Cuba's dilemma.

The Aerocaribe flight from Cancun to Havana was a far cry from the earlier American Airlines flight from Miami to Cancun. The aged plane rattled painfully as it hit the Cuban tarmac after just 40 minutes in the air, and the several dozen people who emerged onto the dark runway were clearly not tourists. Their luggage consisted of overstuffed plastic bags filled with such necessities as toothpaste, toilet paper, and foods not easily found in Havana these days.

The drive into town underscored the message, "You're not in Florida anymore," as our 1957 Chevy dipped jarringly into the deep pot holes that pock the main road into town. The trip was otherwise unimpeded since, even at mid-evening, there were virtually no other cars on the road. As our eyes adjusted to the darkness, though, we could make out at the side of the road the forms of hundreds of people walking or cycling toward Havana.

Sometimes the best way to gain insight about something is to go where it is not. This issue of WORLD WATCH focuses on global capital flows - the unprecedented surge of private money that is having such profound influences on the world. Next to this stream of capital, Cuba - with its 11 million people squeezed onto a narrow 1,000-kilometer-long island - forms a quiet side-channel. It is trying to emerge from more than three decades of central planning, while shunted to the margins of the world economy by the 35-year trade embargo imposed by the superpower just 90 miles to the north.

The question for Cuba now is whether it can develop a more sustainable society while at the same time gradually opening its economy and political system.

I was invited to Havana in mid-February by the European organizers of an international environmental symposium who were keen to provide Cuban specialists with the opportunity to exchange ideas with foreign experts in the field. (I was one of just three U.S. citizens who came to the conference, armed with a Treasury Department license issued under the "Trading With the Enemies Act.")

In today's world, embargoes constrain not only economic trade but intellectual and cultural commerce as well. With their access to international mail, phone lines, and even the Internet constricted, the Cuban academics we met were hungry for any environmental information we could supply. My meager supply of Spanish-language editions of WORLD WATCH quickly dwindled, and dozens of Cubans scribbled their names on scraps of paper, begging me to send them a book or magazine once I got back to Washington.

When the Russians abruptly pulled the plug on three decades of heavy economic subsidies in 1991, the supply of $2 per barrel oil and tractors, fertilizer, and even consumer items abruptly stopped. (At the time, Cuba was still a one-commodity country, as dependent on sugar cane exports as it had been before the 1957 revolution.) And the U.S. refused to lift its embargo, preventing U.S. companies from investing in Cuba or even allowing the country to obtain loans from the World Bank and other multi-lateral lenders.

The resulting economic crisis, still known as the "Special Period," left many Cubans close to starvation. There was no fertilizer for the fields and no fuel to run the tractors. The tropical climate makes growing wheat - which had become a staple in the Cuban diet thanks to cheap Russian exports - nearly impossible. In response, many people had to go back to a traditional diet of rice and beans. Cuban farmers, meanwhile, embarked on a crash course in sustainable agriculture - turning to oxen to plough their fields, and substituting biological controls for the pesticide applications that had been planned by agronomists in Moscow. At the same time, vacant lots in Havana quickly filled with urban vegetable gardens.

During those first few years, the official economy declined by a staggering 40 percent. Oil imports fell by half, and electricity blackouts often lasted more than 12 hours a day. With no fuel to run their aging American cars and buses, Cubans imported thousands of bicycles - some purchased from the Chinese, others donated by sympathizers in North America and Europe. Even production of the country's valuable sugar cane and prized cigars plummeted.

But Cuba has proved more resilient than most foreign observers expected. Five years after the Soviet Union disappeared, Fidel Castro is still in power. By early 1997, tractors were back in the fields, blackouts less common, and the economy again expanding. One reason is that the Cuban government has gradually relinquished some of its economic controls. Since 1993, self-employment has been permitted in some 100 mainly service-oriented occupations, and the center of Havana has filled with markets selling fresh food, handicrafts, and light manufactured goods.

Meanwhile, the government has - with many restrictions - renewed Cuba's connection to the world's capital markets. Desperate for hard currency, it has encouraged European, Canadian, and Latin American investors to move into a few key sectors - tourist hotels, oil, minerals, and sugar - which are now booming. More than 60 foreign companies have opened offices in Cuba, and already have invested over $5 billion in the country.

Tourism has quickly displaced sugar cane as the country's leading hard currency earner. In 1995 alone, Cuba attracted 800,000 tourists - mostly from Europe and Latin America. With some of the world's most spectacular remaining coral reefs, Cuba has great potential for nature tours, and is considering encouraging eco-tourism along its northern archipelago. Another recent priority is the development of renewable energy sources such as wind power and biomass energy, to displace imported oil.

In 1993, Castro took the extraordinary step of authorizing the U.S. dollar as legal currency, and since then a thriving dollar economy has emerged. I never saw a peso the entire time I was in Cuba; nor did I see more than two or three Americans. (There is something strange about being in a country where the only things American are the currency and the forty-year-old cars.)

Items like beef, gasoline, and even taxis are now available, but one must have dollars to purchase or hire them. This has of course increased economic disparities, since most Cubans earn only pesos, and at the blackmarket exchange rate, have an average income of less than $1,000 per year. The standard of living of the typical doctor or professor is still far below what it was in 1990. Even those who own cars can afford to operate them only a couple of times a week. (Yet, Cuba's average life expectancy and literacy rate are still far closer to those of the United States than to Mexico.)

Political reforms are coming even more slowly. Unlike Eastern Europe, Cuba's revolution was not imposed from without, but rose from within - in response to abuses by the earlier regime. While Castro has lost some of his popularity in recent years, he retains considerable support and a firm grip on power. There have been no national elections, the domestic press is carefully controlled, dissent is illegal, and many dissidents languish in jail. Still, local elections are now permitted, the international press has relatively free access to Cuba, and people have the right to worship in the church of their choice.

The United States is of course trying to force economic and political reform by pressuring its allies to pull out of Cuba via the 1996 Helms-Burton law, which threatens penalties against European and other companies that invest in Cuba. But even a few hours in Havana shows how pointless - and potentially counterproductive - this is. The flow of business is seeping quickly into Cuba's pores, widen ing economic disparities, but also opening new opportunities and accelerating the desire for political change.

Compared to the former Soviet Union, Cuba is taking to the opportunities presented by the market with a practiced exuberance - as well as a sense of solidarity that has been strengthened by the U.S. trade embargo. For nearly four decades, Cubans have had to be entrepreneurial and inventive - how else could they have kept those old American cars going so long?

Yet to my surprise, several Cubans told me that the U.S. embargo has in some ways been a good thing. They do not want to go back to the colonial style of capitalism that dominated Cuba before Castro and his band entered Havana in 1957. The embargo, they say, has allowed a slightly more controlled reentry to the global marketplace, giving Cuba a chance to democratize its political system, and at the same time preserve some of the hard-won social gains of recent decades - including government-provided health care, near-universal public education.

The "Special Period" has also given Cuba a chance to consider a new ethic of sustainability to replace the dead theory of Marxism. It gives one pause to consider that by subjecting Cuba to privations, the United States may have given that struggling nation just the incentives it needed to begin turning to more sustainable activities than those to which the United States itself remains addicted.

To an environmentalist, it's hard not to react with ambivalence to the realization that there is a country in the Western Hemisphere - or, indeed, anywhere on the planet - where as a result of deprivation, people have shifted from cars to more bicycling and walking, from pesticide-intensive agriculture to more emphasis on organic farming and home gardening, and from a heavily subsidized central economy to a new encouragement of independent enterprise.

The question now is whether Cuba can keep those initiatives alive while still embracing the new wealth and freer flow of ideas that come with a more open society. Perhaps Cuba can set a new kind of example by choosing the best of both worlds - of local self-reliance and global exchange. But there remains a risk that, like many countries today, it could end up with the worst of both - swept off its feet by the great wave of money - and consumerism - that is now homogenizing much of Asia and Latin America. This last battleground of the Cold War deserves careful reconsideration - and friendly support - in the difficult years ahead.