The Miami Herald
June 10, 1999

Crackdowns, restrictions sour investors on Cuba

Herald Staff Writer

Clarence Boudreau says he knew his $6 million investment in Cuba was in trouble
when President Fidel Castro, who had backed the deal and even loaned him a
helicopter to survey a site, stood him up for dinner.

``They had all my drawings, all my engineering data, so they didn't need me
anymore,'' the Canadian businessman said. ``I tell you, if you're going to do
business in Cuba these days, the No. 1 rule is cash on the table.''

Boudreau is not alone in his vexation with Havana. More and more, foreign
investors are complaining that it has become increasingly difficult for them to work
and profit in Cuba over the past year.

Government officials are cracking down on technically illegal but long-tolerated
deals, sending tax auditors after foreigners, cutting out middlemen and muscling
their way into businesses, say U.S., Canadian and European analysts who
monitor Cuba's investment climate.

State-controlled firms are increasingly backing out on deals, delaying payments
on their debts and pressuring foreign business people to buy locally made but
low-quality products, the analysts added.

Just how many foreigners have been affected is not known because most refuse
to make their problems public, fearing retaliation by a Communist government that
controls the courts, police and their visas.

Investor complains

``People only start telling the truth about Cuba when they get screwed,'' said
Arnold Guettler, 58, a German-Canadian investor who claims Cuba stole $1
million worth of machinery he shipped to Havana.

Cuban Embassy officials in Ottawa declined to comment on the Boudreau and
Guettler cases, but Canadian Foreign Ministry spokesman Christian Girouard
said the government considered them ordinary business disagreements.

``What we have, in effect, are commercial disputes. While these two ventures
have run into difficulties, other Canadian companies have enjoyed considerable
success in Cuba,'' Girouard said.

The Western experts on Cuba blame the recent spate of problems on a Havana
campaign to tighten controls on foreign investments. The controls were only
grudgingly eased when Soviet subsidies ended in 1991 and sparked a crisis.

Some of the foreign investors who rushed in at the time were too small or
inexperienced to carry out the ambitious, even risky deals they were proposing to
Cuban officials who also lacked experience, the experts added.

``It's not like in the early years, when we paid much attention to what foreigners
wanted to do here. Now we go out to look for partners for a project we want,''
Foreign Investment Minister Ibrahim Ferradaz said last month.


Cuba still portrays itself as a good investment opportunity, boasting of 365 joint
ventures between foreign firms and the Cuban government, and more than $2
billion in direct foreign investments. About 600 foreign firms have opened offices in
Havana, according to official reports.

But the recent spate of complaints has clouded Cuba's investment image.

``The bloom is off,'' said a U.S. analyst who monitors business opportunities on
the island. ``There's definitely a lack of enthusiasm among foreign companies in
Cuba today.''

Said Boudreau: ``They think they don't need foreign investors anymore, so they
cheat. They think there's light at the end of their [economic] tunnel, so they

Complaint publicized

Boudreau was one of the first to go public with his complaint, rising at a meeting
between Ferradaz and Canadian business people in Toronto in March to tell his
tale of woe and demand redress.

Boudreau complained that his Ontario firm, FirstKey Project Technologies, spent
$6 million over 18 months putting together the engineering and financial details on
a $350 million power plant construction project in central Cuba.

Castro attended the signing of the preliminary agreements with Cuban government
firms, loaned him a helicopter to inspect a site and even allowed his staff to stay
at government guest houses in Havana, Boudreau said.

But everything changed on the night Boudreau was supposed to dine with Castro
and sign the final documents. Castro stood him up and sent an aide to tell him
the government no longer needed the plant, he said.

His outburst at the Ferradaz meeting was followed by another from an insurance
company executive who grumbled that Havana was forcing the firm to channel all
payments to clients in Cuba through government agencies, according to Peter
Foster, a Canadian journalist who attended the meeting.

Another businessman quietly approached him after the meeting with another
complaint, Boudreau said.

Boudreau said the man claimed to have sold imported supplies to foreign-run
hotels in Cuba for years, but said a government official ordered him to stop in
January because only the government could engage in domestic trade.

When he protested, he was thrown in jail briefly, lost his Mercedes-Benz and was
hassled at the Havana airport as he flew back to Canada, the man told Boudreau.
Contacted by The Herald, the man declined comment.

`All kinds of people'

Canadians are not the only victims.

``There are Mexicans complaining, Caribbeans complaining, French, Italians, all
kinds of people,'' said a U.S. analyst who monitors foreign investments in Cuba.

Roberto Ferrari, Swiss-Argentine manager of the Spanish-administered Havana
Libre Hotel, was ordered to leave in March because he ``complained too publicly
about the government and the bureaucracy,'' a friend said.

A Spaniard who had a computer firm in Havana claimed he was forced out by a
top government official who started a rival business. A Mexican agent in Havana
for a European firm said the government forced his parent firm to cut him out of a
deal to avoid paying him a commission.

Cuban firms have been so late paying debts that many foreign companies
recently started requiring letters of credit for the full amount of exports to the
island, not just part as is usual.

``The Cubans were always a bit late but always paid, always robbing Peter to pay
Paul. But now it's so bad that people are in effect asking for full payment up front,''
said a Spanish businessman in Havana.

Most common among the foreign investors' complaints are cases like Guettler's,
where seemingly solid deals with government ministries or state-owned firms
collapse suddenly and almost inexplicably.

``I had seven contracts with Cuban enterprises and suddenly someone came
along and said those agencies were not authorized to do business with
foreigners,'' said Guettler, whose Neo-Form company went into Cuba in 1996 to
sell his patented process for lightweight concrete extrusions.

He rented a warehouse in Havana and shipped in more than $1 million worth of
machinery and a Chevy Blazer last summer. And then his troubles started,
Guettler said.

Authorities have blocked him from entering the warehouse and have seized his
vehicle. Guettler said he believes the machinery is now being operated by a new
government-foreign venture, without his permission.

``I want to accuse them of theft and industrial spying,'' said Guettler, whose
contracts with Cuba require any dispute be mediated by courts in Spain. ``I am a
very stubborn person. They are not going to steal anything from me.''

Satisfaction unlikely

Experts on foreign investments in Cuba predict Boudreau and Guettler are
unlikely to get satisfaction from Havana.

``Doing business with the Cubans is complicated,'' said a European lawyer who
advises several clients doing business on the island. ``They don't have a long
history of dealing with foreign investors. They don't have very clear laws.
Sometimes they don't even understand the complexities of the deals they sign.''

``And if you complain in public,'' he added, ``the game is over.''