Door Opens Wider to U.S., Cuban Trade : Relations: Latest step is proposal to upgrade communications links between the two nations. Tourism, entertainment and beer deals could be next.

After escaping in 1961 from a Cuban prison where he was serving a 30-year sentence as a counter-revolutionary, Francisco Aruca thought his anti-Communist credentials were impeccable.

But lately, the Miami businessman has been under attack from other Cuban-Americans who accuse him of supporting Cuban President Fidel Castro. His error, in their eyes, is doing business with Cuba.

Aruca’s scrapes with Cuban-Americans are among the potential problems that more U.S. businesses may soon be facing as steps are being taken to open Cuba to more dealings with American companies.

Aruca’s Miami-based Marazul Airlines is one of 87 U.S. companies now allowed to trade with Cuba under special license from the U.S. government as exceptions to the three-decade-long embargo against the island. Most of those companies are relatively small charter airlines, travel agencies and package delivery services, and some have been doing business profitably with Cuba for as long as 14 years.

However, a broader range of U.S. businesses--perhaps including some giant multinationals such as American Telephone & Telegraph--could soon be going to Cuba, as special licenses may shortly be available to telecommunications, entertainment and information companies. That’s as a result of legislation pending before Congress, and Friday’s U.S. State Department announcement that--for the first time in 25 years--Cuba will be allowed to receive profits from telephone calls between the two countries.

These actions are seen as signs of a nascent improvement in Cuban-U.S. relations, coming on the 40th anniversary of the beginning of the revolution that so bitterly divided the United States and the island of 10 million people 90 miles from the Florida coast.

Based on the possibility of liberalized trade relations, U.S. businesses are slowly and subtly trickling into Cuba to analyze ports, railroads and highways as well as to make contacts in case the embargo is loosened, as it was under the Jimmy Carter Administration.

But many of these businesses are aware of the difficulties in doing business in Cuba, including lack of modern facilities and services and onerous governmental red tape. They also are treading carefully, keenly aware that they, like Aruca, risk angering the most radically anti-Castro members of the Cuban-American community--in return for business prospects that are uncertain at best, given the troubled Cuban economy.

“Just don’t use my name,” said the president of a Los Angeles-based trading company who was on the island to talk with brewery representatives. Big companies would probably snap up rum and cigar deals if the embargo were lifted, but Cuba’s dark beer could be a sleeper, especially with the curiosity and publicity that would surround renewed diplomatic relations, he reasoned. He wants his company to be ready if trade is renewed.

That strategy has worked for U.S. business in the past.

In the weeks before former President Carter decided to allow limited travel to Cuba, executives at now-defunct Caribbean Holidays, a New York-based tour packaging agency, began talking with hotels, car rental agencies and other tourism service companies on the island.

“They were ready to start operating the day after the travel restrictions were lifted,” said Kirby Jones, a vice president at the Burson-Marsteller public relations firm and a long-time Cuba promoter.

American firms such as Marazul Airlines now are permitted to do business with Cuba under American law because they provide travel services to the island. Companies may also deliver packages from people in the United States to their relatives in Cuba. All those businesses must provide three-page quarterly reports to the U.S. Treasury Department about their dealings with that country.

Most of those businesses are run by Cuban-Americans, such as Aruca, who was working for the U.S. Labor Department when Carter decided that people with relatives in Cuba, journalists and researchers could visit the island.

“I am an economist by training,” he said. “I saw an opportunity.”

He started out with a Cessna and now has three flights a week between Miami and Havana, 90% full, on Boeing 727s.

U.S. companies that do not provide such specialized services may negotiate with Cubans and even sign letters of intent outlining their plans to do business, said Michael Krinsky, a Washington lawyer who is an authority on the embargo.

“As a U.S. citizen, what you cannot do is make a deal,” he said.

A few pioneers have begun to operate within those rules, anticipating that restrictions against trade with Cuba may be loosened. Travel restrictions were relaxed earlier this month when the U.S. government began allowing people to go to Cuba for religious or educational reasons, Krinsky said.

Then, last week, the U.S. State Department announced new guidelines that will allow telephone companies to upgrade communications links between the two countries. Cuba would be permitted half the proceeds from future calls.

Hopes for further loosening of trade restrictions lie with a bill introduced in this session of Congress by Rep. Howard L. Berman (D-Panorama City). The bill would expand a 1988 law that exempts information from embargoes.

It would allow U.S. production companies to hire Cuban directors and television networks to buy Cuban programming. That would eliminate the kind of problems that U.S. broadcasters faced when the Pan American Games were held in Cuba. Networks bid for the rights on the games, then were not allowed to televise them.

Berman’s bill piqued the interest of Donald J. Schutz, a St. Petersburg, Fla., entertainment lawyer. He sees the possibility for video sales or for movie deals with Cuba’s internationally known film institute.

“Right now, we can pay royalties to Cuban entertainers for records they have already made, but U.S. companies cannot hire them to make records,” Schutz said. To explore the prospects, he joined a group of mainly U.S. business people at a two-day conference in Cuba on investing there.

Such visits to the island are legal as long as business people do not spend money in Cuba. That means visits must be hosted, either by the Cuban government or some other non-U.S. organization.

The British partner of The Living Earth, a Malibu-based ecologically oriented tourism company, pays for Steven Powers’ trips to the island. Powers, who has developed tourism projects compatible with the environment in Belize and Brazil, is studying Cuban forests.

At 30% growth in ‘92, tourism is one of the few bright spots in an otherwise dismal Cuban economy.

Most of the development to date has been in beach resorts. Powers believes he can provide an alternative type of tourism and still stay within U.S. law by working with a foreign partner who will put up the investment.

His brief visit persuaded Joseph Strain, marketing director for the Jacksonville Port Authority, that he should accept the Cuban government’s invitation to return in November as a guest.

“If there’s going to be trade, there’s going to have to be transportation,” he said. “It’s more direct for ships to go to Miami or New Orleans. I have to be able to offer them something. They won’t just come to me.”

What Strain intends to offer clients is detailed information about ports where U.S. shipping lines have not docked for more than 30 years.

However, his early research paints a sobering picture of port conditions. “They are using machinery from the 1940s,” he said. “There is a container harbor under construction, but that will take a while.”

Similarly, Michael P. McHugh, a scientist with Kaman Engineering Sciences in Virginia, left Cuba with serious doubts about the quality of land transportation. Roads and railroads were seriously damaged by Hurricane Andrew in March and flooding in May. He wonders how quickly they can be repaired.

Besides the infrastructure, there are also serious concerns about business culture in a country that has been socialist for three decades. Lawyer Schutz is rethinking his plans after considering how little copyright protection Cuba offers.

Those obstacles to commerce will not be lifted as easily as the trade embargo, which could simply be allowed to expire when it comes up for its annual renewal in September.

Doing business with Cuba is difficult, Aruca said, based on 14 years of experience. Telephone and telex communications are unreliable, the paperwork for the government is onerous and the hostility from hard-liners in the Cuban-American community is unremitting.

The most recent example is a Dade County ordinance allowing cities to withdraw the local business licenses of companies trading with Cuba. Aruca is suing the county government to get the ordinance repealed.

Balancing the problems, Aruca said: “This is a very profitable operation. In spite of the obstacles, I have met with good intentions.”

Trading With Cuba

American businesses that provide air, travel and package delivery to Cuba receive special licenses from the U.S. government to do business with the island nation. Here’s a breakdown of U.S. firms doing business with Cuba.

Travel agencies: 27

Airlines: 12

Package delivery: 33

Other/unknown: 16

Total: 87

Sources: U.S. Treasury Department; individual companies