HAVANA, Cuba - The sound of jackhammers echoes along the famous

seaside walk called the Malecon as construction crews transform priceless

but crumbling 16th Century buildings into pricey five-star hotels. Nearby,

tourists jam an artists market in picturesque Old Havana while guides

discourse about Cuban art in Italian, English and German.

Ten years after experts predicted the collapse of the Soviet Union would

send Fidel Castro's communist Cuba to the graveyard of broken socialist

dreams, Havana is bustling with workers, visitors and a tourist invasion

that poses stiff competition for its Caribbean neighbors.

While life for everyday Cubans is still a struggle, this nation of

11million has clearly turned a corner since the dark days of the early

1990s, when the end of $6 billion in annual Soviet subsidies left Castro

and his followers scrambling to keep their island afloat.

Last year the economy grew by 6.2 percent, Cuban officials say, leading

most other Latin American nations.

Gone are the rolling power blackouts that left portions of the country dark

each day during the post-Soviet crisis. The transportation meltdown that

saw Cubans packed onto everything from dump trucks to bicycles for daily

commutes has eased somewhat, while long lines at government-run stores that

dispense rations of bread, rice and other staples are no longer an everyday

sight.

There is food in the stores now - along with luxury items like televisions

and stereos - and there are free spending tourists in the streets.

Most Americans are barred from visiting Cuba, but tourists from other

countries are coming in droves. Last year, a record 1.6 million visitors

pumped about $2 billion into the economy, and there are ambitious plans to

lure up to 7 million visitors annually by the end of the decade.

For all its progress, though, Cuba has a long, hard road ahead. Houses and

buildings everywhere are crumbling. Ration stores often lack basics like

cooking oil and soap. Salaries for government jobs are abysmally low, and

prices for goods are high. Meanwhile, the state security apparatus is still

a powerful force, stifling any calls for change.

But the influx of foreigners and their money is rapidly changing parts of

the island in both subtle and dramatic ways. There are now a tiny number of

new opportunities for people long accustomed to relying solely on the

government, and there are new challenges to that government's tight control

of the populace.

"Here in Cuba, there are things good and bad, like in any country" said

Yohiry Acosta(cq), 21, who was trained as a mechanic but is studying

English in hopes of getting a tourism job. "We have free health care and

education, but there aren't enough good jobs. I just want to work and

better my life."

Such dreams are fueled by the tourist invasion. Cuban boys who pledge

loyalty to the revolution each morning in school may spend the afternoon

hustling as guides for tourists, eagerly chatting in broken English about

music, sports and other topics.

Sometimes they don't even want dollars, asking instead for a Tommy Hilfiger

or Nike shirt, mildly subversive status symbols in a country built on the

principle that materialism is evil.

But the tourists are bringing more than just designer shirts.

Tourism has helped spark the creation of two Cuban economies - and two

classes of people.

Those still stuck in the old economy subsist on government jobs and an

average salary of 200 pesos - about $10 - a month. For them, putting enough

food on the table and keeping properly clothed is still a struggle, despite

government handouts.

The new economy is based on dollars. When Castro legalized the American

currency during the depths of the crisis, he tossed a lifeline to millions

of Cubans with relatives abroad. Family-to-family remittances now top $900

million a year, according to unofficial estimates.

But "dollarization" also opened a hairline crack in the state-controlled

economy. As tourism has grown, a tiny class of entrepreneurs has emerged.

Industrious Cubans are renting spare rooms to tourists, opening small

private restaurants in their homes and serving as guides for tourists.

There is also a thriving black market - both for everyday Cubans who want

shoes, jewelry and food - and for tourists who want cheap cigars, rum or

coffee.

The black market has inevitably spawned corruption and theft, as workers

swipe boxes of expensive cigars to sell on the street, while more ambitious

thieves nab goods off of trucks to sell to Cubans. Crime is far from the

problem a tourist might face in Caracas or Miami, but in Cuba it is a new

phenomenon.

The government has responded by deploying scores of police officers in the

tourist districts. A bustling prostitution trade has been moved off the

streets. Officials are also charging private entrepreneurs for business

licenses. Still more police sweep neighborhoods where Cuban black markets

thrive, rounding up violators.

The government has also limited the access of average Cubans to tourist

districts like Varadero, a gleaming beach resort two hours from Havana. The

restrictions keep a lid on crime and the black market, but have stirred

resentment among Cubans who can't visit their own country's newest attractions.

And there is the potential for a growing jealousy between the dollar-haves

and have-nots. In a country where all were once equal, some families now

own television sets and video players, while others scramble for bread,

rice and beans.

But Cuban officials express confidence that the changes brewing in their

country and the influence of foreign tourists won't undermine their

socialist ideals.

"The Cuban people really believe in the ideas of socialism, and that does

not frighten us," Central Bank President Francisco Soberon(cq) recently

told Reuters.

As for the crumbling buildings, shoddy housing and the struggle for

day-to-day survival facing millions of Cubans, officials blame the

40-year-old U.S. embargo. In a drama run nightly on news broadcasts, a

Cuban court is taking testimony about the embargo's damages, with the tally

steadily mounting by the millions.

Clearly the embargo has hurt, but other countries are rushing to fill the

void. Most of the classy new hotels and restaurants in Old Havana and

Varadero have been funded by partnerships between Castro's government and

investors from Europe and Canada.

"The potential is enormous," said Gus Garrisen(cq), a Dutch business

consultant who recently toured Cuba. "The Americans are missing a huge

opportunity. I consulted with one Dutch company that built a hotel in

Havana, and it is very profitable. I now live in Bonaire, and everyone

there fears the day Cuba opens to the Americans. It could wipe us off the

tourism map."

Hopes that the embargo will fall burn brightly in Havana, from government

officials to people on the streets eager for a flood of American dollars.

They are encouraged by visiting U.S. politicians and statements from groups

like the U.S. Chamber of Commerce, which favors lifting the embargo.

But Cuba is still wavering somewhere between its past and an uncertain

future. The tiny private sector could easily be snuffed out, and

entrepreneurs fear government crackdowns, higher licensing fees and tighter

restrictions on contact with foreigners. Meanwhile, Cubans with no access

to dollars lament their stagnant salaries and ever- rising prices.

And hovering over everything is the imposing figure of Fidel Castro, now

73, who has run his country with an unyielding hand for 40 years. While

sidewalk murals extolling the revolution are fading and billboards

advertising Japanese electronics are now popping up, Castro's revolution -

and his powerful security forces - are still very much in control.

But now, perhaps for the first time in decades, new forces are at play.

Huge air-conditioned tour buses jam the parking lots near Old Havana each

day, the crowds lining up to tour museums, browse gift shops or tour the

stunning historic district. Varadero's hotels are jammed with Canadians and

Germans who find a Cuban beach holiday cheaper and just as fun as Cancun.

Sunburned foreign college students in soiled cutoffs and scraggly beards

take mountain-bike treks across the countryside, while scuba-divers marvel

over Cuba's gorgeous reefs.

The trickle of free contact between tourists and everyday Cubans seems

likely to grow, creating more opportunity, more friendships, more business

transactions and more desire for change in Cuba. Even if Cuba's leaders

want to turn back the clock, they have cast their lot on a future built

largely on tourism, and they can only exert so much control over their

visitors without scaring them away.

"Everybody here is so curious about what's going on outside Cuba," said

Nathan Russell, who visited recently with a Canadian student group. "The

kids here all have such fresh eyes. It's a fascinating place."

By Mike Williams

Cox News Service

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