Investing in Cuba: a big trickle.

Five years into what Fidel has called "the special period," the standard of living of the ordinary Cuban has declined markedly. In the last four years, Cuba lost more than 75 percent of its export-import market. Tens of thousands of workers have been laid off and virtually all areas of the economy have been opened to foreign investment. These measures have been taken out of economic necessity in the hope that the overall social gains of the revolution might be protected. It is too early to gauge the long-term impact of these changes, but it seems that in the last year Cuba's prospects for economic recovery have improved.

Tourism has continued to grow, with most visitors still coming from Canada (120,000). But Cuba's tourist link has been solidified with the rest of the Caribbean and Latin America, and that region now provides one-quarter of the island's foreign visitors.

In the last year, small but potentially important steps also occurred in the area of direct foreign investment. Canadian Sherritt, Inc. announced that its offshore prospecting had tapped the best grade of oil yet found in Cuba, and that it would invest $24 million. The company projects greater investment in the future, including prospecting in central Cuba, and signed a fifteen-year contract to refine cobalt and nickel. Cuba has become Canada's second most important Caribbean trading partner--following Puerto Rico--with 1993 trade at U.S. $220 million. In 1994 the Canadian government ended its sixteen-year ban on official aid to the island with a $1-million package of development and humanitarian aid.

A 1994 visit by Mexican President Carlos Salinas de Gotari underscored renewed Mexican involvement in Cuba. Domos International of Monterrey signed a $1.5 billion deal (the biggest private investment in Cuba since 1959) that gives it a 49-percent interest in the Cuban telephone company. Over the next seven years, Domos will overhaul the decaying Cuban phone system, increasing the number of phone lines from the current 450,000 to 1 million. Last year, Mex-Petrol signed a $200-million joint venture to reopen an idle oil refinery in Cienfuegos. The new company will refine Mexican oil and sell it wherever it wishes. This project, together with the completion of the Cienfuegos nuclear plant, is very important to Cuba's energy future. Mexico leads all Latin American countries with $2 billion in investments in Cuba; Brazil ranks second with $150 million, and Chile third with $100 million.

British companies are also apparently interested in Cuba's oil potential. Two British firms are currently working in the Ciego de Avila oil fields. To revive Cuba's flagging cigarette industry, a Brazilian subsidiary of British American Tobacco, Souza Cruz, has signed a deal that includes planting 1,730 acres of tobacco in Cuba and machinery for a factory capable of producing 6 billion cigarettes, half of Cuba's annual consumption.

These small-scale successes with foreign investment, combined with the reopening of private peasant markets, have given the Cuban government some breathing space. But they are also risky. The increase in tourism and the legalization of the dollar are exacerbating social inequities in a society that was one of the most egalitarian in the world. The revolutionary government still retains respect from a great number of Cubans but they will be watching closely as Castro leads the country on a tightrope between capitalism and socialism.