Creeping Capitalist Tide Washes Up on Cuba Shores : Economy: The cash-strapped government looks the other way, creating painful contradictions for Cuban socialism.

By late morning, men and women begin to gather in the shady Prado Avenue plaza, a spot known to Cubans as the Housing Exchange. They come on foot and bicycles with scraps of note paper and penciled signs: “One-bedroom apartment in Vedado to trade.”

Would-be real estate agents circulate handwritten lists of houses on the market. Traders pay about 10 pesos to be on the sheet--a fraction of what they will fork over to the agent who closes a deal.

The sale of housing is prohibited by law. But it is an open secret that anyone looking to trade up will have to sweeten their offer. Refrigerators, televisions and video players are popular currency, as are forbidden U.S. dollars. None of the dozens of people milling about seem too concerned with the law.

“The government doesn’t interfere,” said Luis Jova, 26, an engineer looking to trade the three-bedroom apartment that his family shares with his sister’s family for two smaller apartments. “The state just doesn’t get involved.”

The exchange is one of the most open examples of the enormous black market that is keeping Cuba’s destitute economy afloat. Faced with severe shortages not only of housing but of food and clothing, Cubans are resorting to the underground for what some economists say may be as much as half their goods and services. The government, which once cracked down on private commerce, has no choice but to look the other way.

The Cuban government itself has launched market-oriented experiments in a seeming interminable struggle for economic survival following the collapse of the Soviet Bloc in 1989. At the time, nearly 85% of Cuba’s trade was with its Communist allies, most of it in barter at preferential prices. Now, Cuba receives about a quarter of the imports that it did, and a country that once followed five-year economic plans is left struggling day to day.

The government has signed nearly 80 joint-venture agreements with foreign investors in such strategic Cuban industries as tourism, textiles and petroleum--export industries that earn badly need dollars--and it is allowing trusted officials to run a few semi-autonomous businesses and is offering cash incentives to workers in key industries.

English--the language of U.S. imperialism and a U.S. trade embargo--has replaced Russian as the foreign tongue taught in government schools. English words such as know-how and management are creeping into the lexicon of government officials who also bandy such capitalist words as competition and profitability.

Despite these notable changes, the government apparently has not decided how far it is willing to go toward market economics. Some Cuban officials point to China as a model--a government move toward capitalism while maintaining political control; others say the Chinese have gone too far and are bound to face political challenges from new capitalists.

President Fidel Castro, the leader of Cuba’s Communist Party who has ruled the island since 1959, has delivered mixed messages on the economy. He has actively sought foreign investment while swearing his loyalty to communism.

“The associations with foreign capital do not imply a renunciation of the country’s socialist system,” Castro told foreign journalists last month. “I do not accept the theory of the efficiency of capitalism compared to socialism.”

Meanwhile, Carlos Lage, 41, Castro’s economics czar and executive secretary of the Council of Ministers, told Cubans in a long television interview last November that Cuba faces nothing less than “strategically reorienting the development of the country’s economy toward a totally new situation.”

The situation so far is creating uncomfortable contradictions for Cuban communism. Official business leaders run companies with a large degree of independence from central planning, but independent entrepreneurs such as the “real estate agents” remain illegal.

At its fourth congress in 1991, the Communist Party agreed to let tradespeople work individually for private gain. But the government has yet to issue a single license allowing them to do so.

Cubans laboring in joint ventures earn about 20% more than colleagues in other companies--a measure that is creating two classes of workers. Last month, the government began allowing some tourism employees to keep their dollar tips, although most Cubans still are prohibited from owning foreign currency. As a result, maids and bellmen may earn more than doctors and engineers.

Some Cuban officials and academics ask: What about these people working in companies that operate under market-economy rules? Won’t the new rules and added benefits eventually undermine their allegiance to socialism?

Tourism is bringing hundreds of millions of dollars to Cuba, but it is fomenting prostitution and creating resentment over what has been coined “apartheid tourism.”

Scores of dollar stores, restaurants and hotels are off limits to Cubans unless unaccompanied by a foreigner. Even the popular Coppelia ice cream parlor--a revolutionary institution--is segregated, with peso customers lining up downstairs and dollar-paying customers enjoying better service upstairs.

Some Cubans complain that the government’s foreign investment strategy occurs at the expense of Cuban citizens, selling part of the national patrimony to foreign capitalists while denying Cubans the right to buy a piece for themselves.

“The situation has reached the point that this year it is unavoidable for the government to make a decision on what role the state will play in the future and what role, if any, it will allow the market to play,” said one government official and party member. “And what role can individuals have in initiatives? Most people believe it is inevitable we move toward a primitive free market.”

What most Cubans really believe has always been difficult to determine in a one-party system that rewards members who play by the rules and is adept at controlling opponents.

Castro, at his news conference, asserted that “whatever complaints the people might have, no one has the least doubt about the people’s support for the revolution and socialism.”

Support for gains of the revolution--low-cost housing, health and child care, high-quality public education and independence from the United States--clearly remains strong. Even with a rising crime rate, Cubans proudly assert their streets are relatively safe and drug-free.

But support for socialism and for Castro himself is increasingly difficult to measure. Public anger is rising with daily power outages and the growing scarcity of food, gasoline and transportation.

The notorious Cuban humor is becoming ever more vitriolic: “Why are we Cubans like seals?” one joke goes. “Because we are up to our necks in water and still clapping.”

Faced with low peso salaries and high black-market prices, more and more Cubans are abandoning government jobs to strike out on their own. Some work as drivers or maids; others become entrepreneurs, raising chickens on their rooftops or crafting homemade parabolic antennas for sale.

But as people lose their dependence on the government, the government loses its leverage over them. Independent workers may feel less obligated to show up for government rallies, sugar harvests and other “voluntary” work for the revolution. In short, they have less stake in respecting socialist rules of the game.

But if the government seems to be losing some hearts and minds, so far it apparently is not losing political control. Cubans are consumed with the daily chores of survival: waiting in lines for low-priced food rations from official markets and scrambling for additional food on the expensive black market, riding their bicycles to and from work or waiting two and three hours to squeeze onto a crowded bus.

While not starving, the whole country seems to have undergone a tremendous weight loss in the last couple of years. But rather than becoming rebellious, many people simply seem broken-spirited by difficulties and the knowledge that the economy is unlikely to improve soon.

The Cuban economy is almost half the size it was four years ago, and economists predict a “flat” year, at best, for 1993. Export industries still are not bringing in enough dollars to import all of the food, fuel, machinery and spare parts that Cuba needs.

Hit by a U.S. trade embargo in the 1960s, Cuba turned to the Soviet Union and its allies for imports and export markets. But when the Berlin Wall fell in 1989, Cuba lost its second-largest trading partner, East Germany.

That year, Cuba received 13 million tons of oil from the Soviet Union, re-exporting part of it for what amounted to almost 40% of its hard-currency income for the year. Then, Cuba’s No. 1 trading partner, the Soviet Union, came apart.

By last year, oil imports were down to 6 million tons, leaving none to spare for cash exports. Cuba’s trade with its old Communist partners was down to 7% of its former value, according to the government’s Lage.

Cuba has had no access to Western credit since it declared a moratorium on servicing its $6-billion foreign debt in 1986; Russia now estimates Cuba’s debt to the former Soviet Union at about $17 billion.

In one development favorable for Cuba, Russia signed an agreement with Havana last November for delivery of 3 million tons of oil this year in a swap for sugar--a deal that saves on foreign currency and recognizes that the trade relationship is mutually beneficial. But Cuba must import 3 million more tons of oil just to pace up with last year’s short supplies.

The economic decline is evident in the streets of Havana. Although officially there is no unemployment in Cuba, idle men and women line the sidewalks. Bicycles have replaced most cars; long lines of people await aging buses.

The 1950s Fords and Buicks, relics of pre-revolutionary Cuba, are mostly parked, too expensive to drive.

The government tries to distribute hardships evenly among Cubans by rationing food, electricity and fuel. In the monthly food ration book, scarce milk, meat and chicken are reserved for children younger than 7.

Even some Cuban officials admit the crisis has forced them to do things they have always disapproved of, such as shopping on the black market. They are among those arguing most adamantly for a liberalization of the Cuban economy.

“We have to reorganize the economy in some way that we find efficiency and can insert ourselves into the competitive international economy, while making sure the social achievements of 30 years are not lost,” one official said.

“The worst problem now is not the shortage of food and transportation but the erosion of values,” he added. “Scarcity is a bad adviser. It makes you selfish and breaks down the spirit of collective solidarity. To get on a crowded bus, you struggle against old people and your neighbors, push and kick. Well, right now the whole country is a bus in critical condition.”