By JUAN O. TAMAYO
Herald Staff Writer
Arguing that it is not violating the Helms-Burton Act, the Italian telephone company has more than doubled its investments in Cuba by paying $300 million to replace a Mexican firm.
The top official of Mexico's financially troubled Grupo Domos in Havana has already left his post, and Italy's STET is getting ready to expand its management team on the island, officials in Cuba said.
STET's move could bolster the resolve of the Italian government to press ahead with a European Union legal challenge to Helms-Burton, despite the severe risks the dispute poses to international trade.
STET International Netherlands, a subsidiary of the government-owned company, confirmed Tuesday that the firm had raised its stake in Cuba's ETECSA phone company from 12.25 percent to 29.29 percent.
One STET official in Rome said the firm paid $300 million in cash under a deal completed last month to buy shares once owned by Domos, but it was not clear if the money went to the Cuban phone company or to Domos.
Aged phone network
Domos has been in financial straits almost from the time it bought a 49 percent stake in ETECSA in mid-1994, promising to invest $750 million to modernize Cuba's aged phone network in what was billed as the single largest foreign investment in Cuban history. The government held 51 percent.
Domos counted on a $350 million loan from Mexico's National Bank for Foreign Commerce, but an economic crisis enveloped the country and Domos quickly looked for rich partners, selling a 12.25 precent share to STET in early 1995.
Although Domos President Javier Garza Calderon has steadily denied troubles, the company said last week it would soon make an announcement on its Cuban operations. Domos' top executive in Havana, Ricardo Elizondo, left his post as first vice president of ETECSA last month.
Adding to Domos' troubles, Washington threatened it with Helms-Burton sanctions last year because the Cuban phone company was seized from U.S.-owned ITT in the early 1960s.
The STET official in Rome said the Italian firm was not concerned by Helms-Burton because it had documents showing the equipment STET uses in Cuba was not seized from ITT. STET received a letter from the U.S. officials last May asking if it was using ITT equipment, the official said, but neither side took any further steps.
Major revenue earner
ETECSA has meanwhile become a major revenue earner for Cuba, with phone calls to and from the United States rising steadily and the company reporting a one-day record of 43,000 last year.
STET's increased stake in ETECSA might complicate U.S. attempts to negotiate a compromise on Helms-Burton with the European Union, which is challenging the sanctions before the Geneva-based World Trade Organization.
Italy pressed the EU hard to file the challenge, EU officials said, seeking a precedent for defending its oil purchases from Libya, a world pariah for its alleged involvement with international terrorism.
Although Washington can claim a ``national security'' defense to set aside an adverse WTO ruling, that would significantly weaken the fledgling organization's power to settle international trade disputes.
Copyright © 1997 The Miami Herald