Castro’s Favourite Capitalist

The sun is rising over Old Havana, but the man standing at the balcony rail is in the shade. He gazes out over the city’s crumbling rooftops but seems oblivious to the sun-washed beauty of the harbour. His stare is blank, disengaged. He will give only his first name, Rodolfo. He is the operator of the camera obscura. One of many curiosities in the old port, the centuries-old technology uses a system of mirrors to project a 360-degree view of the exterior onto a bowl-shaped interior screen. Fidel Castro reportedly had the camera installed to ensure that he could see all parts of Havana from a protected vantage point. It’s now a tourist attraction.

“I was a teacher,” says Rodolfo. “I was earning less than 20 convertible pesos [around $25] a month. Then, last summer, I got on with Sherritt. With a bonus, my salary bumped up to 50 convertible pesos a month.” Unfortunately, his prosperity was short lived. Earlier this year, the project was cut. “If you know anyone at Sherritt, please talk to them,” he says. “Get them to start it back up.”

The camera obscura is now Rodolfo’s principal source of income. With a monthly salary of 16 convertible pesos, he is one of millions of Cubans who are barely hanging on. Last year, the country’s agricultural sector was knocked out, due to a particularly fierce hurricane season. That, and collapsing markets for Cuban commodities — primarily nickel, oil, and gas — plunged the island into its toughest economic crisis in a generation. With deficits soaring and cash reserves low, the government is delaying payments on profit-sharing agreements with foreign investors, even going so far as to cancel the one to which Rodolfo alludes. This has forced a difficult balancing act on Ian Delaney — Cuba’s biggest outside investor, Rodolfo’s former employer, and the man known on Bay Street as Fidel Castro’s favourite capitalist.

Delaney is ceo and chairman of Sherritt International, a multi-billion-dollar commodities conglomerate based in Toronto. Eighteen years ago, he made a deal with the Cuban Communist leader. He’d get mining rights; Castro would get the foreign exchange he needed to keep his economy going. Since then, Cuba’s economy has been bolstered in no small part by Sherritt’s investments. In addition to providing capital and jobs, Delaney’s company built power plants, and it now supplies the island with 60 percent of its gasoline. As for Sherritt, in 1995 it booked assets of $677 million; the figure now tops $10.1 billion. Approximately one-third of that value derives from Cuba, thanks to the company’s preferred access to Cuban resources, and the global commodities boom of the past decade.

Ian Delaney is a tall man in his mid-sixties, with an ice-blue gaze that belies his gentle demeanour. (His other Bay Street moniker is the Smiling Barracuda — a nod, supposedly, to his genial yet aggressive style of deal-making.) He spends much of his time on airplanes, but right now he’s in his office at the top of a nondescript building at Yonge and Summerhill in Toronto, talking about how he first met Castro.

It was 1991. The Cuban leader was navigating the collapse of the Soviet sugar market, which had been worth as much as $3 billion annually to his country. The loss would precipitate Cuba’s “período especial” — a time when food shortages meant the average Cuban lost twenty pounds. Some survived on fried grapefruit skins; others reared pigs in their bathrooms for protein.

“In good times,” says Delaney, waving his hand dismissively, “everybody’s your friend. Everybody makes big bets in good times. It’s when you are both about to careen off the edge — that’s when you really get to see the colour of the other guy’s eyes, eh?” He laughs. “But we made a bet on [the Cubans] and they on us, and it’s worked out really well.” Until now, that is. Currently, Cuba is buying as much as 80 percent of its food abroad, which helps explain why the island spent $14.5 billion (US) on imports in 2008. Unfortunately, in that same year revenue from exports fell to just $3.8 billion (US) as a consequence of the world economic downturn.

In 2006, Fidel, who was suffering from poor health, began passing control of the country to his younger brother, Raúl, known to Cuba watchers as the more pragmatic of the two. Many thought the new leader would respond to the financial crisis by further opening up the country’s economy. Instead, he has clamped down, imposing austerity measures over the spring and summer. Cubans are now rationing basics such as electricity and fuel, and this past summer Raúl slashed economic growth projections for the rest of 2009 from 6 to 1.7 percent.

“Essentially, the Cubans are running out of cash,” says Heather Berkman, a political risk analyst with the New York–based Eurasia Group. The crunch may partially explain why earlier this year the Cuban state oil company, Cupet, terminated its long-term oil field production sharing contract with Sherritt and a Montreal company, Pebercan. The Cuban government is compensating both parties, but the lost contract effectively liquidated Pebercan and wiped out a quarter of Sherritt’s net Cuban oil production — not to mention that it put Rodolfo and many others like him out of work.

Dial back to 1991, when both Castro and Delaney faced even bleaker circumstances. The collapse of the ussr had caused that $3-billion hole in Cuba’s balance sheet. Few cars could be found on the streets of Havana, because scarcely anyone could afford fuel. Castro was getting desperate.