Cuba's Castro says world economy may slow reform

By Marc Frank

HAVANA (Reuters) - Cuban President Raul Castro warned on Friday that one of his key reforms, improving worker pay, may be slowed by global economic problems.

In a speech to the first National Assembly meeting since he formally succeeded his brother Fidel Castro in February, Cuba's new leader said he would like to move faster to improve the lives of Cubans but that rising prices and a slowing economy forced him to be realistic.

Castro, 77, has taken steps to modernize the state-run Cuban economy that included removing salary caps and increasing economic incentives for workers to be more productive.

He said "the salary problem" was being studied and would be addressed "gradually and according to priorities" but he dampened expectations for quick action.

"It will depend on the economic situation of the country, inevitably linked to crisis in the world today, which could worsen," he said. "It wouldn't be ethical to create false expectations.

"We would like to go more rapidly, but it's necessary to act realistically," he said.

Raul Castro sat next to an empty chair reserved for brother Fidel Castro, who has not appeared in public since he provisionally ceded power to Raul Castro after intestinal surgery for an undisclosed illness in July 2006.

Fidel Castro, 81, took power in a 1959 revolution and remains a deputy in the National Assembly, which keeps his chair open, awaiting his return.

His younger brother has raised expectations for change in Cuba, where the average Cuban receives several social benefits but earns less than $20 a month.

His reforms have included decentralization of agriculture to increase food production, removing salary limits so better workers can earn more, allowing Cubans to buy cell phones and computers and opening up tourist hotels previously off-limits to Cubans.

In committee meetings leading up to Friday's National Assembly session, government officials discussed the need for belt-tightening due to rising prices for fuel and imports.

They also said the government would decentralize a sagging construction sector to make it more efficient and consider raising the retirement age to help Cuba cope with an aging population.

The proposal would gradually raise retirement age from 60 to 65 for men and from 55 to 60 for women, but is not expected to be approved until the assembly meets again in December.

Raul Castro, who wore a traditional white guayabera shirt to address the assembly, said the change was needed to maintain the workforce as Cuba ages.

Forecasts "indicate that in 2025, there will be 770,000 fewer citizens of working age than there are now," he said.