Finding Ways to Dabble in Cuba, Legally
By Anthony DePalma. The New York Times. March 5, 2000
With the custody battle over little Elian Gonzalez in the news nearly every day, the Cuba question is again on many minds, including those of some frustrated American investors who see opportunities slipping away.
Since the Soviet Union fell apart, President Fidel Castro has been forced to flirt with capitalism and the United States dollar he once despised. Investors from Canada and many other countries have poured huge sums into Cuba. And a few Americans are putting their money into third-country
companies and closed-end funds with exposure to Cuba -- although the legality of some of this investing by Americans is, at best, blurry.
"Politics aside," said Enrique J. Lopez, a Cuban-American telecommunications consultant in Hialeah, Fla., "Cuba is moving."
The embargo enacted almost 40 years ago still forbids direct American investments. The Cuba-U.S. Trade and Economic Council, a business group based in New York, advises Americans that investing in a foreign company doing business in Cuba is legal so long as they do not own a controlling stake in
the company, and provided that Cuba is not the source of more than half its revenues.
But government regulators say the council is interpreting the exceptions too broadly. Both sides agree that buying into a company like Sherritt International, a Canadian mining concern, is prohibited because a majority of Sherritt's assets are in Cuba.
But other investments are less clear, and the Office of Foreign Assets Control is reluctant to offer guidance.
A more recent trap facing investors in Cuba is the Helms-Burton law, enacted in 1996, which prohibits business executives who use property that Castro confiscated from American owners from entering the United States.
So Cuban investment plays are not for the faint of heart. But they have the advantage of already being in place if, and when, the embargo ends.
One of the newest Cuban ventures is Leisure Canada, a Vancouver development company. It expects to break ground in April on a 370-room tourist hotel on a 2-square-mile beachfront property between Havana and the resort of Varadero.
A Cuban state tourism company will put up $7.5 million in equity, which will be matched by Leisure Canada. The remaining half of the $30 million project will be financed by some Canadian institutions.
To avoid problems with the Helms-Burton law, Wally Berukoff, chief executive of Leisure Canada, said he investigated 443 properties before selecting sites that he was satisfied had no American links. But the bet for American investors is that the embargo will not be in place by the time the
hotel is up and running, in a couple of years.
Leisure Canada trades on Canada's new national exchange, the CDNX. Share prices hit a high in the last year of $3.50 (Canadian) but now trade at $1.78. Analysts expect the stock to remain flat until construction is complete. Berukoff believes that 10 percent to 15 percent of the company's 3,000
shareholders may be Americans. And Robertson Stephens owns 26 percent of Leisure Canada through an offshore fund.
Alan B. Snyder, president of Snyder Capital Management in San Francisco, recently decided to buy into Leisure Canada. "At these prices," he said, "the stock is kind of a perpetual option on Castro and the future of Cuba without him."
More adventurous investors may be tempted to get into the Beta Gran Caribe fund, a British closed-end fund that is not waiting for Castro's government to fall. The fund already has 14 investments in Cuba valued at $26 million.
"We're mostly holding things at cost, anticipating real increases in three to four years," said Peter A. Scott, chairman of Beta.
The most prominent investments are in biotechnology. The fund, for example, owns about 5 percent of York Medical, a private company in Toronto that tests and licenses Cuban medical breakthroughs like a promising anticancer vaccine.
Beta is traded on the Dublin Stock Exchange, but can also be bought through Cedel, a European clearing house. Shares traded recently at 4.75 Swiss francs. Scott said he did not know if Americans participate because he never asks investors to identify themselves. "In theory, we care if
Americans are involved," he said. "But in practice, we're not going to know anyway."
One way around the regulatory morass could be the closed-end Herzfeld Caribbean Basin fund (ticker symbol: CUBA), which has about $9.8 million invested in companies outside Cuba, many of which would benefit from Castro's fall. The fund returned 22.9 percent last year, and closed at $5.125 on
Friday, off 4.7 percent for the year to date.
The fund's top holding is Florida East Coast Industries, which runs a railroad from Miami to Jacksonville. Thomas J. Herzfeld, the fund's manager, says that if the embargo is lifted, the railroad would be used to haul goods shipped to and from Cuba. Its stock closed at $40.75 on Friday, off 20
percent from its January high.
There's even a speculative Cuban bond play. Herzfeld's fund holds $165,000 in face amount of Cuba's sovereign debt, known as "Batista bonds." Herzfeld bought them for $63,000 in 1995 and said they could be worth as much as $291,000, including interest, if paid in full. (The bonds are
now valued at zero.)
Americans eager for a piece of Cuba can also invest in companies that stand to benefit if the government pays off its debts. The ITT Corp. used to own the Cuban telephone system.
When ITT split into three companies in the 1990s, each inherited part of a $130 million-plus-interest claim on property confiscated by the Castro regime.
The Italian company that now runs the Cuban telephone system is paying ITT's successors a total of $30 million over 10 years for the right to temporarily use the confiscated property. If the claim is ever settled, the smallest of ITT's offspring, ITT Educational Services, with a market
capitalization of $361.5 million, could see a modest bump up in its shares.
Castro Pledges Nonstop Fight Against Hostile U.S.
March 4, 2000. Filed at 8:10 p.m. ET
HAVANA (Reuters) - Cuban President Fidel Castro said on Saturday that he was fighting for a total end to U.S. hostility against his country and this battle would go on even after Cuban shipwreck boy Elian Gonzalez was returned to the island.
``We will carry on fighting ... until the whole conspiracy against our nation disappears,'' the 73-year-old leader told reporters after attending a gala dinner for cigar lovers in Havana that went on into the early hours of Saturday.
Castro, who has launched a patriotic crusade for the return of 6-year-old Elian from Miami, made clear he saw the three-month-long custody dispute over the boy as merely one battle in a wider war to overturn U.S. policy against communist-ruled Cuba.
``When Elian comes home, there will be no party,'' he said.
He said Cuba would press on with the longer-term aim of defeating Washington's tactics of ``blockade, economic war and subversion,'' including an economic embargo against Cuba that has been in place since 1962 and immigration regulations that Havana says are hostile.
Castro expressed frustration at the delay in resolving the case of Elian, who has been staying with relatives in Miami since he was rescued on Nov. 25 after surviving a shipwreck off Florida.
11 MIGRANTS DROWNED
Elian's mother and 10 other illegal Cuban migrants drowned, and the boy has been caught up in a bitter custody battle between his father, in Cuba, who wants him returned, and the Miami relatives, who want him to stay.
The clash has strained already sensitive U.S.-Cuban relations and inflamed political ill will between Cuba's communist rulers and right-wing Cuban exiles in Miami.
Castro, who has converted Elian's case into a personal obsession and a national priority, criticized President Clinton's administration for not promptly carrying out a U.S. Immigration and Naturalization Service ruling in early January that the boy should be sent back to his father in Cuba.
``Every day that goes by, it gets more serious ... and the U.S. government has become an accomplice of that,'' he said.
He added, ``I'm not blaming Clinton ... but we need a bit more firmness.'' Castro chastised the U.S. government, the U.S. political establishment and the justice system for showing weakness in the face of strong political pressure and legal moves by anti-Castro Cuban exiles to keep the boy in
Miami.
``There is a lot of cowardice in all of this,'' he said, noting that even candidates for the U.S. presidential nomination had backed the idea of keeping Elian in Miami.
A U.S. District Judge in Miami, Michael Moore, was due to hold a first hearing on Thursday on a lawsuit filed by the boy's Miami relatives against the INS ruling.
Moore took over the case last month after another judge assigned to it had a stroke just days before he was due to hold his first hearing on it.
Castro expressed fears that some last-minute hitch might arise. ``There should be a hearing ... unless the judge falls sick or unless they kill him. That mafia (the Cuban exiles) is capable of killing judges,'' he said.
Custody Case Like Elian's Gets a Much Faster Ruling
By Rick Bragg. The New York Times. March 6, 2000
MIAMI, March 5 -- On the distant edges of the storm that has whipped around Elián González, another, similar child custody case here has been quietly and quickly decided, at least compared with the Elián situation.
In both cases, the mothers of the children left a foreign country for sanctuary in the United States without, allegedly, the fathers' knowledge. And in both cases the fathers have demanded their sons' return.
One, 2-year-old Khalil Shanti, of Jordan, has been ordered home. The other, 6-year-old Elián, of Cuba, remains here.
The difference, say experts on immigration and Miami politics, is one of flags, passions and power.
"We hate Castro, and we don't hate King Abdullah," said David Abraham, a professor of immigration law at the University of Miami.
Elián was found floating off the beaches of Fort Lauderdale on an inner tube on Thanksgiving Day. His mother drowned, along with 10 other people, trying to come to the United States.
Khalil came to the United States from Amman, Jordan, because his mother said that his father had abused her, and she wanted her son to grow up in this country.
"A living mother's case should be stronger than a deceased mother's case," Mr. Abraham said. "It is that plain and simple. The González case was only put into question because of the reluctance of the federal government to deal with Cuba as it deals with Jordan or any other
country.
"This has opened the door to endless mischief in the González case," he said, "and the delay will hurt Elián."
Efforts by Elián's father to take him back to the island -- backed by Mr. Castro and opposed by the politically powerful Cuban American National Foundation in Miami -- set off parades, traffic jams and slowdowns, court hearings, a federal lawsuit and political meddling on both sides of
the Florida Straits.
More than three months later, after many news conferences and the construction of a tent city for the news media just outside the boy's house, Elián is still here.
In the case of Khalil Shanti, his future has apparently been decided by one barely publicized family court hearing and eight hours of testimony.
Few people in Miami fly the Jordanian flag from their car's radio antenna, and no one here, it seems, is willing to lie down in front of traffic to prevent Khalil's return to Amman.
"Cubans have a different status in this country than everybody else," said Richard Marx, a lawyer representing María Eugenia Pereira, Khalil's mother.
In both cases, there arose a question of jurisdiction.
In a custody hearing in Miami on Tuesday, Circuit Judge Henry Harnage said that the question of Khalil's custody was not within the jurisdiction of any American court.
His custody must be decided in Jordan, where the child was born and spent most of his life, Judge Harnage ruled, and then he ordered the child returned to Jordan within 10 days.
Ms. Pereira said she worried that in Jordan, a male-dominated society, she would have little chance of keeping her son.
"I am very afraid," she said.
She has filed a motion to stay the judge's order while her lawyers appeal.
But at least, said the child's father, Ibrahim Shanti, there has been a clear, simple decision.
On Wednesday, the day after Khalil's case was decided in a Miami courtroom, Elián's cousin, Marisleysis González, wept before a Senate Judiciary Committee in Washington, pleading with the members of the committee to find a way to keep Elián in Miami, where he has lived with
his relatives since he was rescued from the sea.
Meanwhile, a hearing on a federal lawsuit intended to block the boy's return to Cuba is scheduled for Thursday in United States District Court in Miami.
The Immigration and Naturalization Service has argued that it should decide the issue, and in January ruled that Elián should rejoin his father in Cuba. According to the I.N.S., only Elián's father can speak for him.
But here, where Cuban Americans dominate the political landscape, everyone from Ileana Ros-Lehtinen, a Republican United States Representative for Miami, to leaders of the city's many anti-Castro groups, have swung their weight behind the effort to keep the boy here. Presidential candidates, who
have always courted the Cuban vote here, have insisted that the boy should stay.
The Khalil case is different in some other ways. Both parents are American citizens, as is the boy. Mr. Shanti, a clothing retailer, met his wife, Ms. Pereira, who is from Puerto Rico, when he was in college at Barry University in Miami in 1993.
He went back to Jordan to work in the family business and she stayed to go to school at the University of Miami. They married in 1995 in Miami and returned to Jordan to live.
She told the judge that her husband had hit her and mistreated her, and in July she brought the child here for a visit and decided to stay.
Mr. Shanti, who said he had never abused his wife in any way, came to Miami in December to fight for his child, and their lawyers presented their arguments in the family court hearing last week.
"She got out of Jordan because it wasn't safe for her or her child," said Mr. Marx, Ms. Pereira's lawyer.
Mr. Shanti's lawyer, Elizabeth Baker, said the mother tried to paint her client as something he was not.
"He's a 20th-century dad," Ms. Baker said. "He was a very involved father who did everything to help his wife out. He changed diapers, fed him, played with him, helped watch over him."
Mr. Shanti said he was afraid his wife would try to do with his son what others have done with Elián. She marched this week in front of the courthouse carrying a protest sign, and was joined by 10 friends and supporters.
She went to Representative Ros-Lehtinen for help, and got it. The congresswoman said the community should come out in support of her battle to keep her child.
But there is little chance of a public outcry one way or another in an American city where many people consider themselves Cubans first, and no other issue carries such heat.
"There is no on-going cold war with Jordan," Mr. Abraham said.
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