In a move certain to generate controversy over U.S. trade policy toward Cuba, the Clinton administration is considering allowing an American company to take part in a major contract to revamp Cuba's telephone system, U.S. officials said.

The contract currently is held by Grupo Domos, a Mexican company that has run into financing problems.An administration green light to U.S. telecommunications companies to enter into some sort of a partnership with Grupo Domos could leave the administration vulnerable to criticism that it is using a legislative loophole to undermine the U.S. trade embargo against Cuba.

State Department officials say they are reviewing regulations affecting telecommunications in Cuba and expect to draft new recommendations by year's end.

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