Tightened U.S. Sanctions on Trade With Cuba Begin to Have Impact

The bearded man in the hard hat, waiting at a bus stop for a ride up the crimson mountain to the nickel mine just outside town, says he pays little heed to global politics. But this forklift operator does know that in the two years since Canadians began investing in the mine here, his life has grown better.

“They have improved our wages and increased our productivity,” he said of the outsiders.

Indeed, that higher productivity has helped to turn the mine into a key source of foreign hard currency in dollar-starved Cuba.

Prosperity--through bonuses--has also trickled down to the mine’s 1,700 workers, and, from them, into Moa.

In contrast to the ox-drawn wagons and battered tractor-dragged trailers that clog the rutted roads in steamy, poor eastern Cuba, shiny trucks and machinery crowd the well-paved streets here; Moa’s freshly painted houses put to shame Havana’s chipped, streaky buildings.

But now townsfolk like the forklift operator find their improving prospects threatened by the United States’ first steps to enforce the new Helms-Burton law.

The measure, which aims to tighten the U.S. embargo against the Communist nation 90 miles off the Florida coast and especially to curtail crucial foreign investment there, punishes firms from around the globe that do business using Cuban property expropriated from U.S. corporations after President Fidel Castro took power in 1959.

Helms-Burton has made the Moa mine a focus in an increasingly bitter fight between the U.S. and some of its closest allies. The acrimony intensified Wednesday when the State Department announced that it would enforce one of the law’s most controversial provisions: Nine executives and directors of Sherritt International, the Canadian company that co-owns Moa’s mine, as well as their spouses and children, were told that they will lose their U.S. visas by the end of the summer unless the company withdraws from Cuba.

The Helms-Burton threats, U.S. officials have acknowledged, are unconventional in diplomatic and international trading terms.

But they have also been effective, they say, noting that Cemex, the Mexican cement maker, has agreed to divest its Cuban holdings, and four European investors are reconsidering their financing of Cuban sugar crops, this island nation’s most important export.

“It is clear that the [Helms-Burton] law in many cases has had an inhibiting effect [on foreign investment in Cuba] for some time,” Cuban Foreign Ministry spokesman Miguel Alfonso said Thursday.

This has come at a cost, though, for the U.S., as its furious neighbors and many of its major trading partners are siding with Cuba and see little in Helms-Burton other than election-year posturing. They argue that the law even may destroy the 3-year-old North American Free Trade Agreement among the United States, Canada and Mexico; Canada and Mexico are two of the countries most likely to be affected by Helms-Burton.

“If the U.S. government has an argument with the Cuban government over appropriated or confiscated or seized or stolen property . . . that’s an argument with Cuba, not an argument with Canada or any other country,” Canadian International Trade Minister Art Eggleton said in a recent interview.

The only significant foreign investor in Cuba that appears to have accepted Helms-Burton is Spain--and that acceptance has provoked loud reproach from other European countries.

On Thursday, Britain--which has two of its nationals on the board of directors of Sherritt--assailed Helms-Burton, and the European Union warned Friday that it will freeze U.S. assets and impose visa requirements on Americans if European companies are penalized for investing in Cuba.

The anger that has been building against the American law surprised even Cuba, Mario Rodriguez, the Foreign Investment and Economic Cooperation Ministry spokesman, said in a recent interview.

“We ourselves did not expect such a strong reaction,” he said.

Wednesday’s announcement--which later led two of Sherritt’s directors to resign--infuriated not only the Canadians but also the Mexicans, who sent a diplomatic protest Thursday, asking President Clinton to suspend Helms-Burton, named for its principal sponsors, Sen. Jesse Helms (R.-N.C.) and Rep. Dan Burton (R.-Ind.).

The president has until Monday to suspend elements of the law, which he signed on March 12--just weeks after Cuban MIGs shot down in the Straits of Florida two airplanes piloted by exiles, killing four people. If Clinton does not act, Eggleton said, Canada will try to stop Helms-Burton’s application using procedures outlined in NAFTA.

Both Mexico and Canada have been working in concert to attack the law, which also allows U.S. firms to go to American courts to sue foreign investors using Cuban-appropriated properties.

“This [measure] affects Cuba, but it is a very dangerous international precedent,” Claude Heller, Mexico’s ambassador to Cuba, said in an interview in Havana. “Mexico will maintain trade relations with the countries that Mexico decides. It is not willing to submit to third countries.”

Mexican and Italian companies--joint investors in a project to modernize Cuba’s antiquated telephone system--have also been notified that they may have run afoul of Helms-Burton.

But it came as little surprise to many that Sherritt was the first company targeted under the U.S. law. The firm’s high-profile chairman is Ian Delaney, who is also known as “Castro’s favorite capitalist.”

That alone would be enough to goad U.S. officials, analysts say. But the Moa mine also has been exemplary in demonstrating how much foreign investment can do for Cuba and its international partners--and why that so upsets many Americans.

The Moa nickel plant was commissioned 36 years ago with strikingly bad timing by a company that is now a subsidiary of New Orleans-based Freeport-McMoRan Inc. The facility quickly became one of 5,911 properties that belonged to Americans and that were expropriated shortly after the Cuban revolution.

While the U.S. and Cuba have bickered for years over possible settlements of claims resulting from the Cuban seizures, a company spokesman said Freeport-McMoRan has never pursued any claims over the Moa mine.

The mine kept operating, in part with equipment supplied by what once was the Soviet Union; Soviet draglines still scoop ore here.

But when the Soviet Union began to disintegrate in 1989, the Cubans found themselves without an equipment supplier and a market for nickel.

By 1994, at the depth of Cuba’s economic crisis, production sank to little more than half of the Moa plant’s 24,000-ton annual capacity.

At about the same time, Sherritt found itself without a nickel-ore supplier for its Fort Saskatchewan processing plant. Delaney and Castro struck a deal that gave Sherritt a 49% interest in the mine and Cuba a 49% share of the Canadian plant. That gave Cuba its first off-island investment, as well as access to processed minerals, which are far more profitable than raw ore.

The deal quickly, however, cost Sherritt its U.S. market, the destination of almost half its production. Instead, in a few frantic weeks, Delaney found replacement customers in Europe and Asia. And with those markets in place, he set out to increase Moa’s productivity.

“The first thing we did was ensure the health and safety of the workers,” spokeswoman Patrice Merrin Best said in an interview at the company’s Cuban offices in a mansion on Havana’s outskirts.

Sherritt assigned workers steel-toed boots, hard hats and safety glasses, while building 50 toilets and adding showers and lockers. The protein content of meals in the company cafeteria was raised 50%, an important fringe benefit in a country with a severe meat shortage.

Moa workers also began to receive production bonuses--up to 20% of their wages in U.S. dollars, which meant they could buy goods unavailable for purchase in pesos. The base wage at Moa now is 330 pesos ($17) a month, Best said. But some workers earn four times that sum--an enormous wage by Cuban standards, especially in this poor region.

Combined with modern equipment, these incentives let Sherritt boost production to 20,000 tons annually in 1995. Officials expect the plant to reach its 24,000-ton capacity this year.

Moa and Sherritt, thus, have played big roles in a rebound in Cuban nickel and cobalt production, which rose 35% to 43,900 tons in 1995. That increase in production and exports was an important factor in allowing Cuba’s economy to grow 2.5% last year, ending the plunge that began with the demise of the Soviet Union.

“Cuba has shown that it is not an Eastern European domino,” Rodriguez asserted. “It is an independent country capable of responding to something as difficult as making a place for itself in the world market.”

An important factor in Cuba’s ability to find an improving spot in the global economy, economists said, is the estimated $1.5 billion in foreign investment that Havana has received since opening its economy in 1988--including a significant chunk of support from Sherritt.

Besides its efforts at Moa, Sherritt is helping energy-short Cuba to employ modern oil-recovery techniques to squeeze 7,000 barrels a day--about one-third of Cuba’s domestic production--from old wells near the famed Varadero Beach resort.

Because U.S. investors also claim to have owned those wells before the revolution, Sherritt is exactly the kind of firm that should be targeted for punishment under Helms-Burton, State Department spokesman Nicholas Burns said.

He noted that after the 1991 withdrawal by the Soviets and Russians, respectively, from the Cuban-expropriated properties, “a lot of . . . Canadian [and] European companies waltzed in. They took over the old Soviet investments that were originally American. These companies knew what they were getting into. They were inheriting and investing in assets that belong to United States citizens that have been nationalized by Castro and taken advantage of by the Soviet leadership during the ‘60s and ‘70s and ‘80s.”

Canada and Mexico assert that such investors from their country were exercising their rights as citizens of sovereign countries.

Neither Mexico nor Canada has broken trade or diplomatic ties with Cuba, in part as a demonstration of their independence from the United States. “Mexico has always opposed the U.S. embargo of Cuba, as many other nations have,” Heller said.

Now, though, Helms-Burton forces the nations to choose between their pride and sovereignty and their economic interests. The United States, for each, is overwhelmingly the largest trading partner. Canada-Cuba business, for example, totaled almost $439 million last year, compared to more than $300 billion in U.S.-Canada trade.

And, as for the proposed legal means to test Helms-Burton--a dispute-resolution panel to be convened under NAFTA--few see the possibility of universally satisfying results. Will the losing side, for example, accept the panel’s decision, and if so, how?

In the United States, the free-trade accord has aroused vigorous opposition, especially from American conservatives who decry what they said would be diminished U.S. sovereignty under the agreement.

Analysts fear that an adverse ruling under NAFTA on Helms-Burton would only rekindle simmering American, Mexican and Canadian antipathy to the trade agreement, opening it to new attacks.

“NAFTA has been an important agreement,” Heller said. “It has increased trade and been very positive. U.S. exports have grown. I do not think we should endanger it. It does not seem valid that companies that have business in Cuba cannot continue in the United States.”

Darling reported from Cuba and Turner from Toronto.