Raul Looks to the East; Fidel is still around, and officially in charge. But his brother Raul may be about to ditch Cuba's Soviet economics in favor of Beijing's free-market model.(Fidel Castro, Raul Castro)

Byline: Joseph Contreras

After months out of the public eye, Fidel Castro was suddenly back last week, appearing on Cuban TV for a meeting with Venezuelan President Hugo ChAvez. Though he's put on some weight since his last appearance, the mumbling Cuban dictator was an apt symbol for the island he's led for 48 years: too sick to function properly but not quite dead. Castro is like an ailing dinosaur; his Cuba remains stuck in the mud, with an antiquated government and a stagnant Soviet-style economy. On the surface, little seems to have changed in the six months since the 80-year-old Fidel ceded power to his brother Raul.

But look beneath Cuba's petrified facade, and you'll find changes afoot that foreshadow what will come when Fidel finally expires. Under the 75-year-old Raul's quiet stewardship, the country has begun to take a hard look at the many problems plaguing its 11.4 million inhabitants. And some Cuba analysts believe the younger Castro may have picked a new model to emulate: Beijing, where the Communist Party has maintained an absolute grip on political power while loosening the economic reins, encouraging foreign investment and private entrepreneurship--and making China an economic superpower in the process.

The most noticeable change so far can be seen in the way Havana has begun questioning its old methods--challenges that were unheard of in Fidel's day and that have fanned expectations that Raul aims to reorient the country. During a two-day meeting of Cuba's rubber-stamp Parliament at the end of last year, a stern-faced Raul blasted the "bureaucratic red tape" that was delaying prompt payment to farmers for their crops and described the public-transportation network as "practically on the point of collapse." "We are tired of excuses," he growled.

This followed a scathing expose of theft, consumer rip-offs and incompetence at government-run enterprises that was published by Juventud Rebelde, the Communist Party's youth newspaper. Under the headline the big old swindle, the newspaper reported that beer mugs at bars were routinely underfilled, restaurant sandwiches were light on ham and cabdrivers charged passengers four times the official fare. If employees really followed the rules, gave customers what they asked for and charged government-mandated fees, it continued, a large number of state-run businesses and services would go bankrupt. The newspaper was blunt about what was to blame for this mess, quoting a government economist who lamented the country's "skewed" Soviet model.

Raul, meanwhile, has been studying the Chinese alternative ever since he first traveled to Beijing in 1997, where he met Zhu Rongji, the prime minister credited with many of China's most important economic reforms. Raul later invited one of Zhu's top advisers to Cuba to meet hundreds of officials and executives from state-run enterprises, and the visits have continued ever since. "The Chinese model ... has most impressed and influenced the current leadership in Cuba," says former Cuban intelligence official Domingo AmuchAstegui. "In the last 15 years, about 85 percent of the civilian and military leader[s] have gone to China."

These trips are starting to bear fruit. Officially, Havana still insists it must maintain state ownership of more than 90 percent of the economy, and Raul has never publicly endorsed Chinese-style "market socialism." But his actions tell another story. Under his rule, the military has become the most important player in Cuba's economy, running about a dozen companies that capture an estimated 60 percent of all tourism revenues and two thirds of hard-currency retail sales. These ...