Business

Cuba's Sweet, Uneven Beat

The Prime Minister tosses ‘northern ice’ on relations with Cuba, but many businesses stay warm

Bruce Wallace July 19 1999
Business

Cuba's Sweet, Uneven Beat

The Prime Minister tosses ‘northern ice’ on relations with Cuba, but many businesses stay warm

Bruce Wallace July 19 1999

Cuba's Sweet, Uneven Beat

Business

Bruce Wallace

Carlos Fernandez de Cossio is a Young Turk of Cuba’s foreign policy establishment, as sharp and urbane as any man from Havana. The son of a former ambassador to Canada, de Cossio spent part of his childhood in the genteel Ottawa suburb of Rockliffe not far from the Governor General’s residence at Rideau Hall. One rainy morning last month, de Cossio, now 39, returned by limousine to the finely landscaped grounds of the mansion he’d played on as a child, this time to present his ambassador’s credentials to the current incumbent, Romeo LeBlanc. Then, some bad press crashed his homecoming.

Just down the street from where de Cossio exchanged diplomatic pleasantries with the Governor General, Prime Minister Jean Chrétien was telling reporters Ottawa was putting “some northern ice” on its relations with Cuba. He cited human rights concerns, and cancelled plans for future visits by members of his cabinet. The timing could not have been worse for de Cossio. The day before, The Wall Street Journal ran a front-page story suggesting the long romance of Canadian businesses with Cuba has soured. It focused on just one company’s tale of woe—and many Canadians with business in Cuba insist their operations are thriving. But the story, and the Chrétien rebuff, were enough to convince the ambassador damage control was needed. “There are some deals that don’t come out as good as everybody thought,” de Cossio acknowledged to Macleans last week. “But we are open for any investment that meets our development priorities.”

Is Cuba still seductive, or is its allure for Canadian investors fading? It depends on who’s talking. Even enthusiasts admit to frustrations ranging from choking bureaucracy to rules that change on a whim. But if returns haven’t lived up to projected expectations over the last couple of years, say boosters, it’s largely because of falling global commodity prices. Cuba’s mining, oil and gas sectors have been hammered by the drop. “We did not invest as much in the last half of ’98 and ’99 as in previous years, but that is a function of oil and gas prices falling off the face of the earth and only starting to claw back,” says Chuck Allen, vice-president of Calgary-based Cubacan

Exploration Inc. “As more money is available, we certainly plan to pursue oil and gas in Cuba.”

Then there is Vancouver’s Wally Berukoff, president of Leisure Canada Inc., who says: “I’m a raving entrepreneur and the hottest thing in tourism is Cuba.” Berukoff has formed a warm relationship with Cuban leader Fidel Castro, and once entertained him on a visit to Vancouver. A tangible sign of Berukoff’s commitment is that he plans to build 11 hotels in Cuba within the decade. “I’m not pulling out of Cuba,” says Berukoff “I’m endeavouring to do more.”

In fact, Berukoff’s bigger potential problems originate in the United States: Leisure Canada is one of 40 multinational companies named in a $2-billion lawsuit brought by two Cuban exile groups in Miami last month. The two organizations allege the firms conspired with the Cuban government to deny Cubans access to land reserved for tourists, and accuse them of violating human rights by employing Cuban workers at extremely low wages. To people accustomed to the cutthroat politics that swirl around Castro in the United States, the suit smacks of harassment. But the prospect of ending up in Florida courts could frighten skittish investors. Guerrilla litigation and low commodity prices are not the

The Prime Minister tosses ‘northern ice’ on relations with Cuba, but many businesses stay warm

only things putting a chill on Cuban investment. Castro has applied the brakes to the degree of foreign participation in his stubborn socialist experiment. He opened the door in 1993 to foreign firms and allowed some small private enterprises to start up. But by 1997, he was pulling back, reaffirming his distrust of what he sees as capitalisms destructive social values. The country is only now getting legal guarantees for private property in place, and the U.S.-Cuba Trade and Economic Council estimates only $1.5 billion of $9.4 billion in foreign investment announced since 1990 has arrived in Cuba. The government tighdy controls the pace and direction of development, making the island one of the last places in the world where investors must deal with central planners. “We learned not to give the confusing signal that were open for ¿wry business,” explains de Cossio, articulating Castro’s fear that full capitalism will lead to Russian-style corruption.

Such shifts can make investors wary. Ottawa businessman Ron Weissberger hears disillusioned colleagues muttering on flights back from Havana, where he travels frequendy as vice-president of the civil aviation and telecommunications company Intelcan Technosystems Inc. “It doesn’t matter if you have a better mousetrap,” he says. “In a centralized economy you rarely sell. They buy.”

That is the main obstacle for Toronto-based conglomerate Sherritt International Corp. It has become the most-cited victim of Washington’s Helms-Burton Act, which punishes

firms dealing in properties seized from U.S. citizens after the 1959 Cuban revolution by barring executives from entering the United States. (Sherritt operates a mine once owned by an American company.) The company’s willingness to charge into Cuba anyway—it raised a $675-million war chest mostly for such investment—was a bellwether of confidence in Cuba’s potential. But Sherritt still sits on more than $400 million of that money. When company chairman Ian Delaney told the annual meeting in May he was looking to place some of that cash elsewhere—such as a mining venture in Australia—some people marked it as the moment Canadian firms fell out of love with Havana.

Not so, insists Sherritt spokeswoman Patrice Merrin Best.

“We like what we’ve got,” she says of their portfolio of energy, mining, tourism and communications. Sherritt ran into the same problem as everyone in Cuba: a small, centrally planned economy with a bureaucracy not nimble enough to absorb a high level of investment. “We had a responsibility to shareholders to do something with all that cash,” says Merrin Best.

So the Cuban beat goes on, albeit muffled. Many Canadian investors dismiss Chrétiens remarks as a fit of pique— after going out on a limb for four dissidents during a 1998 visit to Havana, he was upset when they were later sent to jail.

Most investors are in Cuba for the long haul, awaiting an anticipated post-Castro boom and pointing to the scores of Americans investing in the island under cover of businesses registered in other countries. “Canadians should hang in come hell or high water,” says Weissberger. “Those who stay will reap the benefits later on.” The new Cuban ambassador agrees. “We’d prefer to have Sherritt invest another halfbillion dollars in Cuba,” says de Cossio. But his caveat shows why investors remain cautious. “We wish Sherritt would invest more in tourism,” he adds. “Tourism is a priority for us.”

Shanda Deziel

Kimberley Noble