By Marc Frank

HAVANA (Reuters) - Cuban investment and freighttransportation fell significantly through June as the Caribbeannation grappled with a two-year old financial crisis andrecession, according to government reports released this week.

The National Statistics Office (NSO) reported that allinvestment, in foreign currency and local pesos, fell 14.7percent from January through June and freight traffic 12.2percent, compared with the same period in 2009.

Investment was reported down across the board, fromconstruction to the purchase of machinery and agriculturalinputs.

Investment fell just over 15 percent in 2009 and freighttransportation 5 percent, according to the government.

Cuba does not release overall performance data until theend of the year, but the statistics office (ONE.CU) hadreported earlier that manufacture stagnated and food productionfell 7.5 percent through June.

Local economists say import-dependent Cuba's economicperformance has always been tied to the level of suppliespurchased abroad the previous year.

With further reductions in spending in place for 2010,Cuba's economic problems will likely continue for a while, theysaid.

The declines follow severe budget cuts and a reduction ofmore than $5 billion or 30 percent in imports last year as Cubafought off the effects of the international financial crisis,hurricanes, policy errors and the long-standing U.S. tradeembargo against the communist-led island.

Economic growth has fallen from 7.3 percent in 2007 to 4.1percent in 2008 and 1.4 percent last year, according to thegovernment.


President Raul Castro, who took over for his brother FidelCastro in early 2008, replaced his economic cabinet last yearand declared the country had to live within its means andimprove efficiency.

Castro has warned of hard times throughout the year evenwhile promising to modernize the Soviet-style economy, the laston the planet except for North Korea.

He announced last month that as much as 20 percent of thestate's labor force, or 1.2 million people, would be let go ortransferred over five years and said he would allow more familybusinesses and private hiring to pick up part of the slack.

"We have to erase forever the notion that Cuba is the onlycountry in the world in which people can live without working,"he said.

Castro's critics at home and abroad have repeatedly warnedhe has been too slow off the mark with needed changes.

He has undertaken a series of reforms in agriculture, fromleasing fallow state land to loosening the state's straitjacketon farmers' purchase of supplies and sale of their produce.

Similar reforms began this year in the retail sector wheresome minor services were leased to employees, more licenses topeddle food granted and cooperatives planned.

Modernization will also include warming up to foreigninvestors, local analysts believe, with the government recentlyextending from 50 years to 99 years the amount of time they canlease land. (Editing by Jeff Franks and Jerry Norton)