BY NANCY SAN MARTIN

 HAVANA -- In 1990, following the demise of the Soviet bloc, Cuban leader Fidel Castro announced the Revolution would be entering a new phase that would require the launching of an economic adjustment program.

 He called it ``the special period in time of peace,'' more commonly referred to as período especial. As food and other subsidized commodities began to disappear, Cubans were hit with a devastating economic crisis that reached its peak in 1994, culminating in a massive exodus out of the island and a tightening of the U.S. embargo.

 Amid the financial vacuum, tourism began to flourish as a government that once shunned tourists eagerly sought new sources of hard currency. Today, tourism has
 become the focal point of the economy.

 ``Tourism is Cuba's main fountain of dollars,'' said economist Carmelo Mesa-Lago, a professor and research scholar at Florida International University's Department of International Relations and Latin American and Caribbean Center.

 The growth in the economy has been steady since 1995, following a 35 percent economic decline from 1989 through 1993. In the seven years ending in 2000, the
 economy grew an average of 3.8 percent per year, putting the year 2000 gross domestic product -- the broadest measure of the standard of living -- at 84.5 percent of where it was in 1989, which many Cubans consider the last ``good year.''

 SHARED OWNERSHIP

 To finance the tourism industry, the government set up joint ventures with foreign investors to allow up to 49 percent foreign ownership in tourism properties (the
 government owns the rest) and endowed investors with freedom from taxes and some fees.

 The lure has attracted a host of investors, primarily from Europe, who have helped to more than double the capacity of the hotel sector over the last decade, according to a market profile by Andersen, a world-wide accounting and consulting firm headquartered in Chicago.

 Currently, there are 24 joint ventures that have 11,900 rooms under development and 3,700 in operation, the profile states. At the end of 1999, there were 189 properties with more than 30,000 available rooms.

 Last year alone, 22 four-star hotels opened in Cuba, the market profile states.

 The efforts have brought financial rewards.

 At a tourism convention in Havana earlier this month, Tourism Minister Ibrahim Ferradaz told reporters 674,000 foreigners had visited the island through April, a 12 percent increase from the same period last year. A record two million visitors are expected by the end of the year, Ferradaz said.

 In 2000, the government reported, Cuba received 1.8 million tourists, earned $2 billion in direct and indirect revenues and had 35,000 rooms in operation. A decade earlier, Cuba had 12,900 rooms, 340,300 visitors and $243 million in revenues.

 Spain's Sol Meliá and Barcelo, Jamaica's SuperClubs, and France's Accor are the main international hotel companies in joint-venture agreements to manage hotel
 properties in Cuba. China also has entered an agreement with Cuba for a resort on one of Havana's busiest intersections -- the corner of Prado Avenue and the seafront Malecón.

 The government projects that by the year 2010 as many as seven million tourists will visit Cuba, spending approximately $11.8 billion. To accommodate these visitors, Cuba plans to add at least 50,900 new hotel rooms. Even though the island's main markets are in Canada, Germany, Spain, Italy and France, Americans make up at least the third largest group of visitors.

 An estimated 170,000 to 180,000 U.S. residents visited Cuba in 1999, including about 150,000 who traveled across the island to visit relatives, Cuban officials said.

 Besides the money spent in Cuba, U.S. residents also send at least $800 million annually in remittances.

 That figure accounts for the second most important segment of the Cuban economy, said Mesa-Lago, the FIU economist.

 FEW GAINS ELSEWHERE

 Cuba has made little progress in the other key areas outlined as part of the economic adjustment program: sugar, biotechnology and foreign investment outside of
 tourism.

 ``The economy has improved somewhat, but not substantially,'' said St. Thomas University economist María Dolores Espino, who has written numerous analytical essays on the Cuban economy.

 ``Sugar lost its predominance in Cuba's economy and in the 1990s, the sugar industry experienced the lowest annual production figures of the second half of the century,'' Espino wrote in her most recent essay. ``Hopes and expectations about the biotech industry proved illusory. Foreign investment has been erratic and has fallen short of expectations.

 ``If tourism is to become a vehicle for Cuba's future economic development, it must first become a leading generator of income and employment. Moreover, effective linkages must be established with other sectors of the Cuban economy, in particular agriculture, services and retailing.''

                                    © 2001