Confiscation!

Though it has never been enforced, Article 90 of Cuba's constitution says that "large landholdings are proscribed," and "the acquisition and possession of land by foreign persons and companies shall be restrictively limited." Last week Prime Minister Fidel Castro enforced Article 90 with a vengeance. His agrarian-reform decree, signed in the six-hut eastern village of La Plata, scene of one of the first guerrilla attacks in Castro's revolution, outlawed the $300 million U.S. investment in Cuban sugar.

Sugar-company lawyers puzzled over the law's 66 sections all week, but the key language was unequivocal and plunged Cuba down a land-reform road where many Latin American hopes have been dashed (see box). No corporation can own land in Cuba unless all stockholders are Cuban; no foreigner may buy or inherit land. If U.S. sugar companies do not sell out within a year, their land will be expropriated and paid off in 20-year government bonds bearing 4.5% interest. According to Castro's estimate, made on a television show, the bond payments would range from $15 to $45 per acre, just one-fourth what the land was worth a year ago.

"We're Sort of Sick." Hardest hit U.S. companies are Atlantica del Golfo (with 500,000 acres), the Rionda group (500,000), Cuban-American Sugar Co. (330,000), United Fruit Co. (270,000). But since the law also prohibits anyone from owning more than 995 acres of farm land or 3,316 acres of ranch land, many Cuban operators will suffer. Castro promised that he will reduce his own family's 2,178-acre farm to the new legal limit.

The companies were officially silent, privately frantic. "This isn't expropriation," cried one sugar executive. "It's confiscation!" Said another: "We're sort of sick here." Sugarmen talked hopefully about one provision in the law: the newly created National Agrarian Reform Institute can let foreigners own land when "beneficial for the development of the national economy." This loophole may permit the companies to stay on until they can find buyers for the land. But losses will be heavy. The price of sugar land has already dropped by half from a year ago, and shares of the affected companies have lost up to 21 points.

"Lamentable Cases." Castro noted that there would be some "lamentable cases" covered by the law. "If all those cases were considered, laws would be converted into telephone books." But on the face of it, Castro's law was a response to the fact that 200,000 rural Cubans are landless and often unemployed. He plans to parcel out the sugar land in free lots of at least 66 acres for each farm family. "Colonization stations," with tractors and agricultural experts, will help the new landowners, he said. He runs the reform institute personally, and to help him he picked a onetime Communist youth leader named Antonio Nunez Jimenez.

As Latin America's rudest slap at capital since Mexico expropriated the oil industry in 1938, the new law is likely to end the steady flow of U.S. private investment to Cuba (total: $850 million) and slow the country's development. U.S. Ambassador Philip Bonsai flew to Washington to confer with sugarmen this week, but there was no talk of retaliatory moves; Cuba still gets a $370 million annual income from sugar admitted to the high-price U.S. quota.

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