HAVANA — Cuba's parliament named Raul Castro president on Sunday, ending nearly 50 years of rule by his brother Fidel but leaving the island's communist system unshaken.

In a surprise move, officials bypassed younger candidates to name a 77-year-old revolutionary leader, Jose Ramon Machado, to Cuba's No. 2 spot _ apparently assuring the old guard that no significant political changes will be made soon.

The retirement of the ailing 81-year-old president caps a career in which he frustrated efforts by 10 U.S. presidents to oust him.

Raul Castro, 76, stressed that his brother remains "commander in chief" even if he is not president and proposed to consult with Fidel on all major decisions of state _ a motion approved by acclamation.

Though the succession was not likely to bring a major shift in the communist government policies that have put Cuba at odds with the United States, many Cubans were hoping it would open the door to modest economic reforms that might improve their daily lives.

Raul Castro indicated at least one change is being contemplated: the revaluation of the Cuban peso, the national currency most people use to pay for government services such as utilities, public transportation and the small amount charged for their monthly food ration.

Cubans complain that government salaries averaging a little more than $19 a month do not cover basic necessities _ something Raul Castro acknowledged in a major speech last year. But he said any change would have to be gradual to "prevent traumatic and incongruent effects."

In his first speech as president, Raul Castro suggested that the Communist Party as a whole would take over the role long held by Fidel, who formally remains its leader. The new president said the nation's sole legal party "is the directing and superior force of society and the state."

"This conviction has particular importance when the founding and forging generation of the revolution is disappearing," he added.

The U.S. has said the change from one Castro to another would not be significant, calling it a "transfer of authority and power from dictator to dictator light."

Secretary of State Condoleezza Rice said Sunday Cubans have a right "to choose their leaders in democratic elections" and urged the government "to begin a process of peaceful, democratic change by releasing all political prisoners, respecting human rights, and creating a clear pathway towards free and fair elections."

Her statement, issued shortly before parliament met, called the developments a "significant moment in Cuba's history."

Cuba's parliament chose a new 31-member ruling body known as the Council of State to lead the country. The council's president serves as the head of state and government.

The vote ended Castro's 49 years as head of the communist state in America's backyard. He retains his post as a lawmaker and as head of the Communist Party. But his power in government has eroded since July 31, 2006, when he announced he had undergone emergency intestinal surgery and was provisionally ceding his powers to Raul.

The younger Castro has headed Cuba's caretaker government in the 19 months since then, and Fidel Castro has not appeared in public.

In his final essay as president, Castro wrote that preparations for the parliament meeting "left me exhausted," and he said he did not regret his decision to step down.

"I slept better than ever," he wrote in the commentary published on Friday. "My conscience was clear and I promised myself a vacation."

In Old Havana, Maria Martinez, a 67-year-old retiree, watched the announcement on a Chinese-made television in her dark living room.

"He's a trustworthy man," she said. "He won't make mistakes."

"All we really want is peace and tranquility," she added.

Her 33-year-old neighbor, Raul Rodriguez, let out a long sigh and nodded as the announcement of Raul Castro's election was made. "He's hard, he's tough," said Rodriguez, who wore an NYPD baseball cap sent by a relative in the U.S.

But a 51-year-old man hefting a wide metal tray of homemade guava and coconut pies through the streets near Havana's train station said "this country, it's like jail."

"They close the doors and say 'The president is Peter or the president is Paul' and everyone responds 'Good, it's Peter or Paul.' There's no openness," said the man named Isidro, who like many Cubans declined to give his last name to a foreign journalist when criticizing the government.

Cuba's young guard apparently will have to wait a little longer.

Machado, 77, the new No. 2, fought alongside the Castro brothers in the Sierra Maestra during the late 1950s and is a key Communist Party ideologue. Raul Castro also promoted a 72-year-old council member, the head of the military's economics ministry, to his replacement at the defense minister.

Cabinet secretary Carlos Lage, 56, who is associated with the modest economic reforms of the 1990s, had been among the most visible Cuban officials since Fidel Castro fell ill and was considered a strong candidate to replace Raul as first vice president. Lage retained his long-held post as one of five vice council presidents below the No. 2 slot.

The other four other vice presidents are Juan Almeida Bosque, 80, a historic revolutionary leader; Interior Minister Abelardo Colome Ibarra, 68; Esteban Lazo Hernandez, 63, a longtime Communist Party leader, and Gen. Julio Casas Regueiro, 72, head of the military's economics activities, whom Castro immediately promoted to be his replacement as defense minister.

The council secretary remained Dr. Jose M. Miyar Barrueco, 75, physician and historic revolutionary leader, and longtime aide to Fidel Castro.

Fidel was among the 614 members of parliament elected on Jan. 20 but his seat was empty at Sunday's gathering. As the names of the new National Assembly's members were read aloud, mention of the absent Castro drew a standing ovation. Parliament gave another standing ovation to Raul. The session closed with shouts of "Viva Fidel!"

In Venezuela, President Hugo Chavez reaffirmed his economic and political support of Cuba when he took a telephone call from Raul Castro after the session. Chavez also sent a message to his ally Fidel, whom he visited numerous times during his illness.

"Fidel, comrade," Chavez said, "I send you a hug. You continue to be El Comandante."

Earlier Sunday, Chavez scoffed at the idea of a transition in Cuba, saying "the transition occurred 49 years ago," from U.S.-dominated capitalism to socialism.

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Associated Press writers Will Weissert in Havana and Anne-Marie Garcia in Santiago, Cuba, contributed to this report.