Investing in Cuba — Special to The Northern Miner

Investment opportunities worldwide are so great that businesses can afford to be selective about where to invest their capital.

Cuba, however, is not the most desirable investment target, according to 10 experts who assembled in Toronto recently. They were there to discuss the problems and prospects of investing in the island nation, which has been run for the past 34 years by the socialist government of 66-year-old Fidel Castro. For example, Dr. Alberto Luzarraga, managing director of Continental Bank, accused Western business people of failing to do their cultural and historical homework before investing in the country. He warned that Cubans may demand adequate compensation for assets seized during the revolution and that the public may demand participation in stock ownership of companies active in the country.

“There are a lot of people who had mining claims seized,” said Robert Helander, senior law partner with Kaye, Scholer et al., of New York City. “And I don’t think they’ll be prepared to say `that’s life.’ I think we’re going to see one helluva lot of claims and counter-claims. It’s going to be a lawyer’s dream and an accountant’s nightmare.”

“Any investor in Cuba faces extreme uncertainty,” added Dr. Archibald Ritter, associate professor of economics at Carleton University. “You would have to be either couragous or foolish to invest there.”

The gathering, attended by about 50 paying guests, was organized by the Toronto-based Canadian Institute of Strategic Studies and the Miami, Fla.-based Research Institute of Cuba. (Additional funding was provided by Texaco, RJR Nabisco and Bacardi Imports.)

Since the end of the cold war and the collapse of the U.S.S.R., Cuba’s 10.6 million inhabitants have found themselves largely abandoned by their major trading partners and left without an annual subsidy from the Soviet Union. The effect on the island’s economy has been disastrous, forcing Castro to announce a major policy reversal in July. Fueled by a desperate need for foreign dollars, the Cuban government finally opened its doors to foreign investment.

So far, foreign exploration companies have not exactly flooded the island. But three Canadian junior mining firms — Joutel Resources (TSE), Miramar Mining Corp. (VSE) and Republic Goldfields (VSE) have recently signed exploration agreements. (For a report on Joutel’s exploration play, see T.N.M., Aug. 30/93 and Sept. 6/93.)

Two other juniors are preparing to take the plunge. MacDonald Mine Explorations (CDN) has a letter of intent to explore further the Florencia-Jobobo gold deposit in Camaguey province. But as yet, a joint venture agreement has not been negotiated.

Also, a private company, Caribgold, financed by geologist David Bell of Hemlo fame and Pierre Lasonde of Franco- and Euro-Nevada fame, is expected to announce a joint-venture deal soon, as well as a TSE listing. Alberta-based nickel refiner Sherritt Gordon (TSE) has a nickel-cobalt feed supply contract with Cubaniquel, as well as interests in oil exploration and production leases off the Cuban coast.

There is, however, a large fly in the ointment, as the Toronto seminar revealed. If the ground constituted by these exploration properties was subject to deals prior to the 1959 revolution which brought Castro to power, then the companies currently involved could find themselves embroiled in legal disputes with Cuban exiles, one million of whom live in the U.S. Many of these exiles owned property, and in some cases mining claims, which was confiscated during the revolution.

Such land claims could arise if, for example, a change in government occurs in Cuba or if a U.S. embargo against the island is lifted. Under the Clinton Administration, the embargo will remain unless specific democratic principles are introduced.