Just round the corner from the hotel, you can't miss it, it's the one with three macaws at the entrance.
Our table was inside, next to a window by the road, except we had gone down while the road went up so passers-by were well above our heads. A strange sensation. Efficient, friendly all-female staff - unusual on this island. The Macaws look good but they are noisy blooming things - best left in the jungle in my opinion.
We both had the 12€95 set menu - very reasonable. chicken salad and sardine salad to start. I had the scabbard fish with banana, my wife had the tuna steak. Both good, and good value too.
The scabbard fish is a strange looking thing - it lives thousands of feet down at the bottom of the Atlantic. You can see them at the fishmarket in the old town. They are long, thin and black, evil looking critters with lots of teeth that you wouldn't want swimming anywhere near you. The Madeirans go out and fish them up with long, very long lines. They peel them and cook them with bananas - fruit and fish, a strange concept. I've also seen them on offer with passion fruit sauce. I think something like a beurre blanc sauce might suit them better, but I dare say the locals have a lot of bananas that need to be shifted.
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