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Authors: Daniel Ammann
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remembers the negotiations as being “very tedious, very long.” In the end, after six months of negotiating, “I couldn’t conclude the purchase. I had to come home with empty hands.” He did not hear a single word of criticism from his mentors Rothschild and Jesselson. They both knew that Rich would profit from the experience.
Despite this single setback, he had clearly demonstrated his capacity for sensitive assignments. He had proved that he could stay calm in chaotic situations. He was persistent and innovative without ever becoming foolhardy. More than anything else, he was enterprising and resourceful. Those were exactly the qualities that Philipp Brothers was counting on in early 1959. A bearded revolutionary was in the process of rewriting history in Cuba. Philipp Brothers, which had enjoyed close business ties with the Batista regime, was not amused. It needed a troubleshooter.
Fidel Castro’s Cuban Revolution
Ernesto “Che” Guevara and his fellow rebels marched into Santa Clara on New Year’s Eve 1958. The loss of the last government-held town before Havana sent a signal to the Cuban dictator Fulgencio Batista, who fled to the Dominican Republic that night with a handful of his henchmen. Fidel Castro’s revolutionary forces entered Havana on January 8, 1959, after more than two years of guerrilla fighting.
The reaction from the country was overwhelmingly positive, especially among the
campesinos
, the subsistence-level farmers. The army and police went over to the rebels within hours. Calm returned to Havana twenty-four hours after the takeover. Castro and his comrades in arms were welcomed by jubilant crowds. While the people had become ever poorer, the Batista clique had become wealthy by exploiting the country and its natural resources. Estimates put the dictator’s fortune at dozens of millions of dollars. Batista had come to power in 1933 aided by the United States, which had supported his military dictatorship with a mutual assistance pact. The U.S. government only withdrew its backing when the Batista regime was in its death throes, unable to guarantee the economic stability of the country any longer.
Fidel Castro and Che Guevara, who would later become Cuba’s minister of industry, embarked upon a program of nationalization of mines and industries—a development that came as a serious shock to Philipp Brothers. Although the company saw itself essentially as a tradingcorporation with no industrial infrastructure or investments, it had begun to prefinance production in several countries. In return it was rewarded with exclusive, long-term contracts. It was a policy that Marc Rich would later hone to perfection. (See Chapter 14 .)
The revolution’s leaders froze one such loan that Philipp Brothers had made to Cuba—a substantial loan of1.2 million for a pyrite mine. To put it in context, Philipp Brothers recorded6 million in pretax profit in 1959. What was to be done? Rothschild immediately suggested sending his young assistant Marc Rich to Havana. The company had a tradition of placing significant trust in young employees and assigning them to extremely difficult tasks. Rich was familiar with the Latin American mentality and by now spoke fluent Spanish.
So the twenty-four-year-old Rich flew to Havana shortly after the revolution in order to negotiate with the new regime. The ensuing talks were to drag on for six months. His negotiating style was determined yet civil. He used all the tricks in the wily trader’s book. He knew that he had to find a solution that was agreeable to both sides. “It’s only a good deal when the two signatories are laughing together at the table. That’s the only way a partnership can have any future. Otherwise it’s the only deal you’ll make,” he explained to me.
Rich analyzed the situation. What did Castro and his government need most of all? They needed hard currency. They needed international contacts. They needed jobs. Castro must want to
Despite this single setback, he had clearly demonstrated his capacity for sensitive assignments. He had proved that he could stay calm in chaotic situations. He was persistent and innovative without ever becoming foolhardy. More than anything else, he was enterprising and resourceful. Those were exactly the qualities that Philipp Brothers was counting on in early 1959. A bearded revolutionary was in the process of rewriting history in Cuba. Philipp Brothers, which had enjoyed close business ties with the Batista regime, was not amused. It needed a troubleshooter.
Fidel Castro’s Cuban Revolution
Ernesto “Che” Guevara and his fellow rebels marched into Santa Clara on New Year’s Eve 1958. The loss of the last government-held town before Havana sent a signal to the Cuban dictator Fulgencio Batista, who fled to the Dominican Republic that night with a handful of his henchmen. Fidel Castro’s revolutionary forces entered Havana on January 8, 1959, after more than two years of guerrilla fighting.
The reaction from the country was overwhelmingly positive, especially among the
campesinos
, the subsistence-level farmers. The army and police went over to the rebels within hours. Calm returned to Havana twenty-four hours after the takeover. Castro and his comrades in arms were welcomed by jubilant crowds. While the people had become ever poorer, the Batista clique had become wealthy by exploiting the country and its natural resources. Estimates put the dictator’s fortune at dozens of millions of dollars. Batista had come to power in 1933 aided by the United States, which had supported his military dictatorship with a mutual assistance pact. The U.S. government only withdrew its backing when the Batista regime was in its death throes, unable to guarantee the economic stability of the country any longer.
Fidel Castro and Che Guevara, who would later become Cuba’s minister of industry, embarked upon a program of nationalization of mines and industries—a development that came as a serious shock to Philipp Brothers. Although the company saw itself essentially as a tradingcorporation with no industrial infrastructure or investments, it had begun to prefinance production in several countries. In return it was rewarded with exclusive, long-term contracts. It was a policy that Marc Rich would later hone to perfection. (See Chapter 14 .)
The revolution’s leaders froze one such loan that Philipp Brothers had made to Cuba—a substantial loan of1.2 million for a pyrite mine. To put it in context, Philipp Brothers recorded6 million in pretax profit in 1959. What was to be done? Rothschild immediately suggested sending his young assistant Marc Rich to Havana. The company had a tradition of placing significant trust in young employees and assigning them to extremely difficult tasks. Rich was familiar with the Latin American mentality and by now spoke fluent Spanish.
So the twenty-four-year-old Rich flew to Havana shortly after the revolution in order to negotiate with the new regime. The ensuing talks were to drag on for six months. His negotiating style was determined yet civil. He used all the tricks in the wily trader’s book. He knew that he had to find a solution that was agreeable to both sides. “It’s only a good deal when the two signatories are laughing together at the table. That’s the only way a partnership can have any future. Otherwise it’s the only deal you’ll make,” he explained to me.
Rich analyzed the situation. What did Castro and his government need most of all? They needed hard currency. They needed international contacts. They needed jobs. Castro must want to
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