By JUAN O. TAMAYO
Herald Staff Writer

Cuba's foreign debt and trade deficit set records in 1998, a year in which its economy barely grew and left 11.1 million people living at about the same level as 15 years ago.

Only tourism and remittances from Cubans abroad, many of them in South Florida, kept the island's economy from sinking in a sea of budget deficits, falling export prices and slowing foreign investments.

That grim picture of an island facing an ``abominable 1998 and not much better prospects this year emerged from three closely held reports on the Cuban economy obtained recently by The Herald.

They were the Cuban Central Bank's official report for 1998, a study of foreign investments commissioned by a Western embassy in Havana and an economic bulletin produced by the French Embassy in Havana.

Together, they paint a picture of a nation almost totally reliant on outside factors for its survival, borrowing heavily just to stay afloat and gathering profits only from tourists and exiles.

``The million-dollar question is just how they survive. It's almost inexplicable, said University of Pittsburgh Professor Carmelo Mesa-Lago, an expert on the Cuban economy.

Even the Central Bank's report, likely to portray Cuba at its best, showed a nation whose gross domestic product grew by a mere 1.2 percent in 1998, following a drop of 35 to 40 percent after subsidies from the Soviet Union ended in 1991.

``There is no recovery, Mesa-Lago said after studying the Central Bank report.

Assigning blame

The report's introduction blamed Cuba's problems on the U.S. embargo, the damage wrought by a drought and Hurricane Georges last year, and an unexplained ``international financial crisis.

But its numbers pointed to domestic troubles: a 23 percent spike in the gap between exports and imports that created a record $2.78 billion trade deficit and a 10 percent increase in hard currency debts -- not including the former Soviet bloc -- to an all-time high of $11.2 billion.

The drop in world sugar and nickel prices cost Cuba $125 million last year, and the overall balance of goods and services imported and exported showed a $396 million gap, the report said.

Internal debts, largely for loans from government-run banks to government-run firms and farms, grew by 25 percent in 1998, the report added. It said the problem of company-to-company debts, described as strangling the Cuban economy in 1996, ``showed signs of improvement.

Not in the red

About the only numbers not in the red were tourism income, primarily responsible for the $2.2 billion surplus in the balance of services, and $820 million in current transfers, believed to consist mostly of cash remittances from Cubans abroad.

Averaging GDP growth figures from 1989 to 1998, Mesa-Lago said, Cuba notched a minus 3.6 percent, the worst record in Latin America except for Haiti.

The Western embassy's report on Cuba's foreign investment prospects was almost as grim, noting that businessmen complain of ``excessive bureaucracy, investment approval delays, payment problems and restrictive labor legislation.

``There is also a perception, which has increased in the last few years, that the government's acceptance of foreign investment is limited . . . by political and ideological considerations directly linked to the leadership's desire to preserve a one-party socialist system, it added.

``Foreign investors in Cuba need to remember their partner on the Cuban side will invariably be the Cuban state, which both makes laws and policies, and interprets and applies them according to its needs and interests, the report added.

Investments estimates

It estimates total foreign investments in Cuba as low as $1.14 billion and as high as $4 billion, a huge spread generated by the government's refusal to provide official figures since 1996.

Harshest of the three reports was the one issued in May by the commercial section of the French Embassy in Havana. The Cuban Foreign Ministry immediately called in a French diplomat to complain about its tone.

The year 1998 was ``abominable because Cuba was weakened by a ``hardly efficient planned agriculture, an ``exhausted industrial base and ``financial asphyxia aggravated by the U.S. embargo, the report said.

And this year is ``a year of total danger, the report added, because of Cuba's continuing problems trying to pay its debts and finance its huge foreign trade deficit.

Cuba, the report concluded, now faces ``a liquidity crisis that raises questions even now about its solvency in the short run.