Transformación (Canacintra), 2004 has seen
the lowest level of bilateral trade in five years.
Canicintra, together with small and medium-sized Mexican firms and the state governors of Coahuila, Veracruz, Tabasco and
Quintana Roo, are pressuring the central government to promote Cuba as a profitable and
friendly market. The governors are seeking a
unanimous vote on this at an upcoming conference; the group is also planning to open an
office in Havana soon.
3. Tariffs. Cuba’s minister of foreign trade,
Raúl de la Nuez, is insisting on the need to
renegotiate a new agreement of economic
cooperation because the old one, signed in
1986, does not include the lowering of tariffs.
Cuba is ready to reduce some tariffs from
40-50% down to average 5%. Although Mexican officials keep saying they’re ready for
such talks, nothing has been done on the
Mexican side to speed things up. At the same
time, Mexican firms are exploring ways to
barter deals with their Cuban partners.
4. The economic zone. Another series of
negotiations between Mexico and Cuba will
have to deal with the exact limits and borders
for oil exploration and drilling. This is considered a major priority by Mexican experts, but
much could depend on the signing of other
agreements as well.
5. The Ahumada case. Essentially a political
controversy, it is being downplayed by both
sides, which have agreed to channel the issue
through diplomatic and legal institutions.
At any rate, Cuban officials are already betting on Mexico’s 2006 presidential elections,
in which PAN will probably be defeated by
parties more friendly to Cuba’s interests.
7
December 2004 ❖ CubaNews
INVESTING
Herzfeld Caribbean Basin Fund recovers from 2002 slump
BY SANTIAGO FITTIPALDI
A
fter nearly hitting bottom in 2002, when
its price per share ended the year at
$3.42, the Herzfeld Caribbean Basin
Fund has recouped its losses to reach $5.21
on Nov. 24.
The fund’s net asset value (NAV) per share
has set a new high at $6.40 (vs. $5.00 in 1994),
and could soon double 2002’s $3.42 low.
The closed-end fund, which invests in
Caribbean Basin companies poised to profit
from an end to the U.S. embargo against
Cuba, has already paid shareholders $1.51
per share since inception — not a small feat
still made 53% for our shareholders,” Herzfeld
told CubaNews, alluding to the fact that the
fund’s adjusted NAV is up 53.4% since its
inception. It’s up 19% this year alone.
Herzfeld is betting most heavily on the
transport sector, with 21.6% of assets invested
in Florida East Coast Industries. The St. Augustine, Fla., company operates the Florida
East Coast Railroad, whose main venture is a
freight line between Jacksonville and Miami.
“We believe there will be a significant increase in freight if the embargo is lifted,” says
Herzfeld, who expects the Port of Miami to be
a major player. Florida East Coast Industries,
HERZFELD CARIBBEAN BASIN FUND PERFORMANCE: 1994-2004
$6.00
5.00
4.00
3.00
Price per share
Net asset value per share
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
* Closing price on Nov. 29, 2004
as Washington has tightened rather than
eased the embargo throughout the fund’s 10year existence.
Herzfeld, 59, launched the Herzfeld Caribbean Basin Fund on May 20, 1993 — the 91st
anniversary of Cuban independence. It began
trading in January 1994 under the Nasdaq
symbol “CUBA” at an initial offering price of
$5.20 a share. It is one of only 545 closed-end
funds in the United States (see CubaNews,
March 2003, page 7).
“We’re betting on an end to the embargo,
but we realized when we opened the fund,
and even 10 years later, that that’s an unpredictable event,” said Thomas J. Herzfeld,
chairman and president of Thomas J. Herzfeld Advisors. “We look at stocks that will do
well if the embargo is lifted, but will still do
well even if it is not.”
The strategy has paid off this year, with 10
of the fund’s holdings hitting new highs over
the past few weeks.
Florida-based Seaboard Marine, for example, now trades at $726 per share, compared
to the $180 a share the fund paid for the stock.
Herzfeld feels Seaboard’s extensive Caribbean route structure makes it well-positioned to
benefit from future U.S.-Cuba trade.
“They haven’t lifted the embargo and we
Details: Thomas J. Herzfeld Advisors Inc., PO
Box 161465, Miami, FL 33116-1465. Tel:
(305) 271-1900. Fax: (305) 271-1040. E-mail:
herzfeld@bellsouth.net. URL: www.herzfeld.com.
he says, has already expressed interest in
running a rail barge between Florida and
Cuba in the future.
With the railway company heading the list
of investments, other top spots are held, as of
Sept. 30, by interests in the leisure sector
(10.69%), namely cruise lines; communications (10.86%), including a stake in Mexico’s
Telmex; utilities (8.48%), comprised of investments in two Cayman Islands companies; and
in construction and related sectors (9.54%),
which includes stock in Mastec, a Miami
transportation and telecom systems provider
founded by the late Cuban-American leader
Jorge Mas Canosa.
Another 8.66% is allocated to investment
funds; 6.8% is invested in trucking and marine
freight; 5.91% in consumer products and related manufacturing; 4.07% in the medical sector; 3.64% in banking and finance; 3.42% in
conglomerates; 2.82% in food, beverages and
tobacco; 2.16% in “other,” 0.91% in retail, and
0.18% in pulp and paper.
Herzfeld says 56% of the fund’s assets are
invested in U.S. companies, followed by 13%
in Mexico and 9% in the Cayman Islands.
Although the fund aims to invest at least
80% of its assets in U.S. and Caribbean Basin
businesses, this year it gained indirect exposure to non-Caribbean risk by investing in
Morgan Stanley’s Latin American Discovery
Fund and Credit Suisse First Boston's Latin
America Equity Fund.
Despite its reluctance to invest in firms
already doing business with Cuba, the fund
this year added a stake in CancerVax.
In July, the California-based company entered into a U.S. government-approved venture with Havana’s Center for Molecular Immunology to develop three cancer drugs (see
CubaNews, August 2004, page 1).
To comply with cumbersome U.S. regulations, CancerVax will pay Cuba with food and
medical supplies instead of cash.
The fund’s 2004 annual report states that,
with Washington now allowing these types of
business deals with Cuba, it may consider
other similar investments.
Herzfeld suggests that President Bush’s reelection pledge to take an even tougher stand
against Fidel Castro has had limited impact
on the fund’s performance. He feels that a
minor sell-off by fund investors in October
was instead more likely a reaction to hurricane damage to Florida companies represented in the portfolio.
The closed-end guru predicts that the Bush
administration will face pressure from lawmakers representing major agricultural states
— Republicans included — to relax the
embargo. Yet, with the fund’s net assets rising
to $9.21 million as of Sept. 30, from $6.63 million at the end of 2003 and $5.74 million at the
end of 2002, investors won’t likely be distracted by the political noise.
Santiago Fittipaldi is a Miami-based freelance journalist with an extensive background
in finance and business. He will be writing for
CubaNews on a regular basis.
Waheed to replace Maschmeyer as CEO of Sherritt
Canada’s Sherritt International Corp. said
its president and chief executive, Dennis G.
Maschmeyer, is stepping down after 40 years
with the company. He’s being replaced Jan. 1
by Jowdat Waheed, currently executive vicepresident and chief operating officer.
Waheed, who has been with Sherritt since
1991, has a bachelor’s degree in economics
from the Wharton School, and a bachelor’s
in systems science and engineering from the
University of Pennsylvania.
Sherritt, with assets of $2.4 billion, is the
top single foreign investor in Cuba, with investments there estimated at $300 million.
It has significant interests in the island’s
nickel industry, as well as in oil exploration,
power generation, soybean-based food processing, tourism and agriculture.
Details: Deanna Horton, VP/Investor Relations, Sherritt, Toronto. Tel: (416) 924-4551.
8
CubaNews ❖ December 2004
NEWSMAKERS
Castro confidant Kirby Jones knows Cuba from A to Z
W
ashington consultant Kirby Jones has
been fascinated with Cuba ever since
his first trip there in 1974, when he
interviewed Fidel Castro for 13 hours over a
five-day period for CBS News.
Thirty years later, Jones is still obsessed
with Cuba. He’s lost count of how many times
he’s been to the island since then, though the
number is clearly in the hundreds.
And he makes no bones whatsoever about
his friendship with Castro. Photos of Jones
shaking hands with the Maximum Leader
over the years fill the walls of his tiny office,
located on the sixth floor of a building which
also happens to house the European Union’s
Washington headquarters.
CubaNews spent about an hour last month
interviewing Jones, just as reports were beginning to appear about a possible change in
Treasury Department policy that would make
it harder for U.S. companies to export food to
Cuba (see story in this issue, page 1).
“They say that American companies have
been operating in violation of the licenses
which call for payment in advance,” he said. “I
first heard about this in Havana, when a client
of mine had his funds frozen by his bank in
California. We’re dealing with big money
here. Maybe a big company can absorb $1
million worth of cash-flow problems, but
smaller ones cannot.”
In practice, he said, containers are loaded,
the ship takes off for Havana, and meanwhile,
the money is sent to the food exporter. But
sometimes, particularly on weekends, the
ship arrives in Havana and is stuck there, so
there’s a 72-hour gap.
“For some reason, OFAC and others say
that’s de facto credit. But this has been going
on for three years, and in international trade,
this process is not unusual for business conducted on a cash basis. There is no credit
being extended in any way.”
NIXON ‘ENEMY’ WAS SECRET U.S. EMISSARY
Jones, 63, is a native of New York’s Westchester County. He went to school at the
University of North Carolina and graduated in
1963. He then joined the Peace Corps and volunteered in the Dominican Republic, working
in Santo Domingo’s urban slums.
After that, Jones did anti-poverty work in
Greensboro, N.C., and in 1968 joined Robert
Kennedy’s presidential campaign. Perhaps
his biggest claim to fame in those years was
being George McGovern’s press secretary
during the 1972 presidential campaign.
As a result, Jones ended up on the official
Nixon enemy list — along with several hundred others including journalists, members of
Congress, actors, writers and Democratic
campaign officials.
But at the same time, both he and his business partner, Frank Mankiewicz, used their
first visit in 1974 to take secret notes to Castro
on behalf of Secretary of State Henry Kissinger and his deputy, Lawrence Eagleburger.
“For the next few years, I acted as a backchannel messenger, meeting with Eagleburger before and after almost all my visits in the
1970s, until the establishment of the U.S. Interests Section in Havana,” he told CubaNews.
$1.04 BILLION IN FOOD SALES
it, feel it, since the Cubans have nothing to
measure it against.”
Jones visits Cuba an average 15 times a
year, essentially opening doors for companies
that have no idea where to start.
“If you’re Company X who has never been
to Cuba but knows they’re open for agricultural products, I can make it easier for you.
“Can I help you get a license from the
Treasury Department? Yes. Can I get visas
and get you down there, do all the logistics,
Jones set up his consulting firm in 1975,
naming it Alamar Associates after a housing project
that was rising just east of
Havana at the time. That
same year, he took his first
client down to Cuba, a
Minneapolis grain company
called IS Joseph Co.
Since then, he’s brought
down 500 to 600 companies,
many of them on large delegations.
“There’s real business to
be done, although there
was real business in the
1970s when I first started,”
said Jones. “Then Reagan
came in and all that ended.”
Until passage of TSRA,
that is. The 2000 Trade
Sanctions Reform and Export Enhancement Act lets
U.S. businesses sell food to
Cuba’s Alimport on a cash- Kirby Jones heads the Washington consulting firm Alamar Associates.
only basis, though the law is
and put you in front of the people you’ll need
open to some degree of interpretation.
So far, according to Jones, Alimport has to meet? Yes. Will you have to do any work to
contracted for $1.04 billion in U.S. agricultur- find out who’s the right person? No.”
Jones said he’s negotiated and sold chickal commodities and has actually paid $932 million in cash for those commodities. The vast en, fresh produce, chewing gum, wood prodmajority of that consists of food staples such ucts and organic fertilizers on behalf of his
clients, none of whom he would reveal (exas chicken, rice, corn, soybeans and wheat.
“If a company is selling rice, they probably cept for Wrigley’s, the chewing-gum maker).
don’t need me. I’m not really dealing with the
commodities. I’m dealing with smaller and FRIENDSHIP WITH FIDEL A PLUS
medium-size companies who can provide the
“The companies that I’ve talked to are very
same quality goods but can move more quick- honest in saying it’s great to get paid in cash.
ly and offer prices that are very competitive,” But they know it's abnormal,” he said.
said Jones.
“The normal way is financing, and every
one of these companies expects this to hap15 TIMES A YEAR TO CUBA
pen. If trade were normal and both parties
“I work on a retainer basis, plus a success could negotiate whatever credit terms they
fee, but I don’t talk about fees,” he told us. “It want, it would allow U.S. companies to be
varies from company to company, because more competitive.”
He added: “Buying rice in the U.S. as
each product is different. For example, introducing a new product into the peso market is opposed to buying it from Thailand is a trevery easy. There aren’t that many products, mendous savings. The Cubans will save in
and most prices are set by the market, so it’s storage costs, and instead of 45 days, the rice
arrives in 36 hours, so they can buy smaller
not consumer-driven.
“But if you’re dealing with corn flakes and quantities on a regular basis instead of huge
jam for the hard-currency market, you’ll have quantities on an irregular basis.”
Jones said his friendship with Castro is a
to meet with Cubalse, TRD, Cimex, etc. If
you’re introducing a product which they have big plus when it comes to negotiating on
not used before, they’ll want to taste it, smell behalf of his clients.
LARRY LUXNER
BY LARRY LUXNER
9
December 2004 ❖ CubaNews
“I’ve known Fidel for 30 years. I’ve taken
my parents and my kids down to see him,” he
said. “The first thing that comes to mind is, if
you were stuck in an airport for 10 hours waiting for your flight, he’d be a great guy to have
beers with.
“He’s a multilayered and multifaceted person. He can give a speech at 10 a.m. and rail
against the evils of capitalism, and at 2 in the
afternoon sign another joint venture. Both are
Fidel Castro. Both are equally honest dimensions of the same guy.”
BUSINESS NOT BASED ON EMBARGO
And despite his well-known opposition to
current U.S. policy towards Cuba, Jones says
he has no problem with anyone in the Treasury or Commerce departments; his OFAC
license to travel there keeps getting renewed
year after year.
“I think there’s an interest sparked by the
food trade, tempered by the antagonism of
the Bush administration, which has taken
U.S.-Cuba friction to a new level,” he said.
Asked whether a victory by Democratic
presidential candidate John Kerry would
have meant a significant change in U.S. Cuba
policy, Jones had this to say:
“If Kerry had won the election, you would
have seen a change, not only because it’s Kerry vs. Bush, but because there would have
been a change in mid-level political appointees like Dan Fisk and Roger Noriega. That
operational level, which is ideologically driven, most likely would have been replaced.”
Jones regrets that he “sees no indication”
of the Bush administration softening its tone.
“I know from talking to people on the Hill
that bills will be introduced very quickly in
the House and Senate [seeking to end restrictions on U.S. travel to Cuba],” he said.
“The intensity to take on the travel ban is
stronger than last year. People in the Cuba
Working Group are strategizing on how best
to approach this.”
Obviously, Jones has made a career out of
opening doors to a forbidden country. So we
asked him whether an end to the embargo
would put him out of business.
“Quite the contrary,” he replied. “Our niche
is not based on the embargo. Our work is getting ready for business. In terms of the
amount of potential business between the
U.S. and Cuba, it’s barely started. You look at
the tourism sector, golf courses, the service
industry, computers, renovations and infrastructure... all that is waiting to happen.”
KIRBY’S 10 OBSERVATIONS TO REMEMBER WHEN DOING BUSINESS WITH CUBA
1. START SMALL. U.S. firms should not try to bit off too much too
soon. Remember, Cuban officials may know your company, but they
do not know you as people. Therefore, a level of confidence needs to
be developed. Both U.S. firms and Cuban officials must show they are
reliable and honest partners. For example, will the U.S. firm deliver
the product promised in a timely and reliable manner? Will Cuban
officials pay on time?
2. CUBANS KNOW THEIR BUSINESS. Many U.S. executives, after first
meeting their Cuban counterparts, say “they are just like us.” This
means the Cubans sitting across the negotiating table have done their
homework and know their business. They cannot be easily fooled.
They may not be up-to-date on all the latest consumer products, but
they do know how to do business. They are as profit-oriented as any
U.S. executive and are smart and direct negotiators.
3. THE PROCESS HAS WORKED WELL. Despite no trade for almost 40
years, government officials on both sides have helped make this new
process a basic success. On the Cuban side, they have simplified their
contracts, managed shipping efficiently, paid all their bills on time
(despite having to use a cumbersome process through third countries) and been open to receive any interested company.
On the U.S. side, officials in the Commerce and Agriculture departments should be commended for the manner in which they have sifted through the various regulationss and been responsive to the needs
of a U.S. business community charting a new course.
4. DON’T CONFUSE POLITICS WITH BUSINESS. Cuban officials often
say they receive high-quality products and good prices relative to
what Cuba had been receiving and paying before. While there is a
political dimension to anything that happens between our two countries, Cuba is not playing trade games for short-term political goals.
An analyst once said the first wave of buying “was but the first chapter in a one-chapter book.” Nothing could be further from the truth.
5. IT’S A LONG-TERM PROCESS, SO BE PATIENT. The Cubans are not at
all interested in just any quick deal. They want to establish long-term
relationships with a diversified number of suppliers. If U.S. firms are
selling into the peso market — which has largely been the case to
date — the process is relatively simple: Alimport is the negotiator,
buyer and distributor.
But in the case of consumer products which have just now started
to be distributed into the hard-currency market, the process is more
complicated. Alimport is the negotiator and buyer, but not the distributor. Other entities play a major, if not determining, role as to
whether such products will be bought.
A request by Alimport for a quote on a container of products to be
sold into the hard-currency market is not a firm order. Orders can
only be confirmed on the basis of interest by Alimport’s clients and
distributors. Demand must exist or be created.
6. SANITARY AND VETERINARY REQUIREMENTS. This aspect of trade
should not be overlooked. The shipping and final transfer of products
— even with a signed and agreed contract — has been delayed as
these technical issues are settled. Cuba has very high standards and
is strict about compliance. There is no shortcut to this aspect.
7. MAINTAIN COMMUNICATION. As with anyone else, Cubans like to
do business with people they know. A one-time visit is not sufficient;
the more fact time there is, the better.
Make visits, invite Cubans to visit your facilities in the U.S. or in
third countries, participate in conferences and international events
where your Cuban counterparts are present. Friendship will never
weigh heavier than the fundamentals of the business, but with everything else being equal, it helps.
8. LOOK FOR POTENTIAL PARTNERS. Over 800 companies from around
the world have representatives in Havana; many have years of business experience dealing with Cuba. U.S. firms would do well to
search out those which could represent potential partners. This takes
time and effort, but a relationship with one of these firms could easily shorten the learning curve and more quickly serve as yet another
entry point into the new Cuban market.
9. SLOW MEDICAL SALES. Although U.S. law allows for the sale of
medical products, this has not happened to any great extent.
Part of the reason has to do with the Cuban pharmaceutical business itself. But as much, if not more, has to deal with the fine print of
U.S. law. Unlike the sale of agricultural products, there is a caveat to
the sale of any medical products.
With the latter, the seller must provide certification to the U.S. government of the end user — which patient is consuming which pills or
being examined by which medical machine. This condition has
proven to be insurmountable. U.S. firms do not have the resources to
undertake such verification. A change in U.S. law must be made if any
substantial medical sales are ever to occur.
10. DON’T WAIT TOO LONG. The current trade in agricultural products
has shown that the first few companies to get contracts with Alimport
were those which had undertaken several months — if not years —
of business development prior to the change in U.S. law.
Nobody could have expected that a hurricane at the end of 2001
would have led to the opening of trade between Cuba and the U.S. —
much less, contracts worth $1 billion.
As we look to the future, what unexpected event will open trade further? Again, nobody knows, but we can reliably predict that the unexpected may easily occur again, resulting in the exportation of products and services not now approved. Those firms willing to prepare
for that day now will once again be the first to capture the market.
10
CubaNews ❖ December 2004
COMMODITIES
Drought takes severe toll on Cuba’s 2004-05 sugar crop
sugarcane estimate — the last assessment of
ern Caribbean for most of the month.
Drought for the May-October period was the plantations’ health before the harvest,
uba is facing its worst drought in 55
years, an unwelcome event for the bat- the worst since 1961 in the provinces of Las which is used to predict output and export
tered sugar industry that could prevent Tunas, Granma, Camagüey and Santiago de availability — would be delayed until October,
it from reaping the benefits of a much more Cuba, said InstMet. A separate report issued in the hope that late-season rains would
by the National Institute of Hydraulic Resour- improve agricultural yields.
buoyant world sugar market this year.
Nevertheless, October failed to fulfill the
For the last 18 months, rainfall throughout ces in early November said the current
expectations. In a hint of widespread worries,
drought is the most severe since 1949.
most of the island was well below averthe local media occasionally refers to
age. In large swaths of eastern Cuba,
the “withered sugarcane plantations
where one-third of the island’s sugar is
RAINY SEASON May - Oct. 2003
visible along the roads” of eastern
produced, the rainy season left barely
Cuba.
60-70% of normal precipitation. In
areas north of the city of Las Tunas —
POWER CUTS WORSEN THE CRISIS
home of Cuba’s largest sugar mill —
In addition to drought-related probrainfall came to only 21% of average,
lems, industrial repairs this summer
according to local media.
were partially interrupted when
Lasting from May to October, the
dozens of mills were forced to generrainy season is the big booster of sugate electricity in the midst of Cuba’s
arcane growth. With the onset of the
DRY SEASON Nov. 2003 - Apr. 20 04
worst power deficit in a decade.
dry season in November, sugarcane
Although the move brought some
essentially matures — a term used to
relief to countryside bayetes, it was
describe the concentration of sucrose
made at the cost of diverting manin the stalks and the readiness for harpower and resources from the prepavesting.
ration of the next harvest.
Extreme downpours associated with
As of October, repairs in Las Tunas
the hurricanes that passed over or
province were only 38-45% complete.
close to Cuba this year helped to offset
the rain deficit, at least in the statistics, The current drought started 18 months ago, as rainfall became Villa Clara province, whose output
for the western part of the island. But scarcer than usual. Throughout eastern Cuba, precipitation has been accounts for 8-10% of the total harlong rainless periods before and after 30-40% below average; in some areas, the rain deficit is even worse. vest, also lagged behind schedule in
repairs, according to local media.
the hurricanes are taking their toll on
For instance, water reservoirs in Las Tunas
As a matter of fact, the general “tune-up” of
agriculture.
To make the things worse, the 2004-05 dry are at 13-26% percent capacity, enough to sup- the industry — customarily made in the sumseason began much earlier than usual. Octo- ply local needs until February 2005, while the mer — accounts for 10-15% of total sugar prober — usually one of Cuba’s wettest months Zaza reservoir near Sancti Spíritus, the duction costs. Interruptions in this process
— came “extremely dry for all the country, largest in Cuba, now holds only 29% of its later become a common cause of expensive
deepening the cumulative deficit [of rains] for caacity. Usually the water reservoirs in Cuba delays in the harvest.
In response to a nationwide problem, authall regions and provinces,” according to an ad- enter the dry season (November through
orities rescheduled the start of this harvest to
visory published on the website of the Cuban April) at top capacity or close to it.
Institute of Meteorology (InstMet).
While authorities have been reluctant to January instead of November, missing the
Moreover, November brought little relief to discuss the impact of Cuba’s drought on the current episode of cool and dry weather and
the problem, as the dry air mass of the Atlan- sugar harvest, the first sign of concern came risking a further deterioration of the fields.
tic anticyclone remained over the northwest- when officials said the important September
See Drought, page 11
BY ARMANDO PORTELA
C
HAVANA
Matanzas
DROUGHT May - October 2004
Güines
Modified after the maps published in November 2004
by the Institute of Meteorology at www.met.inf.cu
Pinar
del Río
Nueva Gerona
Cienfuegos
Trinidad
Sancti
Spiritus
80 kilometers
50 miles
0
Santa Clara
Ciego de Avila
Camagüey
ACTUAL RAINFALL COMPARED TO THE AVERAGE
Dangerously below average
Significantly below average
Within the average range
No data
ACTIVE SUGAR MILLS
Sugar producer
Molasses producer
Las Tunas
Manzanillo
Holguín
Bayamo
Guantánamo
Santiago
de Cuba
11
December 2004 ❖ CubaNews
TOURISM BRIEFS
TOURISM
U.S. boaters angry with turn of events
BY DOUGLASS NORVELL
W
hile a few people in South Florida’s
boating community remain cautiously optimistic about doing business
with and sailing to Cuba during the next four
years, most are angry and embittered.
In the late 90s, pleasure-boat traffic to Cuba
soared after organizers in the Tampa Bay area
resurrected the Havana Cup, a sailboat race
dormant since the onset of the embargo.
An instant success, the Cup race started in
1996. By 1999, it had 400 boats, a clone in Key
West called the Conch Republic Regatta and
the full cooperation of Marina Hemingway’s
Commodore José Miguel Escrich, who
beamed smiles at arriving boaters, then gave
them “fully hosted” status to help maintain
the illusion of zero spending while in Cuba.
Emboldened by the regattas, hundreds of
other boaters traveled to Cuba. One group
from Lantana, Fla., picked a good day and
water-skied from the Florida Keys to Cuba,
while two wandering Key West sailboarders
leaned into the wind one fine day and sailed
all the way across the Florida Straits to
Marina Hemingway — only to be met by puzzled Cuban officials.
Even by Cuban set-sail-on-innertube standards, these guys were daring. Besides, they
were going the other way.
On the business end, the South Florida
Marine Industries Association (SFMIA) hosted Escrich for two visits to its annual boat
show, and boating business executives —
buoyed by opening of U.S. food sales to Cuba
— made quiet visits to Havana in preparation
for new opportunities.
Some made investments looking to an open
Cuba, such as Gigi Morgan, a Florida investor
who bought the Sea Tow franchise for Cuba,
and Robbie Reckwerdt, a Florida boatyard
owner who bought a large ferry to carry passengers across the Florida Straits as soon as
Drought — FROM PAGE 10
A severe shortage of fuel cannot be ruled
out as a major cause for rescheduling the harvest. A brutal hike in world oil prices has
forced the Castro government to tighten its
internal fuel valve. This, in turn, has delayed
the repairs of mills, machinery, roads and
fields for the upcoming harvest.
Ironically, in a departure from the last
year’s trend, the world sugar market outlook
is generally bullish. World prices jumped substantial 57% from the 5.4¢/lb a year ago to the
current average of 8.5¢/lb for March 2005
delivery. As a result, even if this year’s crop
were no bigger than last year’s poor harvest,
the value of Cuban sugar exports would
increase by $175 million thanks to better
world prices alone.
The effects of the current drought will be
the travel ban was lifted. Others, such as
Darrell and Matt Hansen, who operate Salty
Sam’s Marina in Fort Myers and a high speed
passenger ferry to Key West, planned to send
their ferry on to Havana.
All those hopes were deflated in 2000, when
the Treasury Department’s Office of Foreign
Assets Control issued a “cease and desist”
order canceling the Havana Cup, and OFAC
drastically stepped up enforcement of the
existing travel ban.
The prospect of four more years of the status quo under the Bush administration have
caused most remaining hopes to evaporate.
Reckwerdt has moved his ferry to Haiti and
will carry passengers in the coastal trade,
telling CubaNews that he “can’t wait forever
for U.S. politicians to wake up and realize they
are both hurting the Cuban people and missing an opportunity to help Americans.” Reckwerdt said he sees the OFAC crackdown as a
“stab in the back to small business.”
Matt Hansen, speaking of his “spoiled plans
and heartaches,” reaffirmed an often overlooked fact: Fort Myers is 100 miles closer to
Cuba than is Miami. But he’s moved on to
other projects.
“After all,” he said, “we have plenty of passengers wanting to go to Key West.” The Hansens are in the process of merging with another ferry operator who serves the Fort MyersKey West market.
Some still cling to hope, like Frank Herhold, executive director of the SFMIA, whose
members stand to benefit smartly from more
boating to Cuba.
“I would not be surprised to see a relaxation of travel restrictions for boaters,” he said.
Perhaps Herhold, who has strong ties to
South Florida’s politicians, may have inside
information which leads him to hope that
boaters will soon be sailing to Cuba, free of
OFAC-driven anxiety.
seen in the near future. Drought is also
blamed for severe planting delays, even
though cane planted now won’t enter the mills
until the 2006 and 2007 harvests. Camagüey
reported that planting fell 70% short of target
in the first semester, while in Las Tunas
drought killed most of the new sprouts, forcing the province to devote considerable
resources to replanting.
Adverse climate, fuel shortages, poor
repairs and a late start will certainly take their
toll on sugar output this season. The 2.529
million tons of sugar produced in the 2003-04
harvest is a far cry from the annual 8 million
tons produced in the years when Cuba was
the chief source of sugar for Eastern Europe
and the Soviet Union.
This harvest, however, could be even lower
than that — which any way you look at it is
bad news for Cuba’s largest employer.
U.K. TRAVEL AGENTS: DON’T BRING $$ TO CUBA
British travel agents are warning their
clients against taking U.S. dollars into Cuba,
reports the London magazine Travel Weekly.
In November, the Castro government outlawed the use of U.S. dollars on the island following tighter White House sanctions against
Cuba. Dollars can still be exchanged at banks
and hotels, but only at a 10% commission.
“We are warning our customers not to take
dollars because the 10% fee to exchange
money is very steep,” said a Thomson spokeswoman. “Instead, holidaymakers would be
better off taking sterling or travelers’ checks
to exchange into pesos, then they will be
charged the usual 2-3% commission.”
Tour operators say that because the peso is
linked to the U.S. dollar, agents should still
advise clients they may benefit from the weakness of the dollar when they visit Cuba.
“Customers won’t really notice any difference, either in holiday prices or in the amount
of spending money they have,” said an official
of Thomas Cook. “The only difference is they
won’t be able to spend dollars in Cuba.”
Cosmos senior commercial manager Sara
Gelder said the decision was unlikely to affect
bookings as most British holidaymakers buy
all-inclusive packages to Cuba, so they take
very little spending money.
PULLMANTUR CRUISE SHIP CALLS ON HAVANA
Spain’s Pullmantur Cruises has launched a
new cruise route in the western Caribbean.
Alfonso López, the Madrid-based company’s
general director, said the ship, the Vacation
Dream, will call Havana its home port and
once a week will visit Cozumel, Mexico;
Montego Bay, Jamaica, and several stops in
Cuba including the southern coastal city of
Cienfuegos as well as Isla de la Juventud.
The Vacation Dream arrived in Havana harbor Nov. 27 from Santo Domingo, with 500
passengers aboard. It weighs 39,000 tons and
can accommodate 1,047 passengers.
In addition to Spain, the source of 50% of all
its clients, the new service will be marketed in
Latin America, especially Mexico and Brazil.
Pullmantur, founded in 2001, offers a variety
of travel services, including charter flights to
Cuba from a number of cities in Spain.
CUBA NOW NO. 2 DESTINATION FOR CANADIANS
Cuba has replaced Mexico as the second
most popular tourist destination for Canadian
vacationers during the second trimester of
this year, according to Statistics Canada.
From April to June, 143,000 Canadians visited Cuba on vacation, where they stayed an
average of 8.9 nights. They represented an
88.4% jump in arrivals compared to the same
period last year.
Meanwhile, 116,000 Canadians visited Mexico, staying an average 12 nights and accounting for a 22.9% rise over the year-ago period.
The top destination for Canadians is still the
United Kingdom, followed by Cuba, France,
the Dominican Republic and Mexico.
12
BUSINESS BRIEFS
EXCHANGE BUREAU OPENS IN OLD HAVANA
Cuba’s Central Bank has inaugurated an exchange bureau in Old Havana where tourists
will be able to buy Cuban convertible pesos
using Japanese yen, Venezuelan bolívares,
Mexican pesos, as well as international currencies such as euros, British pounds, Swiss
francs and U.S. and Canadian dollars.
The new bureau de change on Obispo Street
(between Cuba and Aguiar) will serve as the
pilot for future stages, reports the newspaper
Granma. Ten tellers and three ATMs are to be
installed. All exchanges will be made at rates
set by the Central Bank, with only the U.S.
dollar subject to a 10% surcharge.
According to Central Bank President Francisco Soberón, 22 of the 23 airlines operating
in Cuba have confirmed they will charge for
services in convertible pesos. He specified
that all those who wish to pay with U.S. dollars in the future will be able to do so using
convertible pesos, at an exchange rate of 1:1.
In order to facilitate currency changes for
tourists arriving on the island, the number of
tellers at airports in Havana and Varadero has
been tripled. For those travelers who have
credit and debit cards from branches of nonU.S. banks, ATMs have been installed.
In other airport terminals, operations have
been coordinated so that when several flights
of tourists arrive, the banking facilities in
these locations will provisionally increase in
order to ensure all the necessary resources
and staff are available.
LOUISIANA TO SEND BIG DELEGATION TO CUBA
Louisiana’s top economic development official will head to Cuba later this month, bringing representatives from state poultry, feed,
fish products and cotton producers.
Companies included on the Dec. 15 trip:
Buras Mill & Feed Co. of Bogalusa; Roy O.
Martin Lumber Co. of Alexandria; Louisiana
Fish of Metairie; TMG Inc. of Clinton; Ellington Cotton Co. of Winnsboro, and Pilgrims
Pride, a Texas-based poultry company with
facilities in Louisiana.
At least one rice producer may also be
included, said Larry Collins, director of international services for the Department of
Economic Development.
Details: Michael Olivier, Louisiana Economic
Development, PO Box 94185, Baton Rouge, LA
70804. Tel: (225) 342-5388. Fax: (225) 3429095. E-mail: olivier@la.gov.
POWER CUTS CONTINUE TO PLAGUE CUBANS
Low energy supplies and equipment breadowns that have forced some power plants to
shut down could increase the number and frequency of blackouts around the island, warns
Cuba’s state-run Unión Eléctrica.
UE said that since Nov. 25, “electric service
has been negatively affected by energy leaks
at key generating units in the nation’s power
system. The level of technical interruptions is
high. Insufficient reserves and unexpected
leaks may impair electric service.”
CubaNews ❖ December 2004
UE also noted that scheduled rolling blackouts would remain in place, and occur more
often than previously planned.
In September, a breakdown at Guiteras, the
island’s largest power plant, prompted the regime to adopt special measures, including
closing businesses, shutting off power for several hours a day and shrinking the work day.
Then on Oct. 14, the Council of State,
Cuba’s top governing body, removed Marcos
Portal from the basic industries ministry and
replaced him with Yadira Garcia Vera.
RUSSIAN BUS MAKER WINS CUBA CONTRACT
Russia’s leading bus manufacturer, Russkiye
Avtobusy, has shipped 50 PAX-32053 buses to
Cuba, reported the Russian news agency
Prime-TASS. Cuba’s Transport Ministry plans
to use them as school buses, according to a
company statement issued Nov. 11.
Risskiye Avtobusy has also signed a dealership agreement with Cuba’s Rusia Automotriz
S.A., to sell at least 100 buses a year in Cuba.
CANADA’S FOCAL UPDATES CUBA WEBSITE
The Canadian Foundation of the Americas
(FOCAL) has announced a redesign of its
Cuba site, (www.cubasource.org/index_e.asp).
Cubasource is available in English and
Spanish. According to policy analyst Cristina
Warren, “it seeks to facilitate the exchange of
information related to Cuba’s international
relations and the political, social and economic
trends and challenges facing the island, and to
facilitate research and constructive communication about these issues within Canada and
internationally.”
Cubasource serves as an information clearinghouse on Cuba, classifying and annotating
the vast and assorted information on the web
related to the island, from all key relevant perspectives, and focusing these into a useable
knowledge base.
This directory includes research resources,
key documents, news sources and a comprehensive database of pertinent organizations
inside and outside Cuba. Cubasource also
includes content about the island produced by
FOCAL, such as a Background Briefing paper
series, analytical articles and Chronicle on
Cuba (a monthly summary of key news items
and related web links).
Details: Cristina Warren, FOCAL, One
Nicholas St., Suite #720, Ottawa, Ont. K1N
7B7. Tel: (613) 562-0005 x240. Fax: (613)
562-2525. E-mail: cwarren@focal.ca.
PHONE NETWORK NEARS 100% DIGITALIZATION
Cuba’s telephone system is edging closer
toward full digitalization in the island’s 14
provincial capitals, with the recent completion
of digital networks in Bayamo and Las Tunas.
Juventud Rebelde newspaper says the two
networks replace aging analog ones, and will
also benefit subscribers from Puerto Padre
and Manzanillo, the second cities of Las
Tunas and Granma provinces respectively.
Among the new system’s benefits, subscribers will be able to make direct calls from
municipalities to all phone numbers in Cuba
— a service before available only in Havana
and the eastern provinces. Everywhere else,
operator assistance was needed for such calls.
Meanwhile, state-run Empresa de Teleco-
Israel’s Habas owns 15% of Miramar Trade Center
T
hose who follow Cuba’s foreign
investment scene have likely heard
of the secretive Israeli-run BM
Group and its investments in the island’s
thriving citrus sector, as well as its development of the Miramar Trade Center in
suburban Havana.
BM was founded by former Mossad spy
boss Rafi Eitan (not to be confused with
the Israeli army chief of the same name
who died last month). Eitan the spy relocated several years ago to Cuba in order to
pursue his investments.
But who’s bankrolling the Miramar
Trade Center? According to the Israeli
newspaper Yediot Ahronot, the Habas
Group acquired a 15% stake in that project
for $30 million back in mid-2002. The Tel
Aviv real-estate firm is owned by Baruch
Habas (chairman), Herzl Habas (deputy
chairman) and Ya’acov Ben Moshe (CEO).
Already, the main buildings comprising
the Miramar Trade Center are up and running. The Habas Group and its investment
partners, including Eitan, have finished six
of 18 residential and commercial buildings,
with completion scheduled by 2006.
The Habas Group, established in 1953
and publicly traded on the Tel Aviv Stock
Exchange, is a major Israeli real-estate
group known for its high-end development
and construction ventures.
According to Dun & Bradstreet, the
Habas family holds 55% of the company,
with U.S. businessman Isaac Dabah owning 20% and the Israel Phoenix Assurance
Co. owning another 20%.
One of the group’s better-known ventures is the Yoo Tel Aviv residential twin
tower, located in the pricey Park Heights
district of North Tel Aviv, and designed by
world-renown French architect and designer Philippi Starck. The Habas Group is currently building the Dan Eden, a 153-apartment complex in Tel Aviv’s upscale Shikun
Dan district, and will start developing a
seaside 27-story residential tower along
the city’s popular Rothschild Boulevard.
The Habas Group also owns the Kanyoter office and shopping-mall complex in
Nes Ziona, the 120-store Kfar Saba Arim
mall and shopping malls in Augusta, Ga.,
and Palm Springs, Fla.
Details: Habas Group, 18 Rival Street,
Tel Aviv 67778, Israel. Tel: +972 3 6876060. Fax: +972 3 687-1417.
– VITO ECHEVARRÍA
13
December 2004 ❖ CubaNews
municaciones de Cuba S.A. (Etecsa) said it
will boost islandwide mobile service in 2005.
José Antonio Fernández, executive president of Etecsa, said a large number of radio
base stations will soon be installed, making
cellular calls possible throughout the island.
As usual, no specific numbers were released.
HAVANA CLUB INTERNATIONAL HAS NEW BOSS
French drinks conglomerate Pernod Ricard
has named Phillipe Coutin as director-general
of Havana Club International S.A.
Coutin, 39, is an agronomic engineer by
training, and represented the company in Trinidad from 1995 to 1999. He replaces Alexandre Sirech, who has since left the company.
Havana Club International is a 50-50 joint
venture between Pernod Ricard and the
Cuban government to manufacture, distill and
export Havana Club rum.
Details: Regla Jiménez, Public Relations
Director, Havana Club International, Calle A,
#309, e/13 y 15, Vedado, La Habana. Tel: +53
7 833-6597 x206 or 885-1749. Fax: +53 7 8366598. E-mail: r.jimenez@havanaclub.cu.
IRAN TO BUILD WATER, POWER PLANTS IN CUBA
Iran is to carry out two industrial projects to
supply water and electricity to Cuba.
The Iranian news agency IRNA reported
that Norouz Kohzadi, manager of Iran’s
Export Development Bank, signed an agreement to that effect Nov. 21 with Cuba’s minister of government, Ricardo Cabrisas.
During a meeting, Kohzadi outlined aspects
of the current bilateral cooperation in banking, and expressed Tehran’s readiness to pro-
vide the necessary financing for the projects
at a medium rate of return.
The exact amount needed to finance the
projects, as well the extent of involvement of
Iran’s Sanir Co., will soon be announced by
the Iranian Embassy in Havana.
Details: Iranian Embassy, 5ta Avenida.
#3002, esq. a 30, Miramar, La Habana. Tel:
+53 7 204-2597. Fax: +53 7 204-2770.
FIHAV RESULTS IN SEAFOOD EXPORT DEALS
Cuba’s fishing industry closed several new
business deals during the recent FIHAV trade
fair in Havana. The contracts, worth more
than $2 million, call for the export of live,
fresh and cooked lobster, fish and crab.
Havana trading firm Caribex S.A. will sell
lobster to France’s Interpral S.A., Spain’s Garonda S.L. and Euro Caribbean of Guadeloupe.
Cuba also inked an agreement with Chile’s
Tres Lirios to acquire seafood products for
the domestic market in convertible currency.
Tres Lirios already supplies $900,000 worth of
products to Cuba annually, including mackerel filets and canned mackerel.
WINDMILLS TO TOWER OVER GITMO NAVAL BASE
By next April, four enormous windmills will
rise over the U.S. Naval Base at Guantánamo
Bay — a fusion of wind and diesel power producing 25 megawatts in what’s being billed as
“the world’s largest hybrid power system.”
Dan Ingold, project manager for Massachusetts-based Noresco, said the $11.6 million
project will decrease Gitmo’s consumption of
diesel fuel by 25%. Under the plan, reported
Nov. 24 by the Miami Herald, each 270-foot-
U.K. delegation eyes Cuban offshore oil potential
L
ord Colin Moynihan, co-chairman of
the UK-Cuba Initiative, led 40 business
executives to Cuba in mid-November,
marking the biggest British delegation of its
kind ever to visit the island.
Moynihan, who is the current shadow
(Conservative Party) minister for sport, said
the delegation is focused on agriculture,
agro-industrial works, energy, tourism and
biotechnology.
“We have a significant number of companies on the biotech side, as well as information technology,” Moynihan told CubaNews.
“We are looking to promote tourism, and we
believe that the first Virgin Atlantic flights
that will come in July next year will be a significant boost to further trading between our
two countries, both in terms of Cuban
exports and British exports to Cuba.”
Moynihan said U.K. executives are especially interested in Cuba’s energy sector, and
hope to participate in Cuba’s plans to boost
oil production, both onshore and offshore.
Great Britain would provide technology to
drill, along with technicians specializing in
deep-water operations at high temperatures
and pressures. Moynihan said Cuba’s most
promising oil prospects are located at depths
of between 2,000 and 3,000 meters below sea
level — which is similar to the North Sea oil
fields off the Scottish coast.
Moynihan said he hoped this aspect of the
UK-Cuba Initiative would be the beginning
of strong bilateral cooperation. He also
stressed existing opportunities in the development of technology to separate sulphur
from oil extracted from onshore fields.
Power generation also interests potential
British investors, especially ways to make
fuel more efficient once sulphur is separated
from crude. Luckily for Cuba, he said, there
is no carbon linked to its oil, so technical
challenges have to deal only with sulphur, “a
field with which Cubans are already dealing
with very effectively.”
Moynihan told CubaNews that the UKCuba Initiative — created in the late 1990s
by the London-based Caribbean Trade Advisory Group — may soon open an office in
Havana, in order to assist British companies
already doing business on the island as well
as those who would like to.
The director of the UK-Cuba Initiative is
David Jessop. On the Cuban side, the initiative is co-chaired by Ricardo Cabrisas,
Cuba’s former trade minister.
Details: Janet Sullivan, Foreign Commercial Office, British Embassy, Havana. Tel:
+53 7 204-1771. Fax: +53 7 204-9214.
tall windwill should generate 950 kilowatts of
energy, save 650,000 gallons of diesel fuel
annually and slash air pollutants and greenhouse gas emissions by 13 million lbs a year.
“It’s an ancient philosophy combined with
state-of-the-art technology,” Navy Cmdr.
Jeffrey M. Johnston told the Herald.
The glossy white windmills will be visible to
distant ships at sea, as well as to Cubans on
the other side of the 45-sq-mile naval base.
Because of on-again, off-again winds, said
the Herald, Gitmo can never become entirely
fossil-fuel free. But the goal is to clean up the
output at a plant built at the height of Cold
War tensions, when the base cut the water
main from Cuba in 1964 and began producing
its own electricity and water.
OFAC DROPS SUIT AGAINST CHURCH MEMBERS
The federal government has dropped its
case against three Wisconsin residents who
visited Cuba on a 1999 church mission without a license.
“It’s been looming over our heads for five
years,” Dollora Greene-Evans told the
Milwaukee Journal-Sentinel after hearing that
a settlement had been signed by Administrative Law Judge Robert L. Barton Jr.
Greene-Evans, along with William Ferguson
Jr. and Theron Mills, faced an administrative
hearing and possible fines of $7,500 each or
more in connection with their trip.
They were among six members of
Milwaukee’s Central United Methodist
Church who had gone to Cuba to mark the
100th anniversary of its sister congregation,
Iglesia Metodista Central de Trinidad.
The federal government contended the
three violated Treasury rules because they
spent U.S. money in Cuba without the necessary OFAC license. In the end, they didn’t
have to pay a dime in penalties, though they
did agree to drop their counterclaims against
the federal government.
HABANOS INAUGURATES CIGAR SHOP IN BEIJING
Habanos S.A. has opened its first retail cigar
shop in Beijing, reports Prensa Latina.
The store, located in the lobby of the luxurious St. Regis Hotel, boasts a humidor room
where regular customers can preserve their
cigars in individual boxes with controlled temperature and humidity.
According to officials, this will be the first of
many other retail stores to open in Beijing
and other leading Chinese cities.
CUBA, VIETNAM HONOR CONSTRUCTION FIRM
Cuban employees of the Ho Chi Minh
Construction Group, set up in 1974 to help
Vietnam carry out Cuba-funded projects, gathered at a ceremony in Havana on Nov. 27 to
celebrate the group’s 30th anniversary.
Between 1973 and 1982, the Ho Chi Minh
Construction Group involved 1,570 Cuban
workers and engineers, and provided vocational training for over 2,000 Vietnamese
workers. During that time, Cuba sent 35,000
tons of materials and equipment to Vietnam
for these projects, which included construction of a hotels, hospitals, roads and farms.
14
CubaNews ❖ December 2004
YOUTH & SOCIETY
In Cuba, very young messengers tow the Communist line
BY TRACEY EATON
His mother and 11 others hoping to reach
t the tender age of 8, Lazaro Castro gave the United States died in the voyage. In June
a fiery political speech to hundreds of 2000, a U.S. judge ordered that Elián be rethousands of people, then unexpectedly turned to his father in Cuba. The boy’s Miami
leaped off the stage and kissed Fidel Castro on relatives had fought against that, saying they
feared Elian would be brainwashed in Cuba.
the cheek.
“State control of the Cuban child begins
More than four years and dozens of speeches later, the precocious youngster is a celebri- shortly after birth,” conservative writer Wilty of sorts, a poster
child for the Cuban
revolution. He’s one of
the most famous of
Cuba’s pioneros, or pioneers: young Cubans
who get their political
and patriotic baptism
each Oct. 9, the anniversary of the death of
guerrilla
Ernesto
“Che” Guevara.
On that special day
this year, 148,199
Cuban children ages 5
and 6 became pioneers
and were given their
first blue neck scarf, a
piece of cloth that’s
sacred in this land.
They’ll wear it to
school every day this Cuban schoolchildren display their patria during a street rally in Old Havana.
fall and on Fridays
they’ll stand and call out in unison, “We will be liam Norman Grigg wrote during the Elián
like Che!”
affair. “Cuban schoolchildren are marinated
Pioneers are taught to worship Guevara, in hatred for enemies of the revolution ... and
who was killed in 1967 by Bolivian soldiers relentlessly programmed to love Fidel.”
trained by Green Beret and CIA operatives.
Under Cuban law, “the family, teachers,
The late Argentine rebel is an icon in the political organizations and mass organizaThird World and the subject of “The Motorcycle tions” have a duty to help children develop a
Diaries,” a movie released in September about “communist personality.” And they must prohis 1950s adventures in South America.
tect young people from “any influence conLazaro Castro, now 13, adores Che — and trary to their communist formation.”
Fidel Castro. He started learning about their
revolutionary exploits as a preschooler. He REGIME DEFENDS TREATMENT OF CHILDREN
took their messages to heart, memorizing
Claudia Marquez, an independent Cuban
their speeches. And today he regularly travels journalist, said she once went to her 5-yeararound the country and abroad spreading the old boy’s classroom and saw his teacher password to millions of people and issuing stinging ing out plastic guns and shouting, “Go!
criticisms of President Bush and the U.S. sanc- Shoot! Boom! Boom! We are killing imperialtions against Cuba.
ism!”
“Education in Cuba is free and obligatory
ELIÁN TRIGGERS BRAINWASHING DEBATE
until age 16, but it is infused with the ideoloBut not all people are comfortable seeing gy that rules our island,” she wrote in a
Cuban pioneers so immersed in politics.
December 2003 newspaper column. “What
“Getting children involved in political prob- use is education when it turns into a weapon
lems that only adults can understand violates
what makes childhood unique,” said Alina of mass indoctrination?”
In July, President Bush put his own spin on
Sánchez, 26, a veterinarian. “Childhood is
the
treatment of children in Cuba when he
sacred. It’s a time of innocence.”
Castro loyalists counter that the pioneers’ accused the regime of promoting child prospolitical work underscores just how much the titution. Castro and his supporters reacted
sharply, saying they were deeply offended.
government cares about children.
It’s a “vile accusation ... dreadful and
The debate over Cuban children and politics
erupted during the custody battle over Elián repugnant,” the Cuban president said. “No
Gonzalez, a grade-schooler who was found country in the world has given children as
clinging to a raft off Florida’s coast on Thanks- much physical and moral protection, as much
health and education, as Cuba.”
giving Day in 1999.
LARRY LUXNER
A
Similar views abound in Guanabacoa, the
small town where Lazaro grew up.
The walls of his home and the fence that
surround it are covered with words and numbers. It’s a giant chalkboard where Lazaro
learned to read and write. The letters are
large because Lazarito, as his parents call
him, was born with severe vision problems.
“When he was a baby, he would crawl
around and bump into furniture. We thought
he was blind,” said his mother, Marta Delgado, 42. Doctors operated on his eyes when he
was 5 and his vision improved dramatically.
The boy skipped kindergarten and excelled
in grade school. Teachers noticed he had a
knack for public speaking and he quickly
became pioneer leader.
CHILD IS OBSESSED WITH FIDEL
On June 2, 2000, Lazarito appeared before a
massive crowd in Havana, demanded the
return of Elián and read a poem to Castro:
“Thank you for your faithful rifle, thank you
for your pen and your paper, thank you for
your heart,” he said.
Something about the boy caught Castro’s
attention. And after the event, his aides
whisked the pioneer and his parents off to a
five-hour private meeting with the president.
Lazarito’s parents say they were so stunned
to be sitting alongside Castro that they could
hardly speak. But their son was completely at
ease and spoke to the Cuban leader about
everything from the Big Bang theory to the
ozone layer and global warming.
At one point, Castro put his hand on the
child’s head.
“Lazaro wouldn’t wash his hair for a week
after that,” his mother said. “And he wrapped
up the school uniform he was wearing and
now he won’t let people touch it. He says it has
Fidel Castro’s fingerprints on it and he wants
to keep it forever.”
The same goes for a book that Castro
signed. It’s encased in plastic and Lazarito
won’t let anyone open it. “He’s obsessed with
Fidel Castro,” his mother said.
LAZARITO NOW A HOUSEHOLD NAME
Whether all this is good for Lazarito is a
question she doesn’t even consider. She and
her husband, Lazaro, 41, a taxi driver, say the
revolution has made Cuba a place of justice
and social equality, free schooling and health
care. They are grateful for that. And like their
son, they worship their commander-in-chief.
“A lot of Cubans who can’t afford toilet
paper use the newspaper instead. We do that,
too,” the boy’s father said. “But if we see a
photo of Fidel Castro, we cut it out and save it.
We love Fidel with our life. And we pray for his
health every night.”
In recent months, Castro and his pint-sized
See Pioneers page 15
15
December 2004 ❖ CubaNews
YOUTH & SOCIETY
Pioneers — FROM PAGE 14
UJC wraps up VIII Congress in Havana
BY DOMINGO AMUCHASTEGUI
C
uba’s Unión de Jovenes Comunistas
(Union of Communist Youth, or UJC)
has finally held its VIII Congress in
Havana after nearly seven years.
Some 1,200 delegates and 300 guests attended the Dec. 2-5 event, whose official slogan was “Un mundo mejor es posible” (a better world is possible).
Julio Martínez Ramírez, 37, who had been
UJC’s second secretary since the VII Congress in November 1997, was chosen as first
secretary, replacing Otto Rivero Torres.
The appointment of Martínez came as a
surprise because of his age, since UJC leaders traditionally have never been allowed to
hold this position if they were too close to
their 40s or had remained as second-in-command for so long.
Martínez, born in Ciego de Ávila province,
has a master’s degree in management, and a
bachelor’s in finance and accounting.
For awhile, he worked in the Ministry of
Fisheries, but in 1987 he was made a political
cadre of the UJC. He then rose to the top provincial leadership within the UJC and since
1993 has also been a provincial leader of the
Cuban Communist Party. Martínez was
UJC’s first secretary in Ciego de Ávila for
five years, and participated as a full delegate
to the VII Party Congress, when he was promoted to the rank of second secretary.
Replacing Martínez as second secretary is
Hassán Pérez Casabana, a revolutionary in
his late 20s who from 1994-95 headed the
Federación de Estudiantes de la Enseñanza
Media (FEEM) for high-school students.
Drafted into the military at age 16, he was
assigned to patrol Cuba’s border with the
U.S. Naval Base at Guantánamo. His distinguished performance led him to become a
Party member at age 18, a notable achievement. As a university student at the School of
History, Pérez went all the way to the top,
being named as FEU’s president in 1998.
When Jimmy Carter spoke at the University of Havana, Pérez was the first one to
stand up and question the ex-president. Since
then, he’s been deeply involved in UJC activities as a member of its Buro Nacional.
IN DEFENSE OF THE FATHERLAND
During the Congress — which consisted
of six working commissions and plenary sessions, and closing remarks by Fidel Castro
— the debates focused on how youth in general should assume key responsibilities in
education, public health and the state-run
economy that are crucial to the survival and
continiuity of the Cuban revolution.
Yet according to a speech made by Martínez, “the most important program of the revolution is the defense of the Fatherland.”
According to Raúl Castro, who participated in two of the sessions, “we cannot con-
ceive of a UJC leader, at any level whatsoever,
who has not undertaken his military service.”
Although Martínez himself never served in
the military, the combination of him along with
the much younger Pérez as second secretary
— fits perfectly well with the new archetype of
UJC leader described by Raúl Castro.
RECOVERY FROM PAST CRITICISM
This VIII Congress had nothing to do with
the wave of criticism coming from UJC leaders
during the V Congress in the late ‘80s towards
old Party and government leaders, something
greatly influenced by perestroika.
After that, the UJC went into turmoil and
decline for a decade. Leaders like Roberto Robaina and Victoria Velázquez were ousted as
top UJC leaders, while others like Juan Contino were transferred to less relevant positions.
Meanwhile, the organization’s membership
took a nosedive. This was the scenario in 1997,
when the UJC was publicly and harshly criticized. As a result, Otto Rivero and Julio Martínez were chosen from within UJC’s national
leadership to start a process of recovery.
Thanks to considerable gains over the last
seven years, the current congress did not witness any serious criticism, sticking instead to
the themes of devoted loyalty to the revolution,
expanding membership and a serious commitment to defense-related activities.
Nothing has been said about the future of
Otto Rivero, but he’ll likely get promoted to a
good position within the Party hierarchy, from
which he would most certainly be appointed to
the Politburo.
LOOKING TOWARD THE NEXT GENERATION
What is the UJC today?
Founded in April 1962, it is an important tool
of power politics, ideological education, social
organization and mass mobilization, thanks to
its network of 48,000 comités de base (chapters)
and a current membership of 543,000 —
around 120,000 more than in 1997.
Secondly, it is the main source for increased
Party membership. At the beginning of 2004,
17,000 UJC cadres were ready to join the Party,
while over 50% of members of the Revolutionary Armed Forces are also UJC members.
Thirdly, over the last 10 years, the UJC has
been the most important source for the promotion of young Party, government and military leaders. This fact has been strongly highlighted by the old Cuban leadership, driving
home the message that the younger generations are in fact taking over the entire power
structure — and thereby implying a strong
sense of generational renewal and change.
Now that the UJC has held its congress, the
big question is: when will the Party congress
take place? The long-awaited event has been
delayed without any explanation for more than
two years, yet not a single reference was made
to this matter during the entire three days of
the UJC meeting.
mentors have been lashing out at the Bush
administration’s tightening of economic
sanctions against Cuba.
“How do they dare tell us they’ll make us a
free people when we’ve enjoyed the fairest,
most humanitarian revolution ever known?”
Lazarito told a crowd on June 21. “Enough of
these ridiculous measures against our people
and these cheap lessons in democracy.”
His speeches are so well-written that some
Cubans are convinced that Communist Party
officials help him.
“A child doesn’t have the ability to analyze
a topic so profoundly and so convincingly,”
said Caridad Rodríguez, 48, an accountant.
“These kids don’t know anything about international politics.”
Lazarito knows plenty, said his mother.
He’s a voracious reader and he writes his
speeches and poems without help, she said.
“I can’t keep up with him,” she said. “He
has an answer for everything.”
To be sure, the pioneer has captured Castro’s attention. The two have appeared on
state-run television many times, chatting, sitting together and even playing chess.
That has helped turn Lazarito into a household name. But the teenager remains humble and easy-going, his mother said.
“He’s a normal child. He hasn’t stopped being a child,” she said. “He likes to run around
and play just like all the other kids in the
neighborhood.”
Tracey Eaton, former Havana correspondent for the Dallas Morning News, has been reassigned to cover U.S.-Mexico border issues.
Y are these names so popular?
Looking at a list of the 1,700 delegates to
the VIII Congress of the UJC, it’s hard not
to notice that more names start with “Y”
than any other letter of the alphabet.
In fact, according to the Havana newspaper Juventud Rebelde, no less than 230
delegates — around 13% of the total —
have names like Yanelis, Yanet, Yamilka,
Yarisetly, Yanaurys and Yanina.
Why is this? One reason, speculates the
newspaper, is that 335 of the UJC’s delegates were born between 1975 and 1977,
when strange names were very much in
fashion. The average age of UJC delegates
is 26 years and eight months.
After Y, the next most-common first letters of names of delegates are A and M.
Some names that jump out are Siul and
Noslen — Luís and Nelson in reverse — a
testament to the “particular creativity of
the parents of this era,” says the paper.
There’s also no shortage of names ending
in eska, uska and eski.
The most common male names of delegates are Jorge, Juan and Carlos, followed
by Alexander, Luís, Yoel, José and Ernesto. At the other end of the spectrum are
especially weird names such as Narjara,
Nicté, Roviet, Tayché and Tsunamis.
16
CubaNews ❖ December 2004
CALENDAR OF EVENTS
CARIBBEAN UPDATE
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Dec. 1-8: Humanitarian trip to Baracoa, Cuba. Visits to institutions for the blind and
handicapped, museums, etc. For members of St. Augustine-Baracoa Friendship Association only. Cost: $1,200 (incl. airfare Miami/Holguín, overland travel, meals, lodging). Details: Soledad McIntire, St. Augustine-Baracoa Friendship Association, PO Box 861086, St.
Augustine, FL 32086-1086. Tel: (904) 461-3175 or 806-1400. E-mail: sole@aug.com.
Dec. 6-8: 28th Annual Miami Conference on the Caribbean, Inter-Continental Hotel, Miami. Keynote speakers include presidents of the Dominican Republic, Haiti, El Salvador,
Guatemala, Honduras and Nicaragua, as well as top officials of IDB, USAID and other
agencies. Cost: $750. Details: Charles Skuba, Caribbean Central American Action, 1818 N
Street, NW, #500, Washington, DC 20036. Tel: (202) 466-7464 x24. URL: www.c-caa.org.
Dec. 9-12: “Los Que Pensaron a Cuba: Taller/Homenaje a Félix Varela,” Centro Hispanoamericano de Cultura, Malecón y Prado, La Habana. Religious trip organized by Catholic Church; only licensed travelers may participate. Details: Golden Air Charters, 6595
NW 36th St., #300A, Miami, FL 33166. Tel: (888) 870-0593. URL: www.goldencuba.com.
Dec. 10: Annual conference of Colegio de Economistas de Cuba, University of Miami.
Long list of speakers includes José Andreu, Antonio Jorge, José Salazar-Carrillo, Raúl
Moncarz and CubaNews correspondent Armando Portela. Details: Institute of Cuban and
Cuban-American Studies, University of Miami, 1531 Brescia Avenue, Coral Gables, FL
33124-3010. Tel: (305) 284-2822. Fax: (305) 284-4875. URL: www.miami.edu/iccas.
Dec. 10-12: Cuba/North America Labor Conference, Tijuana, Mexico. Event sponsored
by Confederation of Cuban Workers “will give people the opportunity to hear first-hand
about Cuba’s workers and their unions.” Cost: $45. Details: US/Cuba Labor Exchange, PO
Box 39188, Redford, MI 48239. Tel: (313) 561-8330. E-mail: laborexchange@aol.com.
Editor & Publisher
■ LARRY LUXNER ■
Dec. 15-17: Alimport negotiating round, Palacio de Convenciones, Havana. Attendance
is essential for U.S. food executives hoping to win contracts with the Cuban government.
Details: Pedro Alvarez, President, Alimport, Infanta 16, 3er Piso, Vedado, La Habana. Tel:
+53 7 55-0573. Fax: +53 7 873-3151 or 873-1471. E-mail: raul@alimport.com.cu.
Washington correspondent
■ ANA RADELAT ■
■
Jan. 3-14: “The Cuban Revolution: 1959 to the Present.” Credit course to be taught by
Harvard professor Jorge Domínguez at University of Miami. Regular UM tuition and fees
apply. Details: Cuba Transition Project, University of Miami, PO Box 248174, Coral Gables, FL 33124. Tel: (305) 284-2822. Fax: (305) 284-4875. E-mail: agomez@miami.edu.
Political analyst
DOMINGO AMUCHASTEGUI ■
Feature writers
VITO ECHEVARRÍA ■
■ SANTIAGO FITTIPALDI ■
■ HELEN SIMON ■
■
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