Cuba Wrangle Puts Mexicans in the Middle

Pity poor Javier Garza Calderon, president of the Mexican company Grupo Domos, which manages Cuba’s telephone company.

The U.S. government has warned the executive to dump his Cuban investment by today--or lose the visas that let him, his family and several other executives enter the United States. Garza Calderon typically visits 60 times a year.

But if he pulls out of Cuba, he could be subject to heavy fines levied by his own government under an “antidote” law passed by the Mexican Congress this week.

Which side to choose? That’s the question facing executives around the world as the U.S. government and some of its closest allies engage in an increasingly bitter skirmish over the so-called Helms-Burton Act passed by the U.S. Congress last spring.

The law punishes foreign companies that use U.S. property in Cuba confiscated after Fidel Castro came to power 37 years ago. While little-known to many Americans, the law has become a flagrant symbol of overbearing Yanqui behavior to Mexicans, who have been important investors in Cuba.

Now key U.S. allies are stepping up their retaliation against the law. On Wednesday, Canada announced it was joining the 15-nation European Union in challenging the U.S. legislation at the World Trade Organization.

And late Tuesday, Mexico’s Chamber of Deputies followed the Senate in approving a bill retaliating against Helms-Burton by imposing fines of up to $300,000 on citizens here who obey the U.S. legislation. Canada and the EU are also considering countermeasures.

“This is a friendly wake-up call to our most important partners,” Fernando Solana Morales, president of the Mexican Senate’s foreign relations committee, said in a not-so-veiled reference to the United States.

“In this new international order, we all have to act based on the law.”

Garza Calderon, whose Grupo Domos bought half of Cuba’s phone company in 1994, is caught in the middle. He sees the new law as a positive step, a spokesman said.

Domos has adamantly defended the Cuba investment since being notified in August by the U.S. State Department that it appeared to be using former U.S. properties. New York-based ITT ran the phone system before the Communist era began.

The Mexican legislation “supports us, because the company is obligated to obey, first of all, the laws of this country,” said Hector Cuellar, a spokesman for the Domos president. “Logically, it’s impossible for us to subordinate ourselves to the guidelines in the Helms-Burton law.”

At least one other Mexican company, however, has quietly pulled out of Cuba to avoid facing Helms-Burton sanctions. Cementos Mexicanos, known as Cemex, stopped providing marketing and technical services to a Cuban cement firm last spring after receiving a U.S. warning, according to officials in Washington. About a dozen such companies worldwide have taken such action.

That kind of decision, however, will be increasingly difficult for Mexican companies to make under the “antidote” law passed Tuesday.

The law prohibits anyone in Mexico from obeying “extraterritorial” laws such as Helms-Burton. It requires residents to inform the Mexican government when they could be affected by such a law, and prohibits them from providing information to foreign authorities trying to carry it out. Offenders could be fined as much as $300,000.

A spokesman for Sen. Jesse Helms (R-N.C.), a sponsor of Helms-Burton, acknowledged that Mexican businessmen were being put in a “damned-if-you-do, damned-if-you-don’t” situation.

But the spokesman, Marc Thiessen, said such a bind will wind up reinforcing Helms-Burton. In practice, he said, Mexican companies that pull out of Cuba will probably blame their decision on poor economic conditions on the island rather than on U.S. law.

Until now, the impact of Helms-Burton has been limited because only part of it is currently in effect. It allows U.S. visas to be withdrawn from foreign executives who “traffic” in former U.S. properties in Cuba. Foreign countries can do little about U.S. visas.

A more controversial part of Helms-Burton, however, would allow former American owners of expropriated Cuban property to sue current owners. President Clinton has put that part of the law, known as Title 3 on hold until at least January.

If Title 3 takes effect, the “antidote” law would allow retaliation in Mexican courts, leading to a possible legal war with the U.S.

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Rock, Javier Garza Calderon, Hard Place

Jvier Garza Calderon’s company, Grupo Domos, bought 49% of Cuba’s telephone company in 1994 for $750 million. U.S. officials say he is trafficking in property confiscated from ITT, whichran the phone system before the Cuban revolution.

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Under the U.S. Helms- Burton Act, here’s what happens:

* Garza Calderon must pull out of the investment or leave his Grupo Domos job by today. If not, he, his family members, four other executives and their family members lose their U.S. visas. He has children in schools in Wisconsin and Massachusetts and makes 60 trips a year to the United States.

* If the second phase of Helms-Burton goes into effect next year, ITT could sue Grupo Domos in U.S. court over the loss of its Cuba property and win damages.

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Under Mexico’s retailatory “antidote” law, here’s what happens:

* If Garza Calderon obeys Helms-Burton and pulls out of Cuba, he faces fines by the Mexican government of up to $300,000.

* If ITT prevailed in U.S. court, Mexican courts would not recognize any such decision against Grupo Domos- and would allow Grupo Domos to countersue ITT in Mexican courts for the same amount of damages.

* If ITT refused to pay, Grupo Domos could theoretically put a lien on its Mexican properties- say, its Sheraton hotels. Mexican officials say they don’t expect disputes to reach that level.