Communist Cuba's recent easing of red tape for private enterprise is improving services for tourists in provincial towns on the Caribbean island, with hundreds of new restaurants and lodgings opening up.

Mom-and-pop small businesses have begun to boom in Cuban cities and towns following reforms by President Raul Castro to boost private enterprise and lay off state workers to improve efficiency in one of the world's last Soviet-style economies.

In the quaint south coast port city of Cienfuegos, the number of private restaurants has jumped from two to 16 in just a few months. There are now more than 100 home-based 'bed and breakfast' lodgings, local entrepreneurs say.

That is a welcome relief for visitors to the town, nestled between the foothills of the Escambray mountains and a palm-lined bay. Both foreigners and locals have grumbled in the past about the poor food and accommodation on offer in the Cuban interior, away from the capital and main tourist resorts.

Cienfuegos' 400,000 residents and wandering tourists, who last year struggled to find refreshment in the often sweltering city, can now choose between dozens of home-based snack outlets serving pizza, pastries, coffee and soft drinks.

Competition means you have to improve your service and that's a good thing, everyone gains, you, the tourists and the country, said Orestes Toledo, owner of the Perla Hostal, a two-room bed and breakfast.

Now even the state will have to shape up, he added, sipping coffee on his roof-top terrace overlooking the bay.

Cuban revolutionary leader Fidel Castro nationalized all small businesses in 1968 and only after the collapse of longtime benefactor the Soviet Union in 1991 begrudgingly allowed their return under tight regulation.

But after a few years, his government stopped issuing new private self-employment licenses that underpinned small business. Many small businesses were strangled by red tape.

Fidel's brother, Raul Castro, became president in 2008 and has now struck out in a different direction with plans to turn much of the retail sector over to leasing arrangements, cooperatives and private entrepreneurs.

Cienfuegos is 150 miles east of Havana, near the restored colonial town of Trinidad and a few hours from the popular Varadero beach resort. Foreign visitors to the city usually pass through for a day or two.

HIGH HOPES

Cienfuegos' new private entrepreneurs believe their businesses will now steadily improve and seem to relish the challenge of more joining their ranks.

I think a lot of people are going to open restaurants. I calculate you might eventually see 40 or 50 and a lot of cafes, said Tony Azorlin, a strapping former forest ranger.

Azorlin and his wife doted over clients last week at the Ache 'paladar', or home-based restaurant.

I think there is a market for that many, as long as tourism holds up, he said. Azorlin added the sky would be the limit for local private business if the United States lifted its ban on most Americans visiting the island.

This ban persists under the decades-old U.S. trade embargo against Cuba, which U.S. President Barack Obama slightly eased earlier this month, to allow more trips by American professors and students, artists and church groups.

Some 2.5 million foreign tourists visited Cuba last year, the government reported.

The Ache was one of 18 'paladares' that opened in Cienfuegos in the 1990s when small family businesses were first allowed. All but two closed over the years under ensuing over-regulation imposed by a state loath to allow competition.

Azorlin said under rules introduced in the last few months, his taxes were now lower. He also could have more seats, hire employees and serve what he pleased, with beef, shrimp, lobster and potatoes no longer banned from private restaurant menus.

At a government office in Cienfuegos issuing private business permits, Arlina Rodriguez estimated she and colleagues had issued more than 200 licenses since Castro lifted restrictions in October, proclaiming small business vital to the country's future.

It hasn't stopped and doesn't appear it will any time soon, said Rodriguez, busy dealing with eight people seeking licenses at her poorly lit hole-in-the-wall office.

Nationwide, the government reports more than 75,000 self-employment licenses have been granted so far.

The Ache is a quaint, upscale eatery, but right next door neighbor Carlos Alberto is of a more ambitious breed. He has just opened the Casa de Chango restaurant and bar, a splashier and lower-priced establishment, operating around the clock.

Carlos Alberto said he wanted to take full advantage of new regulations allowing him to hire labor and rent space.

I have decided to expand and open a second Casa de Chango, and eventually will have three, four or five, he said, insisting local authorities and Chango, the most powerful deity in the Afro-Cuban Santeria religion, would bless his ambition to found the first private restaurant chain in the country.

(Editing by Frank Jack Daniel and Pascal Fletcher)

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