Tag Archives: Compensation issue

TRUMP’S CUBA GAMBIT PUSHES CANADIAN MINER SHERRITT TO THE BRINK

Posted on June 5, 2019 by Arch Ritter

Original article: Sherritt could get caught in the crossfire between U.S. and Cuba

Paula Sambo and Danielle Bochove,

Bloomberg News, June 5, 2020

 

Sherritt International Corporation’s nickel mine in Cuba.

Sherritt International Corp. (S.TO), whose executives were once known as Fidel Castro’s favorite capitalists, is paying the price for its close ties to the struggling Caribbean nation.

The Canadian miner, which gets all its revenue from assets in Cuba, is being hit on multiple fronts by Donald Trump’s isolationism, plunging nickel prices and cost overruns. With the stock at 21 cents and its bonds trading at distressed levels, investors are starting to question the company’s viability.

“It all depends how the world unfolds in terms of commodity prices and the U.S.-Cuban relationship,” Chief Executive Officer David Pathe said in an interview this week. “There’s only so much that we can do right now and that’s focusing on the things that we can control.”

The Toronto-based miner is a shadow of what it once was. Long-known as a proxy for Cuba since former CEO Ian Delaney first engaged with Castro in the 1990s to develop the island’s nickel, oil and gas assets, Sherritt prospered as U.S. relations thawed over the past two decades and commodity prices soared.

Revenue jumped to almost $2 billion a decade ago, while the stock traded as high as $18 in 2007. Since then, the stock has dropped 99 per cent amid heightened country risk, a failed project in Madagascar, cost overruns and the collapse of the commodity super-cycle. The company’s bonds are trading at about 30 Canadian cents, according to multiple portfolio managers, implying low recovery in case of a default or debt overhaul.

“We have seen some bonds selling in the context of more aggressive U.S. policy towards Cuba, which has caused holders that have significant interests or operations in the U.S. to get out,” Pathe said. “That is what it is. From our perspective, we are focused on running our business as best we can.”

Sherritt’s debt costs are rising even as the company’s ability to generate cash flow to service that debt falls. Concerns about global growth have knocked the price of nickel down 24 per cent over the last year, reducing the amount of cash Sherritt receives from markets outside Cuba. Meanwhile, a tightening of U.S. sanctions against Cuba this year has resulted in the island nation being unable to pay Sherritt for the energy it produces in foreign currency and has caused bondholders to sell the company’s debt.

“We have deliberately avoided having any presence in the U.S. since Helms-Burton came in 23 years ago,” said Pathe, who is barred from entering the country under a section of the act. Despite this, the company is being caught in the cross-fire as Trump punishes Cuba for its support of Venezuela, and takes aim at trading partners around the world.

Debt Reduction

Having managed to knock around $2 billion off its debt in recent years, the 92-year-old company’s top priority is to continue to see that balance come down and reduce interest expenses, according to its CEO. The next big bond maturity is $170 million in notes in 2021 and the company has a $70 million revolving facility due next year that it anticipates renewing ahead of the maturity, Pathe said.

As it hangs on by its fingernails, some debt investors are seeing a silver lining ahead.

“They are trading below their working capital; the optionality is huge even excluding long-term assets like the refinery” said Paul Tepsich, founder and portfolio manager at High Rock Capital Management Inc. in Toronto, referring to the refinery in Alberta. “I think they get a deal signed with Cuba imminently and that produces strong cash flow on a monthly basis to Sherritt.”

For Tepsich, who owns Sherritt debt, the company has room to buy back bonds. The Moa nickel-and-cobalt mine joint venture should also provide both cash flow and dividends in hard currency, he said. The company produces electricity, oil and gas in Cuba and has a 50 per cent stake in the Moa mine, although it finishes the ore in Canada.

Coal Sale

For more than a decade, Sherritt has fought to reduce its debt, selling all of its coal assets in 2013 as commodity prices languished. A spike in cobalt prices in 2017 helped the company post its first annual profit since 2012 but it fell back into the red last year. Total debt stands at $706 million, less than a third of what it was less than two years ago.

Sherritt’s debt almost quadrupled between 2007 and 2008 as the company developed the massive Ambatovy nickel and cobalt project in Madagascar with Sumitomo Corp. and Korea Resources Corp. From the start, the project was plagued with delays and cost overruns, not to mention a political coup that resulted in the suspension of mining licenses.

Meanwhile, the company’s footprint in Cuba has created constant challenges. In 1996, Sherritt executives and shareholders were the first to be banned from the U.S. under the Helms-Burton law.  Twelve years later, Fidel Castro’s resignation sparked hope for more foreign investment in Cuba but progress, including subsequent American liberalization under President Barack Obama, has recently been overshadowed by a tightening of policy under Trump. The pressure has worsened Cuba’s access to foreign currency; it owed Sherritt almost US$172 million at the end of the first quarter, although Sherritt said a plan is in place to manage payments.

Last April, meanwhile, the White House said it would activate a provision of Helms-Burton that would let Americans sue for land confiscated in the 1959 revolution.  That’s a big deal for Sherritt: The US$88.3 million claim against its nickel mine is now greater than the company’s market capitalization.

 

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TRUMP DECLARES ECONOMIC WAR ON CUBA

Posted on May 31, 2019 by Arch Ritter

April 18, 2019 6.45am EDT

William M. LeoGrande, Professor of Government, American University School of Public Affairs

Original Article: Trump Declares Economic War on Cuba

The Trump administration has declared the most severe new sanctions against Cuba since President John F. Kennedy imposed an economic embargo banning all trade with the communist island in 1962.

Speaking in Miami on April 17, the anniversary of the United States’ failed 1961 invasion of Cuba’s Bay of Pigs, national security adviser John Bolton announced the end of virtually all non-family travel to Cuba and placed new limits on the money Cuban Americans can send to family on the island.  He also said the U.S. will now implement a 23-year-old law aimed at blocking both U.S. and foreign investment in Cuba, first passed by Congress in 1996 as part of a broader sanctions package against Cuba but put on hold because it triggered immense opposition among U.S. allies.

The harsh new sanctions reverse “the disastrous Obama-era policies, and finally end the glamorization of socialism and communism,” Bolton said.

A law too controversial to implement

Trump’s decision activates a long-suspended 1996 provision of U.S. Cuba sanctions that allows Cuban Americans to sue in U.S. courts any company that benefits from private property of theirs confiscated by Fidel Castro’s regime.

Normally, U.S. courts have no jurisdiction over property owned by non-citizens that is nationalized by a foreign government. For U.S. courts to sit in judgment of another government’s actions toward its own citizens in its own territory is a challenge to that government’s sovereignty.

U.S. allies who do business with Cuba vehemently oppose the move.

In 1996, when the U.S. law was first approved, the European Union filed a complaint with the World Trade Organization and adopted a law prohibiting EU members and their companies from complying with the U.S. legislation. Mexico, Canada and the United Kingdom soon passed similar legislation.

In response, President Bill Clinton suspended the lawsuit provision, which is called Title III, for six months, and in 1998 he signed an agreement with the EU that European companies who do business in Cuba would not be targeted.  Since then, every president, Democrat and Republican, has renewed the suspension. Trump himself renewed it three times – until he didn’t.

The president has now reignited international outrage over this sanction, which abrogates Clinton’s agreement with the EU and complicates already rocky U.S. relations with Mexico and Canada.

Who wins?

A small but elite community stands to benefit from Title III: Cuba’s former one percenters – members of the exiled upper class that owned nearly all the land and business in Cuba prior to the 1959 Cuban Revolution.

Most wealthy Cubans fled the country after Fidel Castro’s Communist government nationalized their businesses and confiscated their homes, bank accounts and property. Some still dream of recouping their lost fortunes.  They can now sue Cuban, American and foreign companies that profit in any way from the use of that property.  For example, former owners of Cuba’s nickel mines could seek damages from Canada’s Sherritt International Corporation, which has invested in Cuba’s nickel mining industry. The former owners of Cuban hotels could sue the Spanish hotel company Melia, which manages hotels across the island.

Every U.S. and foreign company that does business with Cuba – or might do so in the future – risks being sued if they make use of property once owned by a Cuban exile who is now a U.S. citizen. According to a 1996 State Department analysis, implementing Title III could flood U.S. federal courts with as many as 200,000 lawsuits.

Trump’s 2020 bet

Most Cuban Americans will gain nothing from Trump’s latest sanctions.  It exempts private residences from compensation. So, if the main thing you owned back in Cuba was a house that was confiscated after Jan. 1, 1959, you’re out of luck.  The exiled owners of thousands of small Cuban mom-and-pop shops nationalized in 1968 won’t see compensation, either, because the law exempts Cuban small businesses that were confiscated.

Those who stand to benefit are the oldest, most conservative and wealthiest segment of Florida’s 1.5 million Cuban Americans.  Trump believes these influential Republicans helped him win Florida in 2016 because he promised to take a hard line toward Havana, rolling back President Obama’s restoration of diplomatic and economic relations with the island.

If the president thinks these punishing new sanctions can deliver Florida to him again in 2020, he may have miscalculated.

I’ve studied Cuba-U.S. relations for decades. While activating the law may please Cuba’s former wealthy business owners, Trump’s new sanctions – like limiting the money Cuban Americans can send back to the island – are unlikely to be popular in the broader Cuban American community.  By decisive majorities, Cuban Americans support free travel between the U.S. and Cuba, broader commercial ties and President Obama’s decision to normalize relations. Every year, they send $3 billion to family on the island, and hundreds of thousands of them travel there to visit.  These Cuban-American voters don’t want to inflict more economic pain on the Cuban public, which includes their friends and family.

Hurting everyday Cubans

The punitive aspects of the newly implemented law, which administration officials have for months hinted that they would put into effect, are already having an impact.

Cuban American families who owned the land and facilities at the port of Havana and José Martí International Airport have warned the cruise ship companies and airlines that their use of these properties could put them at legal risk.

Along with money sent from their families abroad, tourism-related income sustains many everyday Cubans.

If travel businesses withdraw from Cuba, and if U.S. and foreign firms hesitate to enter into new commercial relations with Cuba for fear of incurring lawsuits in the United States, Cuba’s already fragile economy would take a serious hit.

That may play well with Cuba’s old elite. But the rest of Florida’s Cuban Americans will feel the hurt, too.

 

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PRESIDENT TRUMP RISKS ALIENATING ALLIES OVER CUBAN AMERICAN PROPERTY CLAIMS

Posted on February 14, 2019 by Arch Ritter

William M. LeoGrande

February 14, 2019

The Trump administration is seriously considering whether to allow Title III of the Cuban Liberty and Democratic Solidarity Act (Helms-Burton) to go into effect in March, according to National Security Adviser John Bolton. On January 16, Secretary of State Mike Pompeo announced that he was suspending Title III for just 45 days instead of the ususal six months while the administration reviews whether its implementation would promote democracy in Cuba. He warned foreign companies doing business on the island that they had better “reconsider whether they are trafficking in confiscated property and abetting this dictatorship.”

Title III allows U.S. nationals to file suit in U.S. courts against anyone “trafficking” in their confiscated property in Cuba—that is, anyone profiting from it. If President Trump allows Title III to go fully into effect, he will open the door to as many as 200,0000 law suits by U.S. nationals, most of them Cuban Americans, whose property was taken by the Cuban government after 1959. U.S. courts would be swamped, the ability of U.S. companies to do business on the island would be crippled, and allies abroad might retaliate for U.S. suits brought against their companies in Cuba. Once the suits have been filed, there will be no way to undo the resulting legal chaos and the tangle of resulting litigation could take years to unwind.

The U.S. Foreign Claims Settlement Commission has certified 5,913 claims of U.S. nationals whose property was seized. These are the claims that Cuba recognizies and that the United States and Cuba had begun to discuss during the Obama administration. But Title III takes the unusual position of allowing naturalized Cuban Americans who lost property to also file suit against alleged traffickers. Normally, international law recognizes the sovereign right of governments to dispose of the property of their own citizens. According to the Department of State, by including Cuban Americans who were not U.S. citizens when their property was taken, Title III creates the potential for an estimated 75,000-200,000 claims worth “tens of billions of dollars.”

Back in 1996, when the law was being debated in Congress, angry opposition from U.S. allies Canada, Mexico, and the European Union, whose companies doing business in Cuba would be the targets of Title III law suits, led President Bill Clinton to insist on a presidential waiver provision in Title III. As a result, the president has the authority to suspend for six months the right to file Title III law suits, and he can renew that suspension indefinitely. Every six months since the Cuban Liberty and Democratic Solidarity Act was passed, successive presidents, Democrat and Republican alike, have continued the suspension of Title III.

U.S. allies have denounced Title III’s extraterritorial reach. Mexico, Canada, the United Kingdom, and the European Union all passed laws prohibiting compliance with it. The European Union also filed a complaint with the World Trade Organization, which it did not pursue after President Clinton suspended Title III. In fact, the principal justification both President Clinton and President George W. Bush offered for continuing the suspension was the need to maintain cooperation with European allies.

If President Trump does not renew the suspension, all these old wounds with allies will be reopened as U.S. claimants try to haul foreign companies into U.S. courts for doing business in Cuba. We already have enough tough issues on our agenda with Mexico, Canada, and Europe without adding another one. At this very moment, Washington is trying to muster their support in dealing with the Venezuelan crisis, support that could be endangered if the administration picks a fight with them over Title III.

U.S. businesses would not be exempt from potential liability. A Cuban American family in Miami claims to have owned the land on which José Martí International Airport was built, so any U.S. carrier using the air field could conceivably be sued under Title III. Another family that owned the Port of Santiago could file suit against U.S. cruise ships docking there.

Moreover, it would be almost impossible for a U.S. or foreign company to know in advance whether a proposed business opportunity in Cuba might become the subject of Title III litigation. “This will effectively end for decades any attempt to restore trade between the U.S. and Cuba,” attorney Robert Muse told the Tampa Bay Times.

When President Trump announced new sanctions on Cuba back in June 2017, senior administration officials said they were designed “to not disrupt existing business” that U.S. companies were doing in Cuba. If the president fails to continue the suspension of Title III, business relations will be disrupted far more severely and irreparably than they would be by any regulatory change.

William M. LeoGrande is Professor of Government at American University in Washington, DC, and co-author with Peter Kornbluh of Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana (University of North Carolina Press, 2015)

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THE SHERRITT–CUBA JOINT VENTURE: UNCERTAINTIES FOR BOTH PARTNERS

Posted on September 6, 2016 by Arch Ritter

By Arch Ritter  

September 6,  2016

Cuban nickel production and the Sherritt-Cuba joint venture should have good prospects in view of Cuba’s large and low-cost reserves of nickel. Sherritt’s technology and probable future demand.  However, there are a number of looming issues that darken the horizon for Sherritt and to a lesser extent for Cuba including high transportation costs – shipping nickel/cobalt concentrate from Cuba to Fort Saskatchewan Alberta – together with the “Helms-Burton” status of the mine, and future price levels and volatility..

The Moa mine and processing facility, with a 25,000 ton capacity, were initially constructed by US interests – the Moa Bay Mining Company, a subsidiary of Freeport Sulphur. They used proprietary technology from Sherritt, which had pioneered hydrometallurgy processes at their plant in Fort Saskatchewan Alberta. Extraction and processing began in 1959.

The Government of Cuba then expropriated the operation without compensation in August, 1960 and restarted it in 1961 producing concentrate for the Soviet Union.  The US Foreign Claims Settlement Commission (US FCSC) valued the company at US$ 88.4 million at the time of the expropriation.

Sherritt’s direct connection with Cuba began in 1991 with purchases of Cuban nickel concentrate for its Alberta refinery.  Sherritt had had insufficient volumes of concentrate for many years and in 1990 a refining contract with INCO expired. In 1994, Sherritt International and the Compania General de Niquel of Cuba established a 50/50 joint venture, which now owns the Moa extraction, processing, and smelting operation, the Alberta refinery and the international marketing enterprise. The former President of the company, Ian Delaney, also negotiated agreements with the Cuban Government, permitting Sherritt to enter other sectors of the economy, including electric energy, oil and gas, agriculture, tourism, transportation, communications, and real estate. By 2000, Sherritt International had become a major diversified conglomerate in Cuba.

In this deal, the Cuban Government became and is currently a foreign investor in Canada, as the Compania General de Niquel owns 50% of the nickel refinery, a fact not well known in either Cuba or Canada.

The joint venture between Sherritt International and the Government Cuba is a cooperative masterpiece.  It has generated great benefits for both parties.

 I.         The Nickel/Cobalt Operation

The linking of the Moa nickel deposit and part of Cuba’s processing capacity with the Alberta refinery and its access to attractive energy sources was a stroke of genius and/or good luck for Sherritt and Cuba.

Cuba acquired a market for its nickel concentrate. It acquired access to the technological improvements that have occurred from 1959 to 2016.  These have generated improvements in productivity, energy efficiency, environmental impacts, and health and safety.  It acquired Sherritt’s managerial know-how which. Together with technological improvements, have increased production from around 12,500 tons in the early 1990s to around 34,000 tons in the 2010s.zzzzz3The Government of Cuba is now the joint owner of a vertically integrated nickel operation, from extraction and concentrating through to refining and international marketing. Cuba also has obtained new technologies and managerial skills for oil and gas extraction and utilization, as well as electricity generation.  Cuba’s nickel reserves are fifth largest in the world and production volumes are 10th largest.[i] Nickel has been Cuba’s largest merchandise export since the collapse of sugar by 2002. Foreign exchange earnings from the Sherritt-Cuba joint venture’s share of nickel and cobalt exports have averaged about 40% of total nickel/cobalt exports.

It is not surprising that Ian Delaney became known as “Fidel’s Favorite Capitalist”!

For its part, Sherritt has been able to maintain its Canadian refinery and to use its base in nickel to enter other sectors in Cuba. Its earnings from its Cuban operations are significant. The joint venture has been able to increase metal production and achieve high net operating earnings, which have been in the area of 40 to 50 percent of the company’s gross revenues for most years, depending on international nickel prices.  The following chart illustrates Cuba’s total nickel production volumes.  The impact of Sherritt’s innovations in increasing production volumes in the second half of the 1990s is apparent.

 II.        Petroleum, Natural Gas and Electric Power

Sherritt International’s petroleum and natural gas activities also have been successful. New sources of oil and gas have been discovered and extraction rates have increased through enhanced recovery techniques from 1996 to 2000. Natural gas recovery and utilization has also been improved through the construction of two processing plants, a feeder pipeline network, and a 30 Kilometer pipeline to Havana (Sherritt International, Annual Report, 1997, 13).

Sherritt invested CDN $215 million for the construction of two integrated gas processing and electrical generation systems. The natural gas feedstock previously had been flared and wasted. Commissioned in mid-2002, these operations had a combined capacity of 226 megawatts and generated a significant proportion of Cuba’s electricity. At the same time they reduced sulfur emissions, a potential problem especially at the Varadero site, which is adjacent to the hotel zone. By 2007, installed electricity generation capacity had been further increased to 375 mega watts, following an 85 MW expansion that came on stream in early 2006.

In February 1998, Sherritt acquired a 37.5 percent share of Cubacel, the cellular telephone operator in Cuba for $US 38 million, but this was resold. “Sherritt Green,” a small agricultural branch of the company, entered market gardening, cultivating a variety of vegetables for the tourist market. Sherritt also acquired a 25 percent share of the Las Americas Hotel and golf course in Varadero and a 12.5 percent share of the Melia Habana Hotel, both of which were managed by the Sol Melia enterprise but these also have been divested.  By 2010, Sherritt’s Cuban operations were large and growing. Gross revenues reached CDN $1,040 million in 2008.

 III.      Energy Costs, Transport Costs and Potential Relocation

However, there are a number of clouds on the horizon for Sherritt. First, Cuban nickel concentrate is transported by ship to the east coast of Canada and then overland to the Alberta refinery. This makes some sense economically when energy prices are low.  So far, the existence of the refinery there has compensated for high transportation costs. However, if – or when –transportation costs rise with higher energy prices or when full normalization with the United States occurs or when the existing plant reaches the end of its useful life, would a different location become more attractive?   Energy sources are also available in Venezuela as well as the Gulf of Mexico region of the United States or could be transported to Cuba itself in future.  At some point it will likely make sense to relocate a refinery to a locale closer to the nickel ore body.

 zz3

So far, Cuba is tied to the Canadian location through its 50% joint ownership of the Alberta refinery. But would Sherritt relocate the refinery to a lower-risk Cuba at some time in the future, or to the post-embargo United States or a post-Maduro Venezuela?  Perhaps. However, Alberta will continue to have competitive energy prices and low risk to compensate for its locational disadvantage for some years to come.

 IV.       “Helms-Burton” Status of the Mine Properties.

The second possible problem for Sherritt is that the Moa mine and the concentration plant are “Helms-Burton” properties for which there are US claimants. What would be the current value of the Using the US FCSC interest rate of 6% per year of non-payment, the 2016 compounded value would be a whopping US$ 2,054.6 million. Obviously there will be a negotiations problem for this and all other such claims.

Resolution of the compensation claims issue with full US-Cuba normalization may require Sherritt and the Government of Cuba to negotiate some sort of compensation package for the original US owners.  In one scenario, the US claimants would simply take over the Cuba-Sherritt operation in Cuba. But this would not be reasonable because at this time, the refinery for Cuban nickel is in Alberta and it is jointly owned by Cuba. My guess, however, is that Sherritt, the Government of Cuba and the US claimants will negotiate an arrangement that will be reasonable for all parties.

In any case, the claim of US interests on the mine property generates ambiguities and uncertainties and will be problematic at some time in the future. Sherritt International may well be one of the few economic interests that perhaps could lose from US-Cuban complete economic normalization. A resolution of the property claims issue may turn out to be very expensive for Sherritt. .

 V.        “Nickel Pig Iron”

A technological advance in the production of “Nickel Pig iron” (NPI), a substitute for refined nickel-steel alloys for some uses where high quality is less necessary.  “Nickel pig iron” may well have already captured a portion of the nickel market for low quality alloys.  In future, it may reduce the demand for nickel thereby placing downward pressures on nickel prices. This will likely reduce and Cuba’s foreign exchange earnings and Sherritt’s revenues and profits from nickel exports in future.

As illustrated in Chart 2, nickel prices spiked in the boom of 2003-2007 – helping to generate a period of relative prosperity for Cuba – then declined in the recession of 2008.  What is striking at this time is that in real inflation adjusted terms, the price of nickel in 2015 and 2016 is pretty much where it was in the 1990s. A number of factors are contributing to this of course, especially the growth rate deceleration in China reducing the demand for nickel.  Is “nickel pig iron” also contributing to weak demand for nickel at this time?  What will be its impact in future?

 zzzzz2

Source: United States Geological Survey, Minerals Information, Nickel: Statistics and information., various years. The “real” or “inflation adjusted” price is the US consumer price deflator.

In conclusion, Sherritt has had a great run in Cuba, contributing to improved nickel production and exports, higher foreign exchange earnings for Cuba and high revenues and profits for itself, especially in the 2004-2014 decade.  The future may be less brilliant for both with the uncertainties of resolving the property claims issue and a possible slow=down in international demand for nickel generated in part by “nickel pig iron.”

[i] United States Geological Survey, Commodity Surveys, Nickel, 2016. http://minerals.usgs.gov/minerals/pubs/commodity/nickel/mcs-2016-nicke.pdf

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ASSOCIATION FOR THE STUDY OF THE CUBAN ECONOMY, PAPERS AND PROCEEDINGS OF THE TWENTY-FIFTH ANNUAL MEETING, JULY 30-AUGUST 1, 2015

Posted on April 18, 2016 by Arch Ritter

ASCE: Cuba in Transition: Volume 25

Papers and Proceedings of the Twenty-Fifth Annual Meeting,  July 30-August 1, 2015

All papers are hyperlinked to the ASCE Website and can be seen in PDF format.

wwwPreface

Conference Program

Table of Contents

Reflections on the State of the Cuban Economy Carlos Seiglie

¿Es la Economía o es la Política?: La Ilusoria Inversión de K. Marx Alexis Jardines

Los Grandes Retos del Deshielo Emilio Morales

Preparing for a Full Restoration of Economic Relations between Cuba and the United States Ernesto Hernández-Catá

Economic Consequences of Cuba-U.S. Reconciliation Luis R. Luis

El Sector Privado y el Turismo en Cuba Ante un Escenario de Relaciones con Estados Unidos José Luis Perelló Cabrera

The Logical Fallacy of the New U.S.-Cuba Policy and its Security Implications José Azel

Why Cuba is a State Sponsor of Terror Joseph M. Humire

The National Security Implications of the President’s New Cuba Policy Ana Quintana

Factores Atípicos de las Relaciones Internacionales Económicas de Cuba: El Rol de los Servicios Cubanos de Inteligencia Enrique García

Entrepreneurship in Post-Socialist Economies: Lessons for Cuba Mario A. González-Corzo

When Reforms Are Not: Recent Policy Development in Cuba and the Implications for the Future Enrique S. Pumar

Revisiting the Seven Threads in the Labyrinth of the Cuban Revolution Luis Martínez-Fernández

La Economía Política del Embargo o Bloqueo Interno Jorge A. Sanguinetty

Establishing Ground Rules for Political Risk Claims about Cuba José Gabilondo

Resolving U.S. Expropriation Claims Against Cuba: A Very Modest Proposal Matías F. Travieso-Díaz

U.S.-Cuba BIT: A Guarantee in Reestablishing Trade Relations Rolando Anillo, Esq.

Lessons from Cuba’s Party-Military Relations and a Tale of “Two Fronts Line” in North Korea Jung-chul Lee

The Military, Ideological Frameworks and Familial Marxism: A Comment on Jung-chul Lee,“A Lesson from Cuba’s Party-Military Relations and a Tale of ‘Two Fronts Line’ in North Korea” Larry Catá Backer

Hybrid Economy in Cuba and North Korea: Key to the Longevity of Two Regimes and Difference Young-Ja Park

Historical Progress Of U.S.-Cuba Relationship: Implication for U.S.-North Korea Case Wootae Lee

Estimating Disguised Unemployment in Cuba Ernesto Hernández-Catá

Reliable Partners, Not Carpetbaggers Domingo Amuchástegui

Foreign Investment in Cuba’s “Updating” of Its Economic Model Jorge F. Pérez-López

Global Corporate Social Responsibility (GCSR) Standards With Cuban Characteristics: What Normalization Means for Transnational Enterprise Activity in Cuba Larry Catá Backer

Bienal de la Habana, 1984: Art Curators as State Researchers Paloma Checa-Gismero

Luchas y Éxitos de las Diásporas Cubana Lisa Clarke

A Framework for Assessing the Impact of U.S. Restrictions on Telecommunication Exports to Cuba Larry Press

Measures to Deal with an Aging Population: International Experiences and Lessons for Cuba Sergio Díaz-Briquets

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RECONCILING U.S. PROPERTY CLAIMS IN CUBA: TRANSFORMING TRAUMA INTO OPPORTUNITY

Posted on December 8, 2015 by Arch Ritter

Richard Feinberg, December 2015,  Brookings Institute

Original Here: Reconciling U.S. Property Claims in Cuba: Transforming Trauma into Opportunity.” 

zzzzzzzzz CONCLUSION:  . A Grand Bargain?

In their opening meetings, the U.S. and Cuba will present their conflicting claims. One possible outcome is protracted and contentious negotiations. But there is a much more promising alternative approach: to take advantage of the very size and complexity of the conflicting claims and to make their resolution the centerpiece of a grand bargain that would resolve some of the other remaining points of tension between the two nations, and embrace an ambitious, forward-looking development strategy for Cuba.

There are precedents for such a grand bargain, in such cases as the Soviet Union, Vietnam, and China. The Roosevelt-Litvinov agreements—negotiated in the White House directly between the U.S. president and Soviet foreign minister—laid the foundations for renewing diplomatic relations, and one might argue for the World War II alliance that defeated the axis powers. Similarly, the claims settlement with Vietnam was one piece of a much broader normalization process between the two once bitter adversaries—two nations that now label themselves strategic allies. Pointedly, at the August 14, 2015 flag-raising ceremony at the U.S. Embassy in Havana, Secretary of State John Kerry remarked:

“And last week, I was in Hanoi to mark the twentieth anniversary of normalization of relations between the United States and Vietnam. Think about that. A long and terrible war that inflicted indelible scars on body and mind, followed by two decades of mutual healing, followed by another two decades of diplomatic and commercial engagement. In this period, Vietnam evolved from a country torn apart by violence into a dynamic society with one of the world’s fastest growing economies.”

In recent U.S.-Cuban relations, there is also the precedent of the December 17, 2014 announcements, when the return of Alan Gross and a CIA asset for three Cuba spies was wrapped in the larger story of normalizing diplomatic relations, and on the U.S. side, the relaxing of certain travel and economic restrictions.

The two-tiered settlement strategy outlined above allows for U.S. firms to re-engage in Cuba. At the same time, some individual claimants and their families harbor deep affections for Cuba and would probably be willing to contribute to its future development. Cuba could consider special incentives to regain this legacy of the island’s past, and for interested claimants to match their awards with re-investments in new projects.

With the right incentives, Cuba could also attract the capital and talents of many of the two million Cuban-Americans resident in the United States. With their separate legal issues and emotional charges, and the vastness of their numbers, the property claims of Cuban-Americans will require their own treatment (more on this in a subsequent paper). But the settlement of U.S. property claims might include a general framework for the future consideration of issues of concern to Cuban-Americans – with the overarching goal being reconciliation of the diaspora with the homeland.

The settlement of U.S. claims could be wrapped in a package of economic opportunities for Cuba. Importantly, the United States could further relax its economic sanctions (amending or repealing Helms-Burton), providing more trade and investment opportunities – and the capacity for Cuba to earn the foreign exchange needed to service debt obligations. In turn, Cuba will have to accelerate and deepen its economic reforms, to offer a more attractive business environment for investors and exporters. Politically, the Cuban government could present a significant softening of the U.S. embargo as a victory, offsetting any concessions made in the claims negotiations. A comprehensive package might also be more attractive to the U.S. Congress; formal Congressional consent would enhance the measures’ legitimacy and durability and help to close off any court challenges, should some claimants be unsatisfied with the final settlement. It is time for Cuba to enter the international financial institutions and the United States should no longer stand in the way. The IFIs can play a vital role, in providing capital and connections to the global marketplace. The IMF and World Bank are also deep repository of knowledge on transitions from central planning to more market-driven economic systems.

The claims settlement agreement between the United States and Hungary contained an annex where it was agreed, inter alia, that the Hungarian Government intended to settle outstanding dollar bonds through direct talks with bondholders; and that the United States would seek authority from its legislature to accord Most-Favored Nation (MFN) treatment to Hungary, subject to separate negotiations.

75 In a grand bargain, the United States could offer to work with Cuba and other creditors to renegotiate Cuba’s outstanding official (Paris Club) and commercial (London Club) debts on terms that take into account Cuba’s capacity to pay.76 The U.S. government continues to carry on its books $36.3 million of Cuban obligations to the U.S. Export-Import Bank (Ex-Im Bank), which could be addressed within the Paris Club framework.77 The United States could also agree to reconsider remaining trade and investment restrictions.

At this stage, it would be too much to expect agreement on a detailed development strategy for Cuba. But a process could be put in place whereby Cuba would work with its many international partners, including the United States, to forge a twenty-first century development model that preserves the social gains of the revolution but that also raises labor productivity and living standards.

Under President Raúl Castro, Cuba has initiated economic reform and the international community can accompany it by adding its expertise and resources. It would not be too much for the claims ettlement talks, if they agree on a two-tiered strategy, to include a discussion of the business climate, and what additional steps Cuba needs to take to attract badly needed foreign investment. As strict socialist property relations are gradually replaced by a more hybrid economic system, Cuba will need to design and  implement new property regimes that promote individual initiative but that also encompass land-use, housing, natural resources and other regulatory oversight protective of the public interest and consistent with sustainable and equitable growth.

The strategic goals in a massive claims resolution process must be political: to heal the deep wounds of past conflicts, to lay foundations for peaceful coexistence and the non-violent resolution of disputes, to avoid jeopardizing fiscal balances and crippling debt burdens, to build investor confidence and  international reputation, and to help render the Cuban economy more open and competitive. These vital goals will not always be fully convergent with the more traditional, legal objective focused narrowly on the rights of property claimants. In designing and implementing solutions, as claimants bang on doors and demand attention, policy makers should not lose sight of their overriding purposes. In the interests of both Cuba and the United States, the twentieth-century trauma of massive property seizures should be transformed into a twenty-first century economic development opportunity.

 zzzzzRichard-Feinberg

Richard Feinberg is a nonresident senior fellow with the Latin America Initiative at the Brookings Institution. He is a professor of international political economy at the School of Global Policy and Strategy, University of California, San Diego. His four decades of engagement with inter-American relations spans government service (in the White House, Department of State, and U.S. Treasury), numerous Washington, D.C.-based public policy institutes, the Peace Corps (Chile), and now in academia. He is also the book reviewer for the Western Hemisphere section of Foreign Affairs magazine.

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WHO OWNS CUBA? AS CUBA-U.S. RELATIONS THAW, THE THORNY MATTER OF PROPERTY DISPUTES HEATS UP

Posted on February 23, 2015 by Arch Ritter

CRAIG OFFMAN

HAVANA — The Globe and Mail, Published Friday, Feb. 13 2015, 3:28 PM EST

Original here: WHO OWNS CUBA?

Tonito Ring Ring was a Latin-looking boy with a dial for a belly and a target on his head. In the 1950s, he was the cartoon mascot of the Cuban Telephone Company, then owned by American firm International Telephone & Telegraph. When the Revolution came in 1959, workers at company headquarters in Havana came looking for him. They tore Tonito down from the wall, thrust him into a coffin, walked him down Calle Aguila to the Malecon, and tossed him into the sea. The Communists, meanwhile, seized the entire Yanqui phone company and, in the ensuring three years, confiscated $1.6-billion worth of U.S property across the island.

Almost six decades later, the United States is intent on making the Cubans pay. Literally.

Now the property of the state-run phone monopoly ETECSA, the telephone company is just one of roughly 6,000 confiscated assets, estimated to be worth a total of more than $7-billion, to which American firms and citizens hold claims. If the Cubans want the United States to lift its gruelling economic embargo – now a possibility, after U.S. President Barack Obama announced the re-establishment of diplomatic relations in December – they’re going to have to address the thorny issue of compensation. With Mr. Obama’s presidency winding down, and Cuba’s economy suffering even more than usual thanks to the woes of petro patron Venezuela, pressure is beginning to build to tackle the elephant in the room.

Although Cubans have long considered the embargo a form of slow genocide, America clearly feels differently. In its eyes, Mr. Castro and his comrades took part in nothing less than illegal seizures of property, and should now pay for what they stole if they want to normalize trade. In fact, a two-decade-old American law dictates that there will be no normalization in trade until the claims are settled.

Compensation is a freighted emotional issue for these antagonists, whose mutual antipathy long precedes the revolution. It’s not just about land or assets, communism versus capitalism. It’s about the right to claim victimhood. “Cuba’s crime is not that it’s communist,” political scientist Rafael Hernandez told me as we sat down to talk in his Havana living room last month, the day before Assistant Secretary of State Roberta S. Jacobson made her historic visit to Cuba. “The two countries have a long way to develop a relationship that surpasses a century of mistrust.”

Mr. Obama’s announcement may bring an economic revolution to Cuba. Although the short-term aims include lifting travel and financial restrictions, and even moving toward an exchange of embassies, the long-term goal is to normalize trade.

But Ms. Jacobson has said that the two sides won’t broach the topic of compensation until much further down the road. For the payment issue, even the process is complicated. As previous Cold War-era attempts at land claims have proved, establishing a rate for repayment will be no small feat. For one thing, no one knows whether the United States, which represents all the claims, will seek to settle in one lump sum or want to address each case individually.

q1 001Q4 001Q2 001Tables from Archibald Ritter, “The Compensation Issue in U.S. – Cuba Normalization”, Chapter 16 in A. Ritter and J. Kirk, Editors, Cuba in the International System: Normalization and Integration, Macmillan Press Ltd, 1995 United Kingdom 

Continue Reading: Who Owns Cuba

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Demandas De Propiedad Entre Cuba Y Los Estados Unidos. Una Revisión De La Literatura. (Property Claims Between Cuba and The United States. A Literature Review.) By Jesus V. Bu Sr. Attorney at Law, Independent, Havana, Cuba

Posted on March 6, 2014 by Arch Ritter

By Jesus V. Bu Sr. Attorney at Law, Independent, Havana,  Cuba

 February 8, 2014

Original Essay: Property Issues US and Cuba, A Review of the Literature
This excellent survey of the literature on the issue of property and compensation claims between the US and Cuba is of major importance in outlining the differing views on this contentious and complex issue. This article is comprehensive, well-organized and clear. Unfortunately it is still available only in Spanish.

Abstract:     

Spanish: Este artículo es una revisión de la literatura sobre las reclamaciones de la propiedad pendientes entre Cuba y los Estados Unidos, con el objeto de resumir el estado actual del conocimiento académico. Este artículo examina las reclamaciones entre las partes, los mecanismos legales diseñados para solucionar las demandas y los remedios para cada tipo específico de demandante.


English: This paper contains a literature review designed to summarize the state of academic knowledge surrounding the outstanding property claims between Cuba and the United States. This paper examines the claims between the parties, the legal mechanisms designed to solve the claims and, the remedies tailored for each particular type of claimants.

Note: Downloadable document is in Spanish.

New Picture (4)New Picture (3)

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