(Corrects first name in 3rd paragraph Raicel, not Raciel, to reflect spelling in Cuba)
* Athletes, through state, can sign foreign contracts
* Embargo still obstacle to U.S. sports
* Pay raise aims at improved international performance
By Nelson Acosta
HAVANA, Sept 27 (Reuters) - Cuban athletes will be allowed to work abroad and have been granted significant wage increases and larger bonuses for their performance, official media said on Friday, in hopes of stemming a decline in the country's performance in international competitions.
The government's decision comes even as athletes, in particular baseball players, are defecting in record numbers, with 21 currently contracted by the U.S. major leagues, some earning multi-million dollar salaries.
Just this week, a promising young Cuban pitcher, Raicel Iglesias, 23, failed to show up for training and was widely believed to have left the island, which would make him the latest talented prospect to seek a lucrative Major League Baseball contract in the United States.
Cuba's famed boxing team suffered a similar series of defections in recent years, lowering its performance at the Olympics, world championships and other international events.
The exodus of athletes is mainly due to wages equivalent to $20 per month, in sharp contrast to their potential earnings abroad.
The measure is the latest reform of the Soviet-style system under President Raul Castro, who replaced ailing brother Fidel in 2008 with a call to update the country's economic and social system to the 21st century.
"The Council of Ministers deemed just the decision to perfect the compensation system of athletes, trainers and specialists," Granma, the Communist Party daily, said.
"Other measures will progressively go into effect to update practices so they are more in sync, from our perspective, with the world and thus contribute to achieving better results in sports."
The Cuban government has repeatedly denounced what it calls the theft of its talent, charging it is part of U.S. efforts to undermine socialism and part and parcel of sanctions that do not allow contracts with Cuban athletes who maintain their residence on the island.
The new measures, approved by the government last week, allow athletes to sign contracts with professional leagues abroad, breaking with a policy established soon after the 1959 revolution, which shunned professional sports as exploitative.
The athletes will still have to "meet their obligations to national teams," Granma said, including in international competitions, and will have to go through the state's sports institute for approval.
It was unclear from the official announcement if the ruling would apply to the Cubans currently playing in the U.S. major leagues.
Oakland Athletics outfielder Yoenis Céspedes, winner of this year's Home Run Derby, the popular competition the day before the annual All-Star Game, defected in 2011 and signed a $36 million, four-year contract.
Los Angeles Dodgers outfielder Yasiel Puig, who left Cuba in 2012, signed a seven-year, $42 million contract. Puig made his Major League debut on June 3 and has emerged as one of the top contenders for the Rookie of the Year title. (Editing by David Adams and Doina Chiacu)