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4 CubaNews vApril 201

SEC pressures Spains Telefnica over Cuba business tiesBY VITO ECHEVARRA

The U.S. Securities and Exchange Com-mission is hounding Spanish telecom-munications giant Telefnica over its

business dealings with Cuba.In a Nov. 29 emailed letter to TelefnicaCEO Csar Alienta Izuel, Cecilia Blye thehead of SECs Office of Global Security Risk cited a September 2009 news report inwhich Telefnica allegedly confir med itsinterest in investing in Cuba.

Blye, who asked Alienta if the liquidation ofhis companys Cuba affiliate, Telefnica DataCuba (TDC), was completed in 2005, advisedhim to describe any equipment, technologyor support that you have provided into Cuba,directly or indirectly, and any agreements youhave had with the government of Cuba.

Even though Blye didnt directly threatenTelefnica with legal action if it failed to com-

ply with the SECs request, the letters veryexistence and the fact that it mentionedWashingtons designation of Cuba as a statesponsor of terrorism suggested that heragency would find a legal cause of actionagainst Telefnica if necessary.

TELEFNICA HAS NO IMMEDIATE CUBA PLANS

Meanwhile, the Madrid newspaperEl Pascarried a report about the SECs legal harass-ment of Telefnica. That article included notonly Blyes letter to the company but also theDec. 30 response by Telefnicas chief finan-cial officer, Miguel Escrig Meli, who con-firmed in writing that TDC had been liquidat-ed in September 2005.

U.S. sanctions against Cuba permit, invarying degrees, activities in connection withthe provision of telecommunications servic-

es, Escrig Meli wrote, noting that some ofTelefnicas subsidiaries in Spain and LatinAmerica have roaming agreements with tele-com providers in Cuba.

The CFO also said that after having studied

the potential purchase of Cuban state phonemonopoly Etecsa, his company decided not togo ahead with the acquisition and that ithas no plans to do so.

The timing of the SECs pursuit of informa-tion from Telefnica is curious, since thatcompany has invested in telecom servicesthroughout Latin America for years.

More importantly, the SECs letter appearsto contradict the Obama administrations poli-cy of encouraging open telecom links be-tween the United States and Cuba.

CUBA EXPERT SAYS POLITICS IS TO BLAME

In April 2009, President Obama exempted

that portion of the U.S. trade embargo whichprohibited American phone companies fromdoing business with the Marxist regime.

Even though the new policy technically cov-ered only prospective U.S. telecom deals withCuba, even efforts by Spains Telefnica tomodernize Cubas telecom infrastructurewould have still worked toward achieving theWhite Houses goal of a more open flow ofcommunications on the island.

New York attorney Tony Martnez, whoclosely follows trade and regulatory issuesaffecting Cuba, said he saw this coming.

It is not surprising that the SEC made itsinquiry to Telefnica, he told CubaNews.The designation of a country being on theState Sponsor of Terror List has wide-rangingimplications for that country.

Martnez said Cubas continued presence

TELECOMMUNICATIONS

Ancient mills and old equipment aretaking their toll on Cubas sugar har-vest, with scattered media and source

reports indicating that many mills will haveto remain open in May to meet output tar-gets, Reuters reported Mar. 9.

Fifteen mills opened in December, anoth-

er 28 in January and three in February, inthe first harvest since the Sugar Ministrywas replaced in November 2011 by a state-run holding company.

The industry hopes to reverse a longdecline, with plans calling for output toreach 1.45 million tons, compared with the1.2 million tons Reuters estimates Cubaproduced during the previous harvest.

While there appears to be enough caneto meet this years production plan, millingin May is costly as summer rains set in andyields drop due to hot and humid weather.

Official media reported eastern Santiago

de Cuba was milling at just 60% capacitydue mainly to mill problems and the con-stant breakdown of harvesting equipment,but was nevertheless performing betterthan all the other 13 sugar-producing pro-vinces except Sancti Spritus.

In neighboring Holgun, mills produced

just 52% of their daily target on Mar. 6,according to the provincial radio station.Key sugar-producing provinces such as

Matanzas, where local media reported a17,000-toe shortfall, and Camagey, Ciegode Avila, Holgun, Las Tunas and Granma where sources said there were similardeficits will now have to mill throughMay to meet production targets.

Cuba consumes 600,000 to 700,000 tonsof sugar annually and has a 400,000-ton tollagreement with China. Cuban sugar is alsosold for export on the spot market.

REUTERS NEWS SERVICE

Cuba struggles to hit sugar projections

on that list makes Obamas telecom liberaliztion policy virtually meaningless, since undethe Terrorism Risk Insurance Act, Cuba hano sovereign immunity in U.S. courts.

That, in turn, makes prospective U.S

phone revenues destined for Cuban coffervulnerable to seizure from American plaintifwith multmillion-dollar default judgments (seCubaNews, June 2010, Page 11).

Martnez recalled that at a Feb. 14 complance conference in Washington hosted by thTreasur y Departments Office of ForeigAssets Control (OFAC), officials warned thforeign companies doing business with coutries on the terror list would be subject tmore U.S. government scrutiny.

In addition, the 1996 Helms-Burton Aeffectively discourages foreign firms from ding business with both the U.S. and Cuba even though in practice, it has been selectiv

ly enforced due to diplomatic pressure fromCanada and the 27-member European UnionMartnez insists that Washington politics

behind the latest harassment of Telefnica.It is irrelevant that the reasons for Cub

being on that list are domestic political resons. It is on the list, and the enforcemenagencies have to carry out the law until it is nlonger there, he told CubaNews by email.

The subtle and indirect manipulation thammer Cuba comes from Capitol Hill, wherthe pro-embargo Congressional cadre preses executive agencies to do more on Cuba.

Rather than Congress doing an objectivoversight of our failed policies with Cuba the expense of both the U.S. and Cuban ec

nomies, this political manipulation ensurethat scenarios like Telefnica will continue.

MARTNEZ TO COMPANIES: MAKE SOME NOISE

Martnez has a few suggestions for compnies like Telefnica that find themselveunder undue OFAC scrutiny.

Comply with U.S. laws by ensuring yohave an active sanction compliance programin place, and expect that any foreign companin Cuba that happens to also do business ithe United States to be under economic suveillance by U.S. agencies and embassiesthe lawyer advised.

Those companies who do business in thU.S. need to get politically active and informtheir congressmen and senators. Foreign companies need to complain to their respectivforeign ministries so this matter is brought uin the context of diplomacy as well.

El Pas noted that other Spanish companiesuch as Repsol-YPF SA and BBVA have beesubjected to similar pressure from OFAC oveits dealings with Cuba and Iran.

El Pas didnt disclose how it re-ceivecopies of SECs correspondence with Telefnica, though its our guess that company attoneys or top officials leaked it to the newspapein order to step up Spanish and EU pressuragainst the White House to back off. q