By FRANCES ROBLES AND NANCY SAN MARTIN

Cuban leader Raúl Castro's recent offer to discuss all issues -- including the fate of political prisoners -- is ''a sign of progress'' that could lead to more deliberate strides toward normalization, President Barack Obama said Sunday.

''We are going to explore and see and if we can make some further steps,'' Obama told reporters shortly before his departure from the Fifth Summit of the Americas.

Among the things Obama said would be viewed by his administration as good faith acts by Havana: freeing political prisoners, reducing fees on Cuba-bound remittances from the United States, freedom of the press and freedom of religion.

While Obama said Washington's long-standing policy of isolation has failed, he said Cuba must do more before his administration could consider taking further actions beyond the recent lifting of Cuban American travel and remittances to the island.

Obama's message was clear: Castro's first step should be to reduce the fees the government charges on the money Cuban-Americans send back home.

''It turns out the Cuban government charges a lot off the top,'' he said. ``That would be an example of cooperation.''

He defended his support of the U.S. embargo, despite having opposed it five years ago while a state senator.

''The Cuban people are not free,'' he said. ```The steps that we took were constructive in sending a signal; we would like to see a transformation. But I am persuaded that it is important to send a signal that issues of political prisoners, freedom of speech, freedom of religion, democracy that those continue to be important. That they are not something simply to be brushed aside.''

Obama said that ''completely ignoring Cuba is not going to change policy'' and that engagement might help propel democratic changes in the regions only communist-ruled nation.

``I am hopeful that, over time, the overwhelming trend in the hemisphere will occur in Cuba, as well.''

Obama is facing criticism for his friendly photo taken with Venezuelan President Hugo Chávez. He stood behind his decision to be courteous.

The U.S. used to turn its back on hostile countries -- and ''Americans didn't buy it,'' Obama said.

``As a consequence of me shaking hands or having polite conversation ... are we endangering the strategic interests of the United States?''