TABLE OF CONTENTS July 1998

1) Miami Members Hear Attorney’s Analysis of Claims Against Cuban Government

2) Conflicting Views of US-EU Agreement to Inhibit Investment in Expropriated Properties

3) U.S. Business Interest in Cuba

4) European Visits to Cuba Point to Expanding Investments

5) Economy Continues Weak 6) Pope Met with Cuban Bishops

7) Relaxed Rules on US-Cuban Flights and Transport

8) Migration and Refugees

9) Meetings on Cuba

10) Travel

1) Miami Attorney Assesses Cuba Claims Settlement Options. Some 80 AmCham Cuba members and lunch guests from South Florida on June 24 heard George Harper, Esq., examine practical considerations which apply to claims against Cuba under present law and procedures. He said that, with the newly created international registry of confiscated properties, European investors will be able to verify claims against the Cuban government related to their potential investments. He urged listeners to register their properties. He cited the ITT-STET agreement, in which ITT waived its right to sue for compensation under Helms-Burton, as one way for a U.S. firm to recover income from properties seized by Cuba.

AmCham Cuba is deeply grateful for sponsors’ support for the lunch. Sponsors were Bell-South Intl; Caterpillar Americas Co; Florida Power & Light Co; Steel Hector Davis, Miami law firm; and Warner Lambert de Puerto Rico.

2) Questions on Adequacy of May 18 EU-U.S. Agreement to Deter Future Investment in Expropriated Properties. Fidel Castro was not the only critic of the new agreement aimed at ending the European Union’s complaints about Helms-Burton. According to Pascal Fletcher May 19, writing from Havana, Castro told the World Trade Organization that the agreement would “internationalize the principles of the infamous Helms-Burton law.” (The accord, Disciplines for Strengthen-ing Investment Protection, is at http://presid.fco.gov.uk/news/ 1998/may/18/invest.txt; or at a U.S. government source, http://www.state .gov/www/issues/ economic/us-eu_ invest_ protect.html.)

Congressional critics acknowledge that the agreement means the EU now recognizes Cuba’s illegal expropriation of U.S. property, but they challenge its lack of enforcement mechanisms.

EU implementation of a previous (April 1997) EU-U.S. Understanding on Property Disciplines was conditioned on two U.S. actions: (a) continued waiver of Title III of the Helms-Burton Act, that section creating civil right of action for aggrieved U.S. nationals against those who knowingly benefit from use of confiscated property (Clinton waived it again this month), and (b) waiver of Title IV’s denial of U.S. visas for those who traffic in such properties, wrote Daniel Fisk in a study issued July 23 by the Institute for U.S.-Cuba Relations.

UnderSecretary of State Stuart Eizenstat says that the agreement will protect rights of property claimants generally and Cuban claimants specifically, and that the Administration is seeking a legislative vehicle for amending Helms-Burton. The Disciplines will first be applied as policy, but calls for later subjection to disciplines of the Multilateral Agreement on Investment (MAI) including legal commitments.

At a conference July 23, the House International Relations Committee’s Chief Counsel, Steve Rademaker, was concerned that the U.S. must now recognize foreign investments made in Cuba before May 18, 1998, and accept their eiligiblity for commercial assistance from their governments, even though subsequent investments in expropriated properties will be ineligible. David Wallace, Chairman of the Joint Corporate Commission for Cuban Claims, worried that the accord legalizes existing foreign investments in unlawfully confiscated properties and does not cover products and services generated by confiscated property.

Some speakers feared the international registry may subject U.S. certified claims to EU scrutiny, but others took comfort in Sir Leon Brittan’s statement that the European Commission believes most U.S. claims certiified by the U.S. Foreign Claims Commission, expropriated under Cuban Law 851, are indeed contrary to international law. Some European investors believe the agreement puts them outside the reach of U.S. penalties for exploiting uncompensated properties.

Cong. Benjamin Gilman (NY) regrets U.S. negoti-ators’ lack of success in specifying protection for Cuban-American claimants. The lack of immediate enforcement provisions contributed to Sen. Helms’ view that the Disciplines “legitimizes EU... theft of American property in Cuba.” Speaker Gingrich focused his concern the adequacy of EU committment to fight “the Cuban tyranny.”

Belgian Foreign Minister Derycke fears disputes over this EU “compromise” with the U.S. will be heated. Other European officials have been trying to calm Castro’s fears, saying the agreement will facilitate business development in Cuba.

3) Rising U.S. Business Interest in Cuba. U.S. corporate interest in business prospects in Cuba “has soared in the wake of the Pope’s visit”,

OPINION CORNER. AmCham Cuba’s forum is open to contributors reflecting the entire range of views of business people interested in Cuba, and does not reflect our own positions. Today’s column is offered by another of our officers, Carlos R. Porro of Miami.

After hearing George Harper’s magnificent presentation on “Claims Against the Cuban Government” at our June 24 lunch meeting in Miami, I question why after 30 years we are still on square one. I believe that claims against the Castro govern-ment by U.S. investors have not gotten anywhere during the last three decades for the following reasons:

1) There has been inadquate demand for compensation by the U.S. Government; and

2) Castro’s dictatorship has completely mishandled Cuba’s economy, having ignored all his obligations to international banks, lending countries such as Argentina, Japan, Spain, etc., and he has failed to live up to most of his commitments to international institutions like the United Nations, Organization of American States, Inter-American Development Bank, etc.

Before Castro’s dictatorship, Cuba’s foreign debt was less than US$100 million. Today, Castro’s government owes over US$10 billion to Western international banks, over US$30 billion to Russia and ex-communist central European countries (excluding all military assistance), and some US$2 billion plus interest to the U.S. Government and its citizens.

Everyone knows that all these funds and properties have been used not for the improvement of the living conditions of the Cuban people, their economy, and development, but for Castro’s own personal use and to support communist and guerilla warfare in Chile, Venezuela, Colombia, Panama, Guatemala, Nicaragua, Mexico, Bolivia, Uruguay, Grenada, El Salvador, etc.

In my opinion, claims against Castro’s Government and all other negotiations with Castro’s dictatorship will accomplish nothing. All efforts should be made to restore a democratic system in Cuba and stop the suffering of the Cuban people by ousting Castro as soon as possible, the same as was done with dictatorships in Haiti, Grenada, Panama, the Dominican Republic, Guatemala, Venezuela, Chile, and other countries.

wrote Owen Ullmann in Business Week July 25. Forty corporations visited Cuba with Alamar Associates last spring. A prediction of a jump in total U.S. business visits to Cuba was made by John Kavulich, President of the U.S.-Cuba Trade & Economic Council, to 2,500 this year, from 500 in 1994 and 2,000 in 1997. In pharmaceuticals, Treasury has approved a January 1999 Havana medical industry trade show sponsored by P.W.N. Exhibicion Internacional of Westport, CT, the Commerce Department says it will look favorably on applications to export experimental drugs for testing in Cuban labs, and Smith-Kline Beacham expects approval for a U.S. unit to test meningitis B vaccine developed in Cuba. Finally, Ullmann says, the number of sponsors (130 House members, 30 Senators) of bills to remove food and medical items from the embargo shows that Congress is heeding growing U.S. business pressures including the U.S. Chamber-sponsored Americans for Humanitarian Trade with Cuba. He acknowledged that further policy relaxations depend on how fast Cuban-American support for the embargo fades.

Seafood importers are eager to regain access to Cuban tilapia and shrimp, wrote Larry Luxner in the Journal of Commerce July 8. Cuba’s rising seafood exports ($180 million in 1997) go largely to Europe, with significant exports to Japan and Canada. Seafood was a major sector discussed last month at a Washington agribusiness conference by experts from the Universities of Havana and Florida. Despite U.S. business hopes, William Buckley Jr., writing July 24, predicts no change in U.S. policy on Cuba this year because of the continued refueling of the anti-Castro lobby and embargo supporters.

4) European Officials’ Visits Imply Expanding Investments. High level visitors to Cuba this year support increasing foreign ventures on the island. In June alone, Reuters reported a succession of visits: June 9, Foreign Minister Lamberto Dini of Italy, whose trade with Cuba is about $200 million and tourists exceeded 200,000 last year, pledged to help integrate Cuba into the international community, and doubted that Helms-Burton will be in effect much longer. A UK trade mission expressed hopes June 10 for a boost the UK’s low low business levels (1997 trade was $55 million, $27 million so far in 1998). France’s Transport Minister Jean-Claude Gayssot June 21 criticized the U.S. embargo, announced delivery of 150 minibuses, and ascribed improving relations to Air France direct flights to Cuba. Hopes to solidify Spain as leading investor in Cuba were conveyed by Industry Minister Joseph Pique who in late June brought over 50 Spanish businessmen. Spain’s power firm, Union Electrica Fenosa SA, plans a joint venture with Union Electrica de Cuba SA to modernize the electric system.

From the Americas, in early June Brazil?s Foreign Minister Lanpreia signed four agreements on food sales to Cuba and debt “understandings”. In late June Mexico’s Foreign Minister Rosario Green assured Cuba its support for readmission to the OAS. Ernesto Samper, President of Colombia, told a June 25 meeting of health ministers from nonaligned countries in Havana that Cuba’s health achievements deserve respect from developing nations, especially those critical of Castro’s regime. Samper criticzed the embargo and said he may call on Cuba to help quell its own guerrilla revolution. Chile?s negotiations for a free-trade pact should be completed this month (- Journal of Commerce, June 8). Sherritt International of Canada is expanding its multisectoral investments into soybean processing, under a $12 million joint venture with the Cuban government.

5) Cuba’s Economy Continues to Lag. The UN World Food Program requested emergency food assistance in late July to deal with a drought in eastern Cuba, “the worst in at least 40 years [causing] an estimated $60 million in crop losses, directly affecting more than a half-million people,” according to Francisco Roque Castro, WFP regional director. The July Cuba Monthly Economic Report says the economy has declined 1.6% compared with the same period in 1997.

Cuba expects sugar output of only about 3 million tons, lowest in 50 years, which the June Cuba Monthly Economic Report said will cause import cutbacks of 10%+, largely food and oil. Economy Minister Jose Luis Rodriguez shared his concern with heads of local government assemblies and was quoted in Granma June 15. The low harvest reflects years of cutting immature cane to meet production goals and lower international sugar prices according to the Associated Press. Sugar milling remains inefficient. Sugar represented 46% of Cuba’s 1997 exports.

Banana cultivation has not recovered from Hurri-cane Lilly (the 380,000 tons produced in 1997 was 140,000 tons below the 1996 disaster year).

Tobacco packaging is far behind schedule due to lack of packing material and insufficient electricity.

Widespread theft is blamed for losses in port-transport-warehouse-retail and in tobacco.

Self-employed workers will be hit by an increase in the hard-currency portion of taxes which hard- currency earners must pay, from 75% to 100%, reports the trade union daily Trabajadores.

Tourist facilities, which total 27,394 rooms, face reduced service quality ratings. Surprise inspec-tions by a Quality Group of the Ministry of Tourism and numerous complaints from guests gave rise to ratings reductions by one star for 18 hotels, and three months grace given to 21 others to permit improvements in food preparation, hygiene, etc. Critics ascribe some problems to high portion of tourism industry personnel which has come from the Armed Forces and Interior Ministry.

A rosier picture was provided by Economic Minister Jose Luis Rodriguez who told UNESCO July 8 that tourism, fishing, and tobacco increases permitted economic growth of 4% in the first quarter, with 2.5- 3.5% expected for 1998, reports the Associated Press.

Trade with Caribbean islands grew from $1 billion in 1996 to $1.3 billion in 1997, Foreign Trade Minister Cabrisas has claimed.

With mining now developed only with foreign investment, the July Cuba Monthly Economic Report notes that rising cobalt extraction should permit Cuba to produce 11.5% of world trade in 1998. Nickel and cobalt reserves will rank second and third, respectively, in the world.

Advanced technology and productive capacity enabled an Italian-financed mineral water/soft drinks plant at Guane to do well, selling 30-40% to the local hard currency market, the rest exported.

May’s dollar sales reached record levels, over US $3 million per day (officially. U.S. dollars are exchanged 1-1, though CADECA exchanges maintain US dollar purchases at 22 pesos/dollar, and convertible pesos, when available, are sold at 24-1; some report the current market rate for Cuban citizens to be 19-1).

Joint ventures are subject to surprise audits, reports the June Cuba Monthly Economic Report. Deficiencies, according to the Ministry of Finance, include contracting personnel and sales persons on commission without authorization of the Government Employment Agency, under-the-table payments in dollars to executives and other considerations for Cuban functionaries, purchases of food and appliances for gifts to workers, too many promotional sales, and selling at retail rather than wholesale sales to government enterprises as required. Reportedly Canadian, Mexican, and Spanish enterprises have not been audited. Except for one penalty, warnings were issued for all irregularities. [Cuba Monthly Economic Report subscriptions are $35/year. Call 305-666-5150.]

NEW CORPORATE MEMBERS OF AMCHAM CUBA. We are pleased to welcome the following corporations as new members of our chamber. Caterpillar, Inc. is represented by Joe M. Green, Northern Region Director based in Peoria, and particpants in AmCham Cuba events have included Thoma S. Mehl and John Bolden of the International Services Division in Washington and by W. Markley Childs, District Manager of Caterpillar Americas for the Caribbean and Central America. Holland & Knight, LLP, Miami law firm, joined in March. In addition to Jose E. Sirven, Executive Partner, interested representatives include attorneys Jorge Hernandez-Torano and George Mencio, Jr. Quantum Financial Advisors, Inc. of Washington, D.C., is represented by Joseph F. Rinaldi, Senior Managing Director who has cooperated in business ventures with Cubans on projects in Latin America.

6) Results of Pope’s meeting with Cuban bishops. Pope John Paul last month told the 13 visiting Cuban bishops that he welcomed some political and religious changes, but less as successes than as “a pledge and the beginning of their disposition to create legal and social space for Cuban civil society to grow in autonomy and participation, and for the country to play its proper role in the region and in the concert of nations.” He urged Castro to do more. The bishops noted that Cuba’s Church still has no access to radio and television for religious programming, that religious education has not been approved, and that, though the Church has gained some power, it must play a bigger role to achieve “greater opportunity to extend a hand to whoever needs it.” (- Reuters June 9, 12; ZENIT June 9, U.S.- Cuba Policy Report, June 30)

7) Relaxed US-Cuban Transport Expands U.S. Travel and Relief. Two days before ICAO (UN International Civil Aviation Organization) was to rule on a Cuban complaint against the U.S., the U.S. granted permission for Cuban planes to overfly the U.S., ending over 30 years of “no-fly” zone status. U.S. has flown over Cuba for a decade. Cuban flights to Canada, ½ hour shorter, will conserve fuel, and reduce wear on the planes. (- Washington Times, 6/20; - AP June 22)

Treasury has authorized several charter carriers, including Miami-based Airline Brokers, American Airlines, Cuba Paquetes of Hialeah, Island Air Charters of Fort Lauderdale, and Marazul Charters, which will permit increased humanitarian aid and tourism to the extent that Cuba grants permis-sion to land as early as this month. A first direct flight June 11 carried $1 million in Catholic Church aid - food and medical supplies like antibiotics, wheel-chairs, syringes, and surgical masks - as purely church-to-church aid, not U.S. government aid to Cuba (- Reuters, June 10, 11, 29)

Operation USA, Los Angeles-based relief group, has U.S. permission to send medical supplies and equipment over two years as part of its “Cuba Medical Relief Project”. It will help Havana’s pediatric hospitals with sterilization equipment, portable X-ray units, operating tables, latex gloves, pharmaceutical drugs, vitamins, and other needed items. Plans call for eight 40-foot sea containers and fundraising for a charter plane for medicines with short shelf-life (- Reuters, June 23). Operation USA information is available from Richard M. Walden at 213-658-8876.

The U.S. Feed Grains Council recently donated 40,000 pounds of feed corn to Cuban rabbit producers for rabbit meat donations to day care centers and pregnant women in Cuba.

8) Migration and Refugees. Negotiations are continuing to try to rationalize Cuban immigration and curb illegal rafters crossing into Florida. The Administration’s next lottery, “El Bombo,” will admit 30,000 Cubans over two years if they meet certain criteria, plus another 10,000 via family reunification and refugee visas. At the National Assembly July 23, Castro lashed out at organized efforts to “rob” Cuba of its top ball players.

In the UN, the U.S. again urged Cuba to reduce emigration exit fees which are so high as to drive them to illegal channels, Reuters said June 30.

Argentina agreed mid-June to accept 10-12 Cuban political refugees from Guantanamo.

Nicaragua’s offer in June to accept 200 Cuban refugees repatriated from the Bahamas was reported by the BBC to have been ridiculed and rebuffed by Cuba, though Cuba also invited other applicants to consider immigration to Nicaragua.

9) Meetings on Cuba. Post-Castro scenarios were explored by business, government, policy experts and journalists at a June 29 meeting hosted by the Newmarket Company, advisory and information services firm, at Airlie Center outside Washington. Led by John Deutch, Chairman of the Newmarket Advisory Board, and Anthony Lake, Chairman of Newmarket, participants explored the feasibility of various successor government arrangements, including the impact of significant changes which may occur within Cuba.

On July 23, a policy forum of the Institute for U.S.-Cuba Relations occasioned lively discussion of the new EU-U.S. agreement on property rights in Cuba, discussed in Section 2 above.

“Possibilities for Cooperation between the U.S. and Cuba on Drug Interdiction” were explored the same day at a meeting sponsored by the Center for International Policy (CIP), also in the Capitol building, by Sen. Mark Hatfield and Adm. Benedict Stabile. Back from visiting Cuba to explore needs for cooperation, they cited concern about expanding east Cuba traffic by drug-filled planes and use of Cuban airspace by drug-carrying planes to evade monitoring by the U.S. coastguard. A Wayne Smith paper issued in April calls urgently for drug cooperation with which he says Cuba will agree. Tom Carter (- Washington Times, July 22) reported on a new DeWine-McCollum bill to fund aircraft and Coast Guard cutters to make it more difficult for drug lords to bring drugs to the U.S. and to make drugs more costly.

ASCE, the Association for the Study of the Cuban Economy, meets at the Coral Gables Biltmore August 6-8. Papers by a large number of analysts including several AmCham Cuba members will explore lessons from other nations, intellectual property rights, immigration challenges and foreign investment in post-transition Cuba, the environment, agriculture, health and nutrition, tourism, the dual economy, a report by ECLA (the UN’s Economic Commission on Latin America) on Cuba, analogies with Vietnam and Finland, and opposition groups and possible alternatives. Pre-conference registration can be arranged for $75 for non-members with Ivette Berbeite, ASCE treasurer, 9890 SW 7th St., Miami 33173, tel. 305-598-1019.

In September, the multidisciplinary Cuba Project hosts an international conference, “Reintegration in a Globalizing World: Cuba in Comparative Perspective”, at the City University of New York’s Graduate Center. It will examine the processes of economic liberalization and democratic development. For information, call Dr. Mauricio A. Font, Director, 718-997-2809, e: procuba@soc.qu.edu.

10) Travel Information. The media is offering more information on ways to travel legally to Cuba. Besides giving the official U.S. Treasury Department application source (202-622-2480, or http:\\www.ustreas.gov/treassury/services/fac/fac.html), the Washington Post on June 28 identified groups which may travel legally without licenses: journalists, visitors to close relatives, government representatives on official business, and travelers whose trips are fully paid by Cuban nationals. The Treasury Department considers license re-quests for those accompanying humanitarian donations, and for hardship cases, recognized human rights groups investigating violations, research, and pharmaceutical and medical sales representatives.

Marazul Tours in New York (800-223-5334) packages “research” tours on film, health care, Latin American studies, and other topics, and tourist cards to U.S. passport holders are issued by Cuba Travel in Tijuana, Mexico(310-842-4148, http://www/cubatravel.com.mx) and Intra Kensington Travel in Ottawa (403-283-3383, http:\\www.intraken.ab.ca/cuba.html). Americans flying from other countries without U.S. licenses could be fined or imprisoned.

The American Political Science Assn. conference at the University of Havana November 18-21 for academics, writers, artists, and students will cover topics related to Cuba’s revolution and social conditions in Cuba today. Presentations, reservations, visas and a U.S. license for the $540 tour and conference registration are being arranged by Charles McKelvey at the Center for Development Studies, 210 Belmont Stakes, Clinton, SC 29325, e:cemck@cs1.presby.edu.

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Enclosed for corporate members is the June issue of Looking Ahead issued by the North American Committee. It offers an interesting overview of “Business Principles and Secondary Economic Sanctions” as applied to Cuba and elsewhere by public and private sector analysts from Mexico, Canada, Germany, and the United States.

Officers and members of AmCham Cuba’s Board of Directors will also find enclosed the minutes of AmCham Cuba’s Annual Meeting of last April 16.

Keep sharing news and views with us. Sincerely yours,

Phoebe T. Lansdale

Executive Director

July 30, 1998