US President Barack Obama issued a strong call for Cuban capitalism and an embrace of the free market in a speech watched by Cuban leader Raúl Castro today.

Speaking to a select audience of 1,000 in Havana's Grand Theatre, Obama reaffirmed his belief that US Congress should fully lift the embargo on Cuba, but that internal changes were also required for the country to prosper.

Obama said:

"It is time to lift the embargo, but even if we lifted it tomorrow, Cubans would not realise their potential without more freedom to open a business".

Though the speech broadcast on state television did not see Obama directly take on the current dictatorship or linger on political repression, he did note that he believes "citizens should be free to speak their minds without fear".

Rather than a Reaganesque throwing down of the political gauntlet, it was an appeal for a brighter economic future.

"Many suggested that I came here to Cuba to tear something down, but I am appealing to the young people to lift something up...

"We have a clear example of what the Cuban people can build, it’s called Miami.

"Being self-employed is not about becoming more like America, it’s about being more like yourself.

"What changes come will depend on the Cuban people, we will not impose our political or economic system upon you … But having removed the shadow from our relationship, I must speak honestly about the things we believe".

Directly addressing Castro, Obama said:

"You do not need to fear a threat from the United States. You do not need to fear the different voices of the Cuban people".

Castro was said to be smiling as he left the theatre, while chants of "Cuba!" rang out.