CONTENTS OF THIS ISSUE - SEPTEMBER 1998

1. Business principles for Cuba

2. Inter-American Ministers seek interim business facilitation for Cuba

3. US firms show interest in Cuba

4. Spy charges escalate

5. Cuba’s economy needs help

6. Governments propose

7. Castro extends diplomatic offensive

8. Tighter or increased travel to Cuba?

9. Events of interest

Opinion Corner on page 3

AmCham Cuba’s Florida lunch Wednesday, October 28, will hear Dr. Jorge Sanguinetty on lessons for Cuban privatization learned from East Europe and Attorney Nicholas Guttierez on the impact of post-Castro laws on resolving U.S. claims against Cuba. Invitation and reservation form are enclosed.

1. BUSINESS PRINCIPLES FOR US FIRMS IN CUBA? AmCham Cuba members and guests heard Sept. 25 from the North American Committee (NAC). As its U.S. Secretariat, the National Policy Association was joint host for this lunch. The NAC, coalition since the 1960s of business, labor, and academic leaders of Canada, the U.S., and recently also Mexico, is promoting business principles for private sector involvement in Cuba. The NAC’s Canadian Research Director, Dr. Charles A. Barrett (and Vice President of Canada’s prestigious Conference Board) explained the urgency of trying to find common ground among the three nations on trade, and on promoting voluntary business principles for firms operating in Cuba. The NAC plans next to try to unite diverse groups separately promoting sound business practices for Cuba.

NAC initiatives to promote business principles are well received by governments and organizations on all sides of the Cuba-policy spectrum. The NAC urges their adoption voluntarily by firms working in Cuba, but only as consistent with Cuban laws and regulations. Where these preclude adherence, firms should advocate changes, said Dr. Barrett.

The private sector would lead by example, promote legitimate business roles in development, promote civil society, raise the level of business conduct, and exert influence for change.

Business principles advocated include:

• providing a safe, healthy workplace

• employing fair employment practices

• working to gain the right to recruit, contract, and pay workers directly

• respecting employees’ right to organize freely in the work place

• maintaining a corporate culture that respects free expression

• strengthening of legal practice

Although their widespread adoption in Cuba is still disant, promotion of business principles has already achieved some progress: steel toe boots and eye protection have been instituted, and some training and technology, as a result of joint ventures and economic cooperation agreements with foreign investors who conduct business and interact daily. The NAC focus considers its approach as a constructive way to diffuse the policy debates which stymie political policies affecting the island.

Elsewhere, voluntary principles effectively promoted racial equality in South Africa in the 1970s (the “Sullivan principles”) and discouraged religious discrimination in Ireland (“MacBride Principles”). Multinational corporations are developing their own sets of business principles, including Royal Dutch Shell, Boeing, Levy-Strauss, Lockheed Martin, and United Technologies.

Last year the Council on Economic Priorities, along with U.S. firms like Avon and Toys-R-Us, launched “Social Accountability 8000", a code of certifiable quality controls including labor and human rights standards based on international organization standards. This code is promoted by outlets of participating firms in response to consumer demands.

Dr. Barrett believes that voluntary codes of conduct can profoundly influence business behavior, and that emulation of best practices is a strong motivator which engages investors employees, other businesses and the community. While businesses may at first be reluctant to institute better practices for fear of falling short themselves, and for reasons of cost, voluntary practices impact corporate governance profoundly once they are synonymous with best practice.

The NAC believes the patient applying voluntary business principles in Cuba is consistent with the global trend toward rising awareness of social respon-sibilities by the private sector. Further, promotion in Cuba -- the only country in the hemisphere where greater openness is not the rule -- will shed light on difficulties faced by labor and business, and will focus foreign investors on difficulties to tackle in Cuba.

AmCham Cuba President Ed Bartholomew expressed thanks to three members who helped to sponsor the lunch, as follows: Marriott International, whose Vice President for the International Hotel Division, Kevin P. Kearney, is on AmCham Cuba’s board, Riceland Foods, through the good offices of Carl W. Brothers, Senior Vice President for Marketing, and Western Trading Co., kindness of Ken Kroeker, President.

2. LATIN AMERICAN MINISTERS PROMOTE INTERIM BUSINESS FACILITATION FOR CUBA. Peter Romero, Acting Assistant Secretary of State for the American Republics, told Latin American experts Sept. 9 that inter-American ministerial meetings have discussed provision of “interim business facilitation” to Cuba and defining business principles by Year 2000. He warned that, while Fidel Castro wants to work (at a minimum) to protect relations with the Church, he controls what measures he might loosen and when.

3. U.S. BUSINESSES PURSUE OPPORTUNITIES IN CUBA. Though the U.S. denied licenses to firms who hoped to go to Havana with Alamar Associates early this month, “dozens of...executives” did attend Summit II which was limited to Cancun. They included a wide range of business interests - Fortune 500 giants Eli Lilly and Philip Morris, Oklahoma Dept. of Commerce, Murphy Family Farms of North Carolina” and others (L. Robinson, U.S. News & World Report, Sept. 28).

Ms. Robinson commented that U.S. business is “beginning to challenge the Cuban-American lobby that has worked to keep Cuba under an embargo since 1962,” even though they remain somewhat nervous about upsetting the U.S. government or exile groups. She cited as an example Tom Boylan, U.S. citizen and chairman of a Cayman Island firm, Sun Intl.. Holding, who said the “antiquated [Treasury] ruling” was based on attitudes left over from the Cold War, whereas he planned to use the trip for, in his view, the legitimate purpose of making business contacts for his Cayman Island firm contracted to develop the Mariel free trade zone seaport outside Havana.

Analysts offer reasons why U.S. firms are “pushing to loosen the embargo” at this time. They include hits on farmers by the end of price supports, the Asian market decline, fear of displacement in prime Cuban locations by Europe, and, broadly, that “it’s easier to make the case for trade with Cuba than with Iran or Iraq” espe-cially as no other nation observes the U.S. embargo. Investors are attracted by Cuba’s economic potential (may become our 3d or 4th largest trading partner, says trade lawyer Pamela Falk), major tourism deve-lopment, the likelihood that U.S. rice producers will underbid European and Asian suppliers, and easing of U.S. licensing procedures for drug giants like Eli Lilly, Pfizer, Pharmacia & Upjohn, and Wyeth-Ayerst under an embargo loophole allowing pharmaceutical sales.

Interest seems to rise despite slow Cuban response to business demands like investment protection accords (signed with 34 countries), few 100% foreign ventures only in free-trade zones, and otherwise 50-50 partnerships with the state. Only one private condominium project has been allowed, and TACA of El Salvador launched Cuba’s first private-sector airline.

Indirectly, U.S. businesses may get involved in Cuba through foreign subsidiaries in Canada and Mexico. There are reports of U.S. grains transshipped to Cuba from third countries. To get McDonnell Douglas DC-30s, Cubana leased them from France’s AOM (Flight.Intl. Aug.12-18). Other Cuban fleet renewals are by purchase of European aircraft.

Pressures for sanctions reform sit poorly with some, like Florida vegetable producers who fear that lifting sanctions will allow Cuba to “undercut prices and become a significant competitor”, the U.S. International Trade Commission told Congress mid-month in its report on the impact of unilateral sanctions in 29 countries. For some, economic sanctions serve as protectionist barriers, in turn engendering opposition to sanctions reform (Journal of Commerce, Sept. 16).

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OPINION CORNER: Jay Malliin, Sr., American author who grew up in Cuba, describes the evolution of his attitude on U.S. policy towards Cuba: “Isolation or Engagement”.

I was forced out of Cuba twice, once fleeing, once by force. A native-born American raised and educated in Cuba through high school, I began and worked my journalism career in Cuba. My son born in Havana was the fourth generation to live in Cuba. Our roots in Cuba were deep. My parents and I lost properties when the Castro government engaged in unbridled seizures in the early ?60s.

Although my career would eventually take me to distant places, Cuba was the topic about which I most filed stories, delivered talks, and wrote books and articles. My work was clearly anti-Castro, whether reporting dissension in Cuba or exposing Cuban intelligence activities in Bolivia. I was high on the Castro enemies list. When I was in Peru for the Washington Times, the local communist paper ran a detailed biography of me which could only be been provided by Havana. For over five years, I was news editor of Radio Marti, the U.S. Government station that broadcasts to Cuba.

But then the world changed drastically. The Berlin Wall tumbled down -- I myself chipped souvenir pieces. The Soviet empire fell apart -- I could recruit correspondents for Marti in Warsaw, Budapest, and Moscow.

The loss of Soviet support and economic assistance was a harsh blow to Cuba, but the Castro government survived. Significant transition began. Cuba courted foreign investors; the beginnings of a free market were initiated. A great deal of the housing and infractrusture is in poor condition; much of the populace lives at a bare-existence level. Even so, one has but to compare the orderly transition of Cuba with the crime-ridden anarchy of Russia’s economy to see that the Cubans are much more successful in their transition.

My own views have changed radically also. As Cuba is transformed, slow as this may be, U.S. policy becomes increasingly anachronistic and counterproductive. Cuba is no longer a base for Soviet forces. Cuba no longer maintains armies in Africa or works to subvert Latin American nations. Cuba is now accepted by all Latin American countries. Fidel Castro is greeted as a hero when he goes to South Africa, South America, and even two Caribbean countries where U.S. troops landed to prevent Castroite takeovers, Grenada and the Dominican Republic. Cuba is no longer isolated. It is the United States that is isolated on the Cuban issue.

It is well past time for the U.S. Government to seek and implement ways to assist the transition underway in Cuba. Our failure to do so works against our own best interests, including those of the business community.

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4. SPY CHARGES ESCALATE. After years of reported infiltration into exile groups in the U.S., in mid-September the FBI arrested ten Cubans for spying for Castro on Cuban-American paramilitary groups and others. The FBI said no sensitive information was lost. One target, the oldest group, Alpha 66, with 5,000 members and 40 years leadership by Andres Nazario Sargen, continues rifle training in the Everglades to carry out Cuban infiltration plans. The FBI alleged infiltration of the Brothers to the Rescue and Democracia, Ramon Saul Sanchez’ group which sends protest flotillas near Havana (Jerry Seper and Tom Carter, The Washington Times, Sept. 15).

Georgie Anne Geyer (Washington Times, Sept. 1) said the seven “wannabe assassins” (“exiles of the generation that fled... Cuba after 1959") who were arrested in August for planning to assassinate Castro were not strong with the Cuban-American National Foundation. She said ex-Marine Jose Antonio Llama of CANF’s Executive Board seemed to have acted “on his own”, and ownership by CANF President Pepe Hernandez of the sniper rifle was hard to prove.

While Cuba’s government seems to remained silent on alleged Cuban spies in the U.S., it counterattacked with charges that the U.S. holds the “world record” for spying on Cuba(Washington Post, Sept. 18).

5. ECONOMIC HARDSHIP. The August Cuba Monthly Economic Report identifies drought damage (not to mention later hurricane Georges damage). It said later deliveries suffer from lack of truck fuel and tires, root crop production is the lowest in 20 years, meat and milk are 10% below last year, fish farms produced 25,000 tons through August compared to 40,000 tons, and half (70,000 ha.) the spring sugar cane planting is lost. Consumption is the lowest in 40 years, the Ministry of the Economy and Planning said.

6. CUBAN AND AMERICAN POLICY INITIATIVES. In August in the Dominican Republic, Castro asked for trade preferences and sizable aid for developing countries. Jaime Suchlicki (Journal of Commerce, Sept. 18) said the proposal would fail with the U.S. due to uneven access to each other’s markets: Cuban efforts to gain U.S. markets for sugar, rum, tobacco, nickel, citrus, and biotechnology will be frustrated since they are neither economically nor strategically important to the U.S. Cuba will deny access to Cuba for U.S. products that would compete with development plans. Trade potential will be sabotaged if Cuban state enterprise products are dumped for dollars. Cuba cannot hope to become an important U.S. client like China or Russia and lags far behind China and Vietnam in meeting conditions for development and corporate involvement. And the U.S. will resist lifting the embargo for fear of economic dislocations harming Caribbean nations and Central America.

As for U.S. policy, observers doubt that Sen. Helms’ Cuban Solidarity Act (S. 2080, to set aside $25 million for humanitarian aid or democracy-building) will pass soon. So far, under Sec. 109 of the Libertad Act, USAID has awarded 12 grants for such purposes (listed in the US-Cuba Policy Report,Sept. 15).

Reps. Diaz-Balart and Ros-Lehtinen strongly oppose “all forms of aid including food assistance to...Castro”. Other Members urge tight monitoring of World Food Program aid to be sure food reaches the neediest.

7. CASTRO’S PUBLIC APPEARANCES CONTINUE. After his Caribbean diplomatic campaign, Castro was welcomed in early September by South Africa where Mandela awarded him the Order of Good Hope.

In a five-hour CNN interview, an apparently fit Castro revisited relations with the U.S. including the missile crisis, taking issue with both the U.S. and the USSR on some points. Asked “Who won the cold war?”, he promptly replied: “the United States, of course.”

8. RESTRICTED OR INCREASING CUBA TRAVEL? U.S. denial of visas for Alamar Associates’ business summit trip to Havana made it clear that no openings exist in trade relations with Cuba (Kevin Hall, Journal of Commerce, Sept. 8). Alamar’s President, Kirby Jones, said the U.S. continually “raised the bar” for the trip for which he had understood requirements were met. However, it was ultimately viewed as conflicting with the U.S. policy of preventing any service bene-fiting Cuba’s government.

Jones challenged three USG conditions: that executives meet with dissidents (“who would select these?”, “is this a requirement of our travel restrictions?”), that they be willing to make negative comments about the visit (“is this a condition of application of the law?”), and that they declare that business will only be carried out if Cuba has a democratically elected government. USA* ENGAGE, a U.S. business coalition, also criticized the license denials, saying State Department had ruled the trip legal.

Disapproval suggests other proposed fact-finding trips should carefully consider “full hosting” where non-U.S. citizens must pay all costs in Cuba and U.S., travelers spend no money.

Despite apparent difficulties faced by some would-be U.S. travelers to Cuba, some travel agencies have ambitious plans (flyer enclosed).

9. CUBA ANALYSES. While some weary of waiting for Cuba’s prospects to change, a flurry of meetings suggests others do not: Alamar Associates hosted an NYC review of Cuba this week, Cuban and American experts examined “Cuba in Evolution” at a Dallas Morning News meeting Sept. 28-29 and Cuba in the Global Economy; Options for Cuban Economic Policy with Catholic University’s Cuba Study Group Sept. 30. Meetings Oct. 7 consider the EU-US Understanding on Expropriated Property (Center for International Policy) and Small Business and Independent Labor Development in Cuba (US-Cuba Business Council and the Center for Strategic and International Studies).

The Atlantic Council has issued its “International Perspectives on U.S. -Cuban Relations”, a thoughful analysis of implications for U.S. policies, both interim, while Castro remains in power, and long range. It says reintegrating Cuba into the world community will be a “long and difficult process”, requiring an international context for bilateral initiatives and sensitivity to Cuba’s nationalism, bitter history, and independent mindset. It is available at http://www.acus.org.

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We hope to see you in Florida for the lunch on privatization and claims settlement on October 28!

Cordially,

Phoebe Lansdale, Executive Director September 30, 1998