BY JUAN O. TAMAYO

 The Cuban government has temporarily halted foreign investments in real estate,
 casting a shadow over a program once touted by the communist government as
 evidence of its shift toward a more capitalist economy.

 Havana did not explain its decision, but foreign investors in Cuba speculated that
 it was brought on by the avalanche of projects waiting to be approved, or by a
 government decision that it no longer needs foreign capital as desperately as in
 the past.

 In addition, some government agencies seem to be surprised at the high profits
 made by investors in the first property development -- profits of 20 to 30 percent in
 less than one year -- and eager to step in and pocket any profits for themselves,
 the investors said.

 The freeze announced last week by the Foreign Investment Ministry halted about
 30 proposals currently under consideration by the government for new
 condominium and townhouse developments, said Stephen Marshall, a British
 real-estate agent based in Havana.

 Sixteen other developments already under construction, totaling about 2,000 units
 and financed mostly by European firms, will go ahead as planned, Marshall said
 in a telephone interview from Cuba.

 Interest in building luxury residences for foreign diplomats and business people
 living in Havana, as well as vacation homes for visitors, soared after Cuba
 approved a foreign investment law in 1995 that allowed foreigners to own property
 for the first time in nearly four decades.

 Havana, a city of four million residents, has seen its housing decay significantly
 since President Fidel Castro seized power in 1959. The government charges
 foreigners huge rents for old homes and apartments, most of them seized from
 Cubans who fled abroad in the 1960s.

 Castro, who also nationalized most foreign-owned properties in the early 1960s,
 portrayed the 1995 law as proof of his government's move to embrace the
 concepts of private property and foreign investment.

 Cuba-watchers believe the freeze is part of a campaign to reconsider foreign
 investment policies and deals approved haphazardly to keep the government
 afloat after the end of Soviet subsidies in 1991.

 ``Cuba seems to constantly reevaluate previous commercial policies to make
 certain they are consistent with current commercial needs. There seem to be an
 increasing number of changes these days, said John Kavulich, president of the
 New York-based U.S.-Cuba Trade and Economic Council.

 Added one Venezuelan investor in Cuba: ``The Cubans basically believe they can
 be more selective with foreign investors because they are not as desperate . . .
 and that foreigners will always be there to invest.

 TOO MANY PROPOSALS

 Marshall, the real-estate agent who also runs a tourism company in Havana, said
 he believes the Cubans took the decision because they were ``simply inundated
 with too many proposals, and many developers were getting upset at the delays.

 ``Sixteen projects in such a short time, after being essentially without foreign
 investments in real estate for decades, is an awful lot of real-estate work to
 undertake, he said.

 The ministry notified him Tuesday that because of the freeze, a team of officials is
 now available to consider his 8-month-old proposal to build a new golf course in
 western Havana, Marshall said.

 Government-run firms have also been buying up several units under construction,
 Marshall added, after seeing some investors in the only condominium completed
 so far, the Montecarlo Palace condominiums in Havana, sell their units at profits
 of up to 30 percent.

 Cuba attracted a great deal of interest from multinational firms as well as
 fly-by-night business people when it opened its doors to foreign capital in 1992,
 and it claims to have received more than $2.5 billion in investments since then.

 But since the crisis peaked -- Havana claims its economy grew by 6.2 percent
 last year -- the Castro government has been trying to weed out projects and
 investors it no longer considers absolutely necessary.

 A `REPOSITIONING'

 ``There's a general repositioning, that they will no longer accept some of the
 things they were forced to accept in the past, and will break some signed deals if
 they think they can get away with it, said a European lawyer involved in several
 deals in Havana.

 The British-run Caribbean Financial Co. was denied a permit to operate an office
 in Havana in January even though it has made about 160 loans totaling $60 million
 since 1996, mostly to Cuban tourism enterprises, from its unofficial office in the
 Cuban capital.

 Vice President Carlos Lage has been criticizing the three free-trade zones
 established in Havana since 1995 as generating considerable profits for foreign
 investors but few benefits for Cuba. The zones now hold 294 companies but
 employ only 800 workers.

 The Canadian firm Sherritt International has yet to invest an estimated $300
 million of the $472 million it raised in 1996 through a bond sale advertised as
 aimed at stepping up the firm's investments in Cuba.

                     Copyright 2000 Miami Herald