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.

Delaney, too, was in a tough spot. Together with his then partners, Eric Sprott and Bruce Walter, he had just won control of Sherritt in a proxy fight — a victory that at the time appeared hollow. “The only reason I’d been able to take it over was because it was functionally insolvent,” he explains. “We had a nickel refinery with nothing to refine.”

Proxy fights — in which one shareholder convinces others to throw out existing management — gained notoriety during the ’80s, when takeover kings Ronald Perelman and Carl Icahn prowled Wall Street, but they have always been relatively rare in Canada, where most large publicly traded companies are protected by entrenched interests or by regulation. Nevertheless, Sherritt’s vulnerability made it a target, and Delaney’s 1990 coup marked him as an assertive force in Canadian industry.

His first challenge upon ascent was to reopen Sherritt’s Alberta metals refinery, which had been languishing for two years for want of a nickel feed. The best targets seemed to be Russia and Cuba. He investigated Russia but says he couldn’t get comfortable there. Then, by happenstance, he was invited to lunch with a group of Cubans who were touring Canada. Among them was Raúl de la Nuez, formerly Cuba’s minister of foreign trade. “We were laughing through the whole lunch,” says Delaney. “It was just rock and roll.” So in January of 1991, he went for a visit.

In Havana, he met Marcos Portal Leon, then the minister of basic industries, who arranged for him to inspect the nickel operations at Moa. “So we get on some old Russian jet,” says Delaney, who has trained as a pilot and asked if he could handle flying duties. When his hosts said yes, he found himself navigating a Russian-made flight deck covered in Cyrillic characters he couldn’t read. But they arrived without mishap, allowing Delaney to inspect a mine that, prior to the 1959 Cuban Revolution, had been the property of what is now the American mining company Freeport-McMoRan. In state hands, it was running way below capacity.

The party then flew on to Varadero, where Delaney got a first-hand view of the country’s nascent resort industry. But he hadn’t yet bagged the real prize: an audience with Castro. The opportunity presented itself on his second day in Varadero, over lunch. The group included a member of Castro’s council of ministers, who asked Delaney how he took over Sherritt. Delaney started explaining what a proxy fight was, but the man stared back at him, uncomprehending. Delaney tried again. “A shareholders’ revolution,” he said, this time getting his point across. “Who were the shareholders?” the minister asked. “The institutions — pension funds, financial institutions — responsible for the savings of workers,” Delaney replied.

He got his audience with Castro soon after. They met at the Palace of the Revolution, the former law courts in downtown Havana, which had been erected by the pre-revolutionary dictator of Cuba, Fulgencio Batista.

“Castro is a very skilful interviewer,” Delaney says. “It’s sort of a defence mechanism. He wants to control the conversation, and the best way to do that is to seek your opinion.” Delaney, needless to say, is the kind of person who always has an opinion. “Later, once I’d gotten to know him, I realized there is no person of consequence on this planet who has not had lunch or dinner with Fidel Castro. What am I gonna tell him? So I started interviewing him.”

The strategy worked, leading to Delaney’s first deal for Cuban mining rights, in early 1991. Three years later, it bloomed into an ambitious joint venture: a profit-sharing initiative between Sherritt and Cuban government–run General Nickel. The venture allowed for nickel and cobalt to be mined in Cuba, processed at Sherritt’s Alberta refinery, and then sold to international markets other than the United States. Cuba also threw in the underperforming mine at Moa.

In 1995, Delaney proposed a new deal to the Cubans: he wanted to be designated a “welcome” investor. (He sold the idea to Sherritt’s board with an analogy to nineteenth-century Canadian parliamentarians, who offered liberal terms to European investors to secure capital for the Canadian Pacific Railway.) The Cuban government agreed and sent him a letter outlining the terms. Delaney later included it in a shareholder prospectus, as proof he had negotiated secure access to the resources the company needed for the indefinite future.

At the time, the United States was in the process of passing the Cuban Liberty and Democratic Solidarity (or Helms-Burton) Act, designed to stiffen the trade embargo against Cuba. Delaney knew that anti-Castro forces there wouldn’t approve of Sherritt’s activities, so he decided to split the company up, placing its Cuban operations under the auspices of Sherritt International. Then he went to his directors and offered them a choice. If they were comfortable with being on a US blacklist, they were welcome to stay. If not, they could move to one of Sherritt’s new divisions.

“Some of them had to leave; they had business interests in the United States,” Delaney says. “Others just plain old didn’t want the aggro. But most of them stayed.”

Sometime during this period, he also paid a visit to Washington, DC, where he informed Canada’s embassy staff that he would be making Fidel Castro a major business partner. He knew this would not be popular, given the sensitivity of the subject and Canada’s complex relationship with the United States. “The trade attaché said, ‘What are you going to do?’ ” Delaney recalls, chuckling. “I said, ‘Raise a boatload of capital, for the specific purpose of flying in the face of Helms-Burton.’ ”

Sure enough, in November 1996, eight months after Helms-Burton passed, Delaney received a letter informing him that he was on a US State Department blacklist. Along with all directors and senior officers of Sherritt International and their families, Delaney was denied entry into the United States.

The company remained enough of a bête noire for the anti-Castro lobby in the US over the next few years that in 1998, Lincoln Diaz-Balart, a congressman from Florida, remarked that “Delaney has very willingly accepted his role as the most clearly identified business figure in collaboration with the Castro dictatorship. That is a very risky corporate policy, and I would not want to be in Delaney’s or Sherritt’s shoes once the Cuban people are allowed to elect their representatives.” In fact, the consequences of the deal for Sherritt had long since begun to take effect: before Delaney struck his deal with Castro, more than half of the company’s nickel had been sold in the United States.

With its new corporate structure in place and its political course charted, Sherritt International started the next phase of its Cuban play: diversification. It began to invest in the country’s fledgling oil and gas sector and built up its utilities business, providing Cubans with a stable source of electricity and solidifying Sherritt’s position as one of the country’s best foreign friends. “When people click a light on at home,” Delaney explains, “we want them to know that a Sherritt plant is delivering the electricity.” From a business perspective, the results were spectacular. By 1997, output at Moa alone had increased to 26,500 tonnes, more than twice its 1994 production. Sherritt had lost $20 million on its metals business in 1993, but its half of the Cuban joint venture earned $30 million on sales of $147 million in 1996. In 1997, when most mining companies were hit hard by low metal prices, its profit jumped by $4 million.

On a personal level, Delaney began to enjoy his most favoured capitalist status. He framed the letter from the US State Department, which he still keeps in his Toronto office. (The downstairs boardroom is decorated with cartoons lampooning the US trade embargo.) He also started getting to know Fidel. “We hosted a cocktail party down there in one of those protocol houses in Havana,” he says. “Castro arrived at 10:30 p.m. There must have been a hundred people there; he got around to talk to every one of them.” As host, Delaney accompanied Castro, but by 2:30 in the morning he was ready to drop. “My back is killing me. My arches have collapsed. I desperately need to go to the bathroom, and he’s still firing along.” Eventually, Castro looked at his watch and realized the time. “So he’s heading for the door. But on the way out, he taps one of his senior ministers on the shoulder and says, ‘Hey, I feel pretty good. Let’s go wake up some ambassadors!’ ”

Fun with Fidel aside, doing business in Cuba carries with it special challenges and risks. For starters, there are ongoing questions over who actually owns the property Sherritt has been using on the island, and in particular the Moa operations. The Helms-Burton Act states that the US trade embargo cannot be lifted until property considered interfered with by the Cuban government has reverted to its rightful owners. What’s more, it authorizes American citizens to sue, in American courts, any foreign national or company that purchased or made use of property nationalized by Cuba after the revolution. Freeport-McMoRan could therefore, in theory, pursue a claim over Sherritt’s interests at Moa.

It’s also conceivable that Sherritt would benefit in the event the embargo is lifted, since its history in the country would give it a powerful comparative advantage and, barring punitive action, it would regain access to the enormous US market for its oil, gas, and nickel products. In April, when the Obama administration announced it was lifting travel restrictions on Cuban Americans going to the island, Sherritt’s stock jumped 25 percent.

The company’s expansion and success in Cuba raise some important questions about its relationship with the local workforce, however. Those lucky enough to find jobs with Sherritt remain, by North American standards, extremely poor. Rodolfo’s salary of 50 convertible pesos, which he regarded as princely, works out to about $60 a month. Discussing the company’s policies concerning workers in developing countries, Delaney says, “We have to be careful we don’t induce inflation. If the average wage is $2 a day, you can’t just start hiring people for $10 an hour.” He also points to what he calls Sherritt’s near-perfect record on labour issues, not only in Cuba but worldwide. “We have one of the best labour management accords in North America,” he says. “At the conclusion of present contracts, we will have gone sixty-two years — twenty-two on my watch — without ever losing a person-day because of a labour dispute.”

Delaney’s claim appears quite correct across the company’s global divisions, but then labour disputes aren’t exactly encouraged in Cuba. According to Daniel Wilkinson of Human Rights Watch, the Castro regime has systematically repressed virtually all forms of political dissent, denying its citizens such basic human rights as freedom of speech, freedom of assembly, and the right to organize in pursuit of better wages and working conditions.

Asked about Cuba’s rights record, Delaney poses a rhetorical question: “Do I like it? No. There is a lot wrong with Cuba, and it should be doing better.” That said, he continues, those who criticize the regime should consider the positives as well. “In Cuba, nobody is outside the system. Everybody gets some rudimentary degree of health care. Can you say that about Mexico City?” He pauses. “We do business with all these regimes, and there is a fundamental level of welfare in Cuba that just isn’t achieved anywhere else.” In his view, Cuba should not be held to a higher moral standard than countries such as China and Pakistan, which he believes are more deserving of censure.

To be certain, engaging the Cuban government on rights issues isn’t easy, as then prime minister Jean Chrétien discovered during a state visit in 1998. According to Rollercoaster, a book by former diplomatic adviser James Bartleman, when Chrétien met with Castro he presented the Cuban leader with a list of four political prisoners he wanted to see released. Castro’s reaction was to hiss at Chrétien that he had “never been so humiliated,” and the dialogue ended there.

Sherritt has become so closely identified with Cuba that some financial analysts regard the company’s fortunes as a proxy for the country’s. By 2007, Sherritt had increased its oil production in Cuba to 30,600 barrels per day, up nearly 4,000 barrels from the beginning of 1997. Net earnings (profit) had also risen to $370 million, as the global commodities bubble drove the price of nickel to $17 (US) a pound. The company’s stock soared to an all-time high of $17.48 (US) in 2007, before nickel crashed back down to around $7 (US) a pound, leading Sherritt to record a net loss of $290 million for 2008. In July of this year, it reported its half-year earnings: owing to the cancellation of the contract between Cupet (the Cuban state oil company), Sherritt, and Pebercan, Sherritt’s net earnings for the second quarter had sunk from $80 million the year before to $24 million, a decline of almost 70 percent.

Officials at the Cuban consulate in Ottawa refuse to comment on why the contract was scrapped, and calls to managers at Pebercan, which has since ceased all commercial activity, were not returned. But news reports at the time indicated that the issue was the Cuban government’s failure to remit payments in a timely fashion.

Delaney characterizes Sherritt’s role in the deal like this: “Ten years ago, Sherritt and Pebercan began to do some joint venture projects in Cuba. But the Cubans took Pebercan out. We got sideswiped inadvertently.” Though his company lost some leases, “In the fullness of time,” he says, “I don’t think I’m going to care.”

In February 2009, Cuba committed to paying Sherritt $60 million (US) in compensation for the failed deal, which it has duly handed over. It also paid more than $160 million (US) in previously outstanding oil and gas receivables earlier this year, which Sherritt subsequently invested in certificates of deposit. Delaney remains confident in his Cuban investment, boasting, “We have an amazing book of assets right now in Cuba. We’ve still got twenty-five-year nickel assets, twelve-year oil assets, and fifteen-year power assets.”

Uncertainties remain, however. Earlier this year, the Cuban government delayed the visa process for Peter Kent, Canada’s minister responsible for the Americas, who had publicly announced that he was going to broach the subject of human rights while on the island. In return, the Canadian government similarly delayed the visa for Cuban senior cabinet minister Rodrigo Malmierca, who was coming to Toronto to attend a Sherritt International board meeting. Ironically, this all took place around the same time as Barack Obama began liberalizing his country’s Cuba policy. “It’s like the hemisphere is going in one direction and our PM, flying the flag of anti-Communism in his little boat, is going in another,” says Mark Entwistle, former Canadian ambassador to Cuba. “Canada’s trade policy in Cuba traditionally has been engagement but dialogue. But now the PM has invented something different.” (Kent’s spokesperson did not respond to requests for comment.)

Given the challenges involved in dealing with the Cubans, Sherritt has been aggressively diversifying its international holdings. Its biggest new project is a deal with Japan’s Sumitomo, South Korea’s Korea Resources, and Montreal-based snc-Lavalin to develop a $4.5-billion mine at Ambatovy, in Madagascar. The company expects it to yield 60,000 tonnes of nickel per year, but it is being built in a country that, as Delaney puts it, effectively has no internationally recognized government. Sherritt struck its initial deal under a government that was deposed in March, in a military-backed coup mounted by Andry Rajoelina, a media owner and former disc jockey. In July, the company disclosed that a French law firm engaged by Rajoelina was reviewing Sherritt’s right to develop the mine. Though the project is at risk, Delaney points out that the company’s total financial exposure is a mere $500 million. Of course, this is provided no further cost overruns occur, on a project that to date has been plagued by them.

The Ambatovy project, like Sherritt’s Cuban holdings, has also provoked criticism from activists, although for different reasons. Madagascar has one of the world’s most diverse ecosystems, hosting about 5 percent of the planet’s species, some 80 percent of them endemic to the island. The mine will tear up over 1,300 hectares of land, much of it rainforest that harbours nearly 1,400 species of vascular plants, sixteen types of lemur, and 130 species of amphibians and reptiles.

Delaney acknowledges the dilemma. “[The Ambatovy mine] is smack in the middle one of the most endangered rainforests in the world,” he says. “There’s nothing I can do about that; it’s where nature put the nickel.” But then again, he points out, the local population was burning down the forest to survive. “There are 20 million people there, living on the edge. So what do you do? Develop or not develop?” The choice was to develop, conforming to standards agreed upon by banks and other creditors, and enforced by — well, that remains in question.

Whatever the risks, and despite the concerns of environmentalists, investors have responded positively to Delaney’s strategy, driving Sherritt’s stock up sharply from a low of around $1.69 a share in March to $7.64 in early October. Mark Entwistle, the old Cuba hand, believes Delaney’s unique relationship with the Castros and Cuba will allow the company to weather the troubles there as well. “Cuba is a long-haul market,” he says. “To be successful, companies must believe they are investing in a long-term relationship with an entire nation. I put Sherritt in that boat. They will ride it through. Nickel prices will go back up, and they will suddenly look brilliant again — just for being in Cuba.”