In Cuba, peso makes a comeback, pleasing customers

*Peso-priced retail outlets opening across island

Global Markets

*Seen as first step toward ending dual currency

*Santiago de Cuba apparent pilot project

By Marc Frank

SANTIAGO DE CUBA, Feb 1 (Reuters) - Retail outlets selling everything in Cuban pesos are popping up across the country in what may be the government's first steps toward phasing out its unpopular two-currency system.

The establishments opened the past year in a reversal of two decades of national policy that priced most goods and services in a dollar-linked convertible peso widely known by its acronym, the CUC.

"They have opened restaurants, pizzerias, cafeterias and pastry shops and set up areas across the city where they sell sandwiches, snacks and soda," said retiree Pedro de la Fuente from Guantanamo, the capital city of Cuba's easternmost province.

"The population has welcomed this because before these things were available only in convertible pesos," he said.

The change appears to be part of President Raul Castro's plan to make more goods and services available in pesos in a gradual transition away from the two-currency system, which he has pledged to eliminate.

Since taking over from his ailing brother Fidel two years ago, Raul Castro has pledged to make daily life easier in the communist state, where the government tightly regulates almost all economic activity.

He has taken steps to reform agriculture to increase food production, liberalize the sale of computers, cell phones and domestic appliances and free up the official media to criticize bureaucratic mismanagement.

Cuba adopted the dollar as its second currency to prop up its economy, which spiraled into a deep depression after the Soviet Union, the island's benefactor for 30 years, collapsed in 1991.

The dollar was eventually replaced by the CUC, which is pegged at a value of US$1.08 to one.

Cubans have complained mightily about the two-tier system, saying it makes too many things unaffordable for them unless they receive dollars from relatives living abroad.

The average Cuban salary is 440 pesos a month, the equivalent of 18 CUCs at the current exchange rate of 24 pesos to one.

SANTIAGO THE PILOT PROJECT

The epicenter of change is Santiago de Cuba, the island's second largest city, where far more peso outlets have opened than in other cities.

"There is a special plan, where the party and government allocated Santiago a budget to remodel dozens of establishments and open new ones," a Communist Party cadre and administrator of various eating places said, asking her name not be used because she was not authorized to talk with foreign journalists.

"The idea is for the population to feel good, to have the services they deserve, to be able to sit down in any restaurant, cafeteria or what have you and pay in pesos," she said.

For the 50 percent of the population with some dollar income from family remittances, state bonuses, tips or other sources, the prices are often a steal, but they are only occasionally accessible to those not so fortunate.

"At least I can go out to eat a few times a month in the money I'm paid with," said Carmela, a professor of nursing in the central city of Camaguey who earns 600 pesos per month.

An informal survey in Santiago de Cuba found that at Ideal supermarkets, much of what one finds in the convertible peso markets can be had for a price equivalent to up to 20 pesos to a convertible peso, still very expensive but a bit more affordable than the 24-to-one official exchange rate.

Local fish stores sold a kilogram (2.2 pounds) of shelled oysters for 60 pesos, lobster meat for 50 pesos, crab for 15 pesos and salted fish for 50 pesos.

At the restaurant Las Americas, a meal of pork, rice and beans, salad and a local beer or soda, cost around 35 pesos and in the evening the place was packed.

The pizzeria down the street sold a large pie and beverage for 20 pesos to a full house, adding on up to 10 pesos for lobster, chicken, sausage or shrimp topping.

A few doors away a fish restaurant did a brisk business offering a variety of grilled and fried dishes for between 30 pesos and 50 pesos.

The peso establishments were well lit, clean and air conditioned, luxuries reserved for CUC-based eateries since the 1990s.

That was not true everywhere -- in the eastern city of Holguin, for example, some remain dark, dirty and hot.

The government has said little about the project or how fast it will move, but Raul Castro has told Cubans it will take several years to return to one currency.