Across the rest of the island, monthly government salaries of 408 pesos (about £11) don't cover grocery bills, let alone a night out. But in Bayamo the central government has made a special effort to support peso businesses, giving the lowly currency actual buying power.

Along the stylish pedestrian mall known as Paseo, or the Boulevard, six blocks of restaurants, barber shops, ice-cream parlours and department stores give Cubans a taste of tourist life at local prices. Jazz bands jam for free until 2am at the Piano Bar, where mojitos go for just 5.50 pesos, or 16p. A 1950s-style diner serves up meatball sandwiches for about half a peso – the equivalent of about a penny – and four scoops of the richest ice-cream in Cuba for about the same price.

"Almost everyone who comes in is surprised at first. The music is good. The cocktails are strong," said Ernesto Aldana of the Piano Bar, where the Cuba Libre – copious rum measures with ice and splashes of cola and lime – costs 4.80 pesos, the equivalent of less than 13p. "It's like you're paying in dollars," Mr Aldana said. "But you're not."

Under the country's dual currency system, most things Cubans want and need are not available in the money they earn – the regular Cuban peso, which is worth about 2p. Virtually all flourishing businesses across the island are priced for foreigners in so-called convertible pesos, worth 59p each.

Cuba has had two currencies since the collapse of the Soviet Union wrecked its economy and sparked investment in tourism. Tourist businesses took US dollars and charged US prices, while the peso was maintained for everyday transactions. The convertible peso, also called hard currency, was born around the same time but took on its current value in 2004, when the government banned the US dollar.

Cubans have long hoped the government would merge the two pesos and close the gap between the goods and services they and foreigners can afford. But so far, nothing has changed under Raul Castro, who took over as president from his ailing brother, Fidel, earlier this year.

Cuba's government historically has chosen provincial areas to test potential economic policy changes. In Bayamo, a city of 140,000 and the capital of Granma province, leaders of the regional Communist Party began expanding peso businesses in 2005.

"Normally, there's a gap between quality of service to foreigners and service to Cubans," said Isidro Alonso of Bayamo's Communist Party's Committee on Ideology. "We are working to erase that."

Huge government subsidies are needed. Paseo businesses here take in only 1,000 to 1,700 pesos a day, or £27 to £44. And the programme took shape only after Bayamo Communists asked central government planners for special autonomy and won the right to sell regionally produced items.

"We would see products like powdered milk made here and sold somewhere else and we said, 'How is this possible? If we make it in Granma, we should be selling it in Granma,' " Mr Alonso said.

However, rising global commodity prices have made Bayamo's government subsidies more costly, while hurricanes Gustav and Ike in recent weeks dealt serious blows to Cuban food production.

The government recently ordered all provinces to contribute more food and reduce Cuba's dependence on foreign imports, said Humberto Rondon, technical director at a state cheese and ice-cream factory outside Bayamo. In Granma's case, officials will now have to ship about 80 per cent of its cheese to elsewhere in Cuba.

Despite the problems, the Bayamo experiment is so successful that the central government in Havana is continuing to devote £5.5 million this year to reopen some peso businesses.