By Stephen Brookes in Havana
for Insight Magazine

The Havana University economist is hazarding a cautious prediction about Cuba's future when the fluorescent lights in his office suddenly blink off, and an electric fan by the window purrs slowly to a halt.


"I'm sorry about this," he says, leading his visitor past a bank of stalled elevators and down 12 flights of stairs to the lobby. "We're never quite sure when the blackouts are going to hit." Pausing to let a noisy crowd of students squeeze by in the dim, narrow stairwell, he glances around and says quietly, "This, my friend, is Cuba  -- downhill slowly, in the dark."

Pro-Castro rally in Havana                                   Stephen BrookesIn the midst of its most wrenching economic crisis since Fidel Castro seized power in 1959, Cuba is fumbling desperately for a way out. Battered by the drying up of subsidies from the former Soviet bloc, the 1992 tightening of the U.S. embargo and a succession of disastrous harvests, the economy has shrunk an estimated 50 percent since 1989. Imports --  the lifeblood of a country that for decades has produced little but cigars, sugarcane and Marxist cheerleading -- have shrunk by roughly 70 percent in the last two years. The country's fastest-growing export now is refugees, who are attempting the perilous 90-mile escape to Florida at the rate of some 500 per month.

With no money, no credit and no chance of getting either anytime soon, Castro has been forced to move the country onto crisis footing and make a few tentative stabs at self-sufficiency. But conditions are bleak. Since almost no oil comes into the country anymore, Cuba suffers daily blackouts that shut down schools and factories for 10 hours at a stretch. Workers are being laid off in droves, and manufacturers have no spare parts with which to repair their Russian-built equipment. Public transportation ranges from inconvenient to nonexistent (the streets of rush-hour Havana are jammed with bicycles, not cars), and key supplies such as medicine are available only to those who can pay with American dollars.

Entire blocks of once-bustling downtown Havana, in fact, are virtually boarded up. Aging buildings are allowed to collapse for lack of repair materials. Some stores and restaurants remain open but empty, as if the country were pretending to run normally. At the Hollywood Cafe on Animas Street, two waitresses exchange amused looks as a foreigner takes a stool at the empty turquoise counter. "There's nothing here," apologizes one, leaning on a broom. "Would you like a glass of water?"

Faced with economic paralysis, Castro's regime has been relentlessly promoting tourism and courting foreign investors, hoping to attract hard currency and develop the country's few natural resources. And last summer, in what he called a "temporary step backward" from socialist ideals, Castro issued a flurry of edicts to move Cuba in the general direction of a market economy.

For the first time in decades, Cubans were allowed to own and do business with U.S. dollars and to independently practice some 140 different professions. (Nothing too fancy: The approved list includes hairdressing, candle-making and bicycle repair.) Farmers, while still forced to sell their produce to the state, were permitted to form cooperatives and split the profits among themselves. Castro told the French weekly Paris-Match at the time, "We are like other countries, like China which tries to open up and manages quite well by using some capitalist mechanisms."

Is Cuba really shedding socialism? Don't believe it, say some observers, who argue that the reforms are merely a way for Castro to defuse growing discontent without giving up power. Allowing people to use dollars is just a way to gain control of a growing black market, they argue, and legalizing entrepreneurs helps lighten the public payroll.

"Cuba isn't moving to a market economy," scoffs a Western diplomat in Havana. "The regime that created the socialist system is completely intact. But it knows that Cubans are volatile and that it has to let off some of the pressure once in a while. That's a sign of a mature totalitarian regime."

But the pressure is building as more and more Cubans sink into lives of quiet desperation. The minimum wage is 138 pesos per month, and even top-level professionals only earn about 400 pesos per month.

That kind of paycheck doesn't go far; less than a third of the basic needs of most Cubans are provided for out of the wages and subsidies offered by the state. The monthly food ration is a paltry five pounds of rice, an equivalent amount of beans, about a pound of chicken or pork, some coffee and a small amount of bread.

Other basics are doled out skimpily as well. The state-run Epoca department store on San Nicolas Street, for example, offers a thin selection of clothing, toys, shoes and cheap electronic appliances, all at rock-bottom prices. A pair of cheap blue jeans costs roughly 35 cents, and a primitive car alarm can be had for less than a dollar. But on a typical weekday afternoon, the store is empty.

"Some days go by and we don't have a single customer," says one of the five saleswomen idling behind a counter. "Young people don't like the clothes, so they don't buy." But another woman objects. "The reason people don't buy these things is because they can't! You can buy those blue jeans for 35 pesos, but you're only allowed to buy one pair every three years!”

But it is possible to buy a pair of genuine Levi's 501s in Havana -- as long as you have dollars, not pesos, in your pocket. The rambling, brightly lit Pan-American Store in the upscale neighborhood of Miramar, for example, is regularly crowded with well-heeled Cubans shopping for everything from Sony stereo systems to Italian shoes to Campbell's onion soup. American goods, brought in via Mexico, are in plentiful supply, and compared with other state-owned stores with their grimy bins of rice and flyspecked fish, the Pan-American is a beacon of high-end consumerism.

But with a monopoly on imports, the government can charge what it likes, and the prices are anywhere from 20 to 100 percent higher than those in the United States -- and only U.S. dollars are accepted.

The dollar stores aren't just for luxuries; they're virtually the only source for basics such as soap, shampoo and quality clothing. "We don't have much choice,” says a wan young woman waiting in line with two boxes of Omo detergent and a handful of plastic cooking utensils as her young daughter stares, entranced, into a glass cabinet stocked with imported candy bars. "There's nowhere else to buy these things. "

The regime allows Cubans to receive up to $1,000 per year from relatives abroad (although much more comes in illegally), and the influx of tourists has helped spread more dollars rapidly through the economy. Still, only about a fifth of Cubans have access to the currency, and it's highly sought after: A dollar fetches about 110 pesos on the black market.

Wittingly or not, the government has midwifed a multi-tiered economy that has confused even its own policymakers. "There are three separate markets now," explains George Carriazo Moreno, deputy director of the government-run Center for Research on the Global Economy in Havana. "Food, clothes and gasoline are available at low prices, in pesos, but everything's rationed. So there's another market where you can buy more of these things, also using pesos, but at much higher prices. And then there's another market -- the dollar market. It's an absurd situation."

For ordinary Cubans, survival depends on how well they can negotiate la bolsa negra -- the widespread black market that is fast supplanting the official economy.

"There's a word people use here: resolver," says the Western diplomat. "It's just a term for solving the needs of the moment. You make a little trip out to the country, buy some food, bring it back and trade it for clothing. You steal something from the factory where you work and sell it on the street. You buy your ration of cigarettes and resell them to your neighbors for 10 times the price. You do some plumbing or electrical work in exchange for food. It's how people get by."

Transactions take place everywhere, day and night; on the oceanfront promenade, in people's homes, on the sidewalks outside the dollar stores. Certain parts of the city, especially the section known as Old Havana, have become veritable black market shopping malls.


Streetcorner butcher                 Stephen BrookesIn a doorstep on Refugio Street one recent afternoon, a woman in her late 40s was offering two packs of cheap Cuban cigarettes for 25 cents each and a small pineapple for about 50 cents. Halfway down the block, two men were chopping up a pig's head to sell. Across the street, a woman wearing a shirt printed with purple dinosaurs stood in a doorway with a tray of coconut cookies; when a customer stopped to look, a small girl appeared at her side, proffering a basket of stunted, greenish oranges.

Others have set up shop at home. While Havana's well-known restaurants  -- Floridita, for example, where Ernest Hemingway once regularly held court  -- are prohibitively expensive to the vast majority of Cubans, a number of tiny restaurants have sprung up in private homes.

They're illegal but easy to find; it takes only a few moments of asking people at random one afternoon to be directed to a dark, unmarked doorway a few blocks away. Up a flight of stairs, a chubby woman is stirring a large aluminum pot on the kitchen stove of a cramped, cheerless apartment. There's only one dish available, a sort of spicy pork stew with tomatoes and rice, but it's delicious and cheap  -- $2 buys a full plate of food and a couple of slices of dark bread.

Sitting for a moment with her customers at a wooden table in the living room while her two children play on the floor, the cook says that her place is one of three such restaurants on the block. She does a good business, buying food from a cousin who drives out to the country regularly, and serves about 15 meals a day. A friend who works in a bakery gets the bread for her. "People have to eat," she says. "And sometimes they just can't get food. It can take all day just to find a chicken. So they come here  I always have something."

Castro is not, however, pinning his hopes for economic rejuvenation on living-room restaurants or street-corner cigarette sales. The regime is ardently courting foreign investors -- so far with only moderate success, mostly in tourism and natural resources such as oil and nickel. (Some investments are essentially symbolic: The first thing a visitor to Cuba sees is a huge green Benetton billboard outside the airport -- followed closely by graffiti that solemnly intones, "Socialismo o Muerte" -- Socialism or Death.)

Most of the investors are European and Mexican, with a smattering from Canada and South America. But with the economy in such disarray, putting money into Cuba is not for the fainthearted.

"Cuba can be a good place for certain investors, but only those who get a sweetheart deal," cautions a European business consultant in Havana. "The government wants to create an appearance of stability, but this is a very high-risk place. In terms of repatriating profits, long-term stability and so on, everything is unclear."

Nevertheless, the allure of a potential mega-boom in tourism is drawing in the daring, particularly Spanish resort companies such as Melia. Cuba's official tourism agency runs low-cost flights and package tours from Europe, Mexico and the Caribbean and expects to bring in some $900 million this year  -- replacing sugar as the top money earner.

Aiming to raise the number of tourists to around one million (it's currently about half that), the regime began in 1991 to allow foreign companies to retain half-ownerships in hotels and run them along capitalist lines. Helped along by tax holidays and breaks on customs duties, developers have been putting up strings of elegant hotels, many along the spectacular beaches at Varadero a couple of hours northeast of Havana.

Tourists in Havana                                              Stephen BrookesTourism has been growing at a healthy 20 percent per year, but investors are expecting a bonanza when the United States lifts its trade embargo, which prohibits U.S. citizens from spending money in Cuba. Spurning tourism, Havana has watched from the sidelines during the last few decades as the Caribbean boomed. In the mid-1950s, Cuba was the Caribbean's prime vacation spot; of the 1 million tourists who came to the region, fully 600,000 went to Cuba  and 400,000 of those visitors were American. Since then, the number of Caribbean tourists has ballooned to 22 million a year, but Cuba's tourism level remains where it was 40 years ago. Some Cuban economists predict that lifting the embargo would immediately bring in $200 million a year, but others put the figure far higher.

"Forget about sugar, about manufacturing -- that's all old history," says the manager of a Spanish-run hotel in Varadero. "When they lift the embargo, this country is going to be one huge resort. And why not? It's got everything. It's paradise. And it's closer to Miami than the Virgin Islands."

In fact, the advance guard of the American invasion is already there; hundreds of Americans arrive every month from countries such as Mexico and the Bahamas. "Cuba -- you can't beat it," says Roger, 26, a restaurant manager from Rhode Island who flew in on a five-day, $500 package tour from Nassau. Stretched out on the Varadero beach with his fiancee and a tube of Coppertone No. 8, he waves a plastic cup of rum at the ocean and cheers, "Viva la revolucion, man!"

But tourism is turning out to be a double-edged sword for Castro. It has brought crime and prostitution back to Cuba, and there's an undercurrent of resentment that the government is diverting scarce resources to foreigners, while telling Cubans to cinch their already-tight belts. New roads are being built to open up remote beach areas to development, but urban centers are allowed to decay and housing stagnates. While most Cubans haven't eaten beef in years, the buffets at the tourist hotels are groaning boards of steak, lobster, imported fruits and intricately contrived pastries. Not that most Cubans could eat there even if they had the money: In a sort of "tourist apartheid," ordinary Cubans are not allowed in most hotels unless they're in the company of a foreigner.

Moreover, the best and brightest of the educated elite are forgoing dead-end government jobs for the chance to work with foreigners. Take Roberto, a 28-year-old tour guide with Havanatur, who spent three years in Moscow studying robotics, speaks four languages and holds graduate degrees in engineering and mathematics. He spends his days shepherding tourists between Havana and the beaches of Varadero.

"This is a fantastic job," he says in flawless English, explaining that he makes more in tips on a good day than his father, a respected government economist, earns in a month. His expertise in robotics, he says, is worthless in robot-less Cuba, and his fluency in Russian has turned out to be a drawback. "I get stuck with a lot of the Russian groups," he says. "They're cheap, and they whine about everything."

So Castro is facing a gathering storm. As the triple forces of tourism, economic liberalization and domestic deprivation gain momentum, they are starting to tear deep rifts in Cuban society. Those who have maintained contact with relatives abroad or prospered either as licensed entrepreneurs or in the black market are growing wealthy. These macetas, as they're called, tend to be cautiously anti-Castro (in private conversations, they refer to Fidel as "The Coconut"), and many have ties with the virulently anti-Castro Cuban-American community in Miami.

As the macetas get rich, meanwhile, Castro's loyalists are becoming steadily poorer -- and more resentful. Anxious about losing support among the dwindling faithful and keen to show that he's still committed to his revolution, Castro has been casting about for villains  but his options are limited. He can't afford to close the state-run dollar stores, since they're crucial to funneling hard currency out of Miami and into government coffers. He needs the skilled workers who have flocked to tourism. And since the new private businesses soak up some of the unemployed, he doesn't want to shut them down. That leaves the “criminals" in the black market.

On May 5, Castro pounced. He issued an edict that money and goods earned illicitly would be confiscated, citing "robbery, speculation, diversion of resources belonging to state bodies, participation in shady industries, activities in the black market and other forms of enrichment that damage the most vital interest of our society."

But with even his supporters dependent on the black market, it's doubtful that Castro will snuff it out. And enforcement is unlikely to be harsh; the average police officer is as casual about the rules as most other Cubans. It's illegal, for example, to run a private taxi service. But one such driver, pulled over in Havana recently by the police, was able to rectify the "misunderstanding" with a $1 bribe.

"This one was okay," said the driver as he eased the car back into the light evening traffic. "Some of them can make things rough for you."

But to many in Cuba, the crackdown is another sign that reports of the death of socialism are greatly exaggerated. "Castro's trying to present an open image, but it's all a lie," says a 40-year-old dissident who spent three years in Santa Ana Prison for distributing anti-Castro literature and now is waiting for permission to emigrate. "Castro doesn't want to lose power, and the people around him are all puppets. Every day Castro has more enemies, but people are afraid. You can lose your job if you say anything against the government."

And despite veiled hints that he might step down in a few years, there's no indication that Castro has any serious intention of loosening the reins of power. Dissidents remain isolated, and while there were a few incidents of stone-throwing during blackouts last summer, there's no serious, organized political challenge to the regime.

"There's a good chance of a lot of 'mini-intifadas:" says the Western diplomat. "But they won't be coordinated ideologically. The government is strong enough to keep any leadership or network from emerging; the local Committees for the Defense of the Revolution, as well as the military and police, are intact, and the party is still strong. So there are four parallel structures in control, and they're incredibly efficient and intimidating."

For the near future, the outlook is precarious. A report released by the State Department last year predicted that the limited efforts to open up Cuba's economy could lead to social instability within the next decade and noted that the government is likely to meet any dissention with repressive measures.

And some observers in Havana even see a distinct and unnerving parallel with a neighboring Caribbean country. "There's no real reason," says one, "why Cuba couldn't sink to the condition of Haiti."

(Insight Magazine, June 13, 1994)