MIAMI -- Cuban leader Fidel Castro's decision to step down as head of state after nearly half a century could signal the passing of power to a new generation and fresh hope for the island nation through economic reforms.

Tuesday's resignation letter, which includes disclosures about his flagging health, was an unequivocal indication that the 81-year-old revolutionary is choreographing his own succession and leaving on his own terms. Castro, who has run Cuba for 49 years, ranks as the world's longest-ruling head of state outside of monarchs.

He will remain first secretary of Cuba's Communist Party and a member of parliament, serving in an advisory role.

Officials in Washington said there were no immediate plans to change U.S. policy toward Cuba, including its trade embargo. In Miami's large exile community, reaction was subdued.

Castro's 76-year-old brother, Raul Castro, who began leading the country when his brother fell ill and temporarily ceded power to him more than 18 months ago, has been considered the likely next head of state. Raul Castro is the constitutionally designated successor by virtue of his No. 2 position in the party hierarchy.

But the elder Castro recently has indicated that he might favor a younger, more energetic person to succeed him. Fidel Castro has hinted that someone else might emerge Sunday when the newly elected National Assembly convenes to propose a new executive body, the 31-member Council of State.

"He's catching up to me in years, so it's also a generational problem," Castro says of Raul in his autobiography, "Fidel Castro: My Life," released in English this month.

Speculation about who might become president, if not Raul Castro, has centered on Vice President Carlos Lage, a 56-year-old physician by training who has been representing Cuba at international events in Castro's absence.

Lage designed and implemented a slate of modest economic reforms in the early 1990s, after the Soviet Union collapsed and billions of dollars in annual subsidies to Cuba ceased. Those changes allowed thousands of Cubans to open small businesses, many catering to foreign visitors and giving rise to the first tourism boom on the island under Communist rule.

Fidel Castro has made no secret of his distaste for the changes that put dollars in the hands of some Cubans while leaving the majority with the inconvertible peso that isn't accepted at hard-currency stores selling imported food and consumer goods.

Nevertheless, Raul Castro and other Cuban officials have continued to discuss the need for structural changes to improve living standards. They have encouraged Cubans to speak out about the current system's shortcomings and to propose ideas for strengthening the country of more than 11 million people.

The revolution's supporters point to the country's free and universal education and health care, while critics say the country suffered a loss of personal liberties and material well-being.

In South Florida, where 800,000 Cuban Americans live and dominate the political and economic scenes, about 100 people gathered along Little Havana's Calle Ocho to wave placards denouncing Castro. Several members of the exile community dismissed Castro's announcement as relatively meaningless as long as he's alive and influencing Cuban life.

In his resignation letter, posted at about 3 a.m. in Cuba on the Web site of the Communist Party daily Granma, Castro reminded Cubans of comments he made to a television moderator in a December letter that he said were intended to prepare the nation for his retirement.

"My elemental duty is not to cling to positions, much less to stand in the way of younger persons, but rather to contribute experience and ideas whose modest value comes from the exceptional era in which I lived," he cited from his earlier note to viewers of the nightly Round Table political discussion show.

Cuba scholars describe Castro's carefully managed withdrawal as evidence that gradual change is on the horizon for the island, whether U.S. policy is revised to promote that change or not.

"What we will see in agriculture and in small businesses that are now state-run is a redefinition of property rights," said Julia Sweig, a Cuban revolution historian and senior fellow for Latin America on the Council on Foreign Relations. "If you look over the last few years, even before Fidel got sick, you see they've been talking about the need to get the state out of the way" to allow farmers and small entrepreneurs to fill the production void.

As Cuban defense minister, Raul Castro was instrumental in redirecting state and military resources to food cultivation in the difficult years after the Soviet aid cutoff. He deployed troops to the fields to oversee food production and help industries streamline in the absence of fuel and spare parts.

The younger Castro's defense industry operations, under an economic transformation blueprint drafted by Lage, partnered with foreign investors to develop a thriving network of tourist hotels, buses and airlines, bringing in 2 million foreign visitors a year and bolstering hard-currency coffers by $2 billion annually.

Lawrence Wilkerson, former chief of staff to former Secretary of State Colin Powell and co-chairman of the U.S.-Cuba Policy Initiative of the New America Foundation think tank in Washington, noted that Raul Castro had been "re-energizing the bureaucracy" of the Cuban leadership during his interim tenure.

"Instead of having fiats from the comandante ... he's been energizing [government ministers] and making them responsible for specific functions of the bureaucracy. That's very encouraging for Carlos Lage or whoever is ultimately the head of state," said Wilkerson, a retired Army colonel who visited Cuba last spring.

Fidel Castro's position as head of the Communist Party remains arguably the more influential post of the three he has long held as head of state, party and government. Any resignation of that position probably would come during a party congress, which has been overdue and much debated behind the scenes. The last congress was held in 1997, by which time Castro was already working to roll back the reforms embraced during the so-called Special Period in Peacetime that spurred a national mobilization akin to emergency wartime measures.

Castro said in his letter that he deliberately had downplayed his likelihood of resuming full powers after his illness to soften the blow should he not survive the long convalescence.

"When referring to my health, I was extremely careful to avoid raising expectations since I felt that an adverse ending would bring traumatic news to our people," he wrote.

But noting that his "dearest compatriots" had re-elected him to the 614-seat National Assembly in a Jan. 20 one-party election, he made clear he would serve no more than a symbolic role.

"I will neither aspire to nor accept the positions of president of the Council of State and commander-in-chief," he told Cubans. "It would be a betrayal of my conscience to accept a responsibility requiring more mobility and dedication than I am physically able to offer."