Destino, London, W1

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Imagine a hellish fusion of a hacienda and The Hacienda, and you'll get an impression of the downstairs bar at Destino. The leather armchairs and original Spanish tiling are straight out of an elegant Mexican gran casa, while the sound system thumps out Hispanic house at teeth-rattling volume. This must be how it felt to be Panama's President Noriega during his last hours of freedom, only with a wider choice of rum-based cocktails.

Imagine a hellish fusion of a hacienda and The Hacienda, and you'll get an impression of the downstairs bar at Destino. The leather armchairs and original Spanish tiling are straight out of an elegant Mexican gran casa, while the sound system thumps out Hispanic house at teeth-rattling volume. This must be how it felt to be Panama's President Noriega during his last hours of freedom, only with a wider choice of rum-based cocktails.

If I've already taken a scattergun approach with my Latin American references, that's because Destino adopts a similar attitude to the continent's cuisine. This isn't your typical Tex-Mex joint, but London's first South American fine-dining restaurant. So tacos, fajitas and enchiladas are gussied up with anomalous ingredients like tuna loin, oysters and tiger prawns, and there are authentic Mexican dishes such as lamb mixiote and chicken mole (that's the one with the chocolate sauce).

Formerly Down Mexico Way, Destino is housed in a huge and atmospheric three-storey building, the original Sevillian-tiled interior (it opened in the 1920s as London's first Spanish restaurant) restored to match the upmarket new menu. Unfortunately the staff don't seem to have gone through a similar programme of refurbishment.

All four of us arrived in the first-floor dining room reeling from a contemptuous greeting by the maître d', who seemed to have modelled his look on Miami Vice and his people skills on Simon Cowell. "Latin American restaurant, Siberian welcome," as Tom observed. And our waiter, while friendly enough, wouldn't have known a caipirinha from a capybara. What sort of beer is Destino's specially brewed Rocio, someone wanted to know. "Is ... brown," our waiter ventured frowningly (it wasn't).

The margarita is a Mexican restaurant's gold standard, and Destino's, at £6.50, was just standard. Much better, from the extensive list of tequila- and rum-based cocktails, was a long Passionata, with rose-flavoured tequila, Pasoa and fresh passion fruit. Also on offer are more than 20 types of tequila, and mezcal at up to £30 a shot for occasions when only a very expensive cactus-and-worm-based drink will do.

Our meal began with guacamole, which they take extremely seriously at Destino. In the centre of the dining room, two specialist chefs preside over a wooden counter, mixing each portion to order and sending it to table in its own mortar. You can specify the preferred degree of spiciness; we chose medium, but should have gone for something more scorchio.

Destino's executive chef, Franz Conde (ex-Gaucho Grill; they don't mention that in the publicity) has introduced a modern Californian feel, with dishes like fresh oyster broiled with habanero rouille, tuna loin with Chino-Latino chilli, and oyster mushroom chimichanga.

Salmon ceviche, helpfully glossed as "Mexican gravadlax", was elegantly presented and bustlingly full-flavoured, the raw fish cured in tequila, mint, orange and lime, and sliced wafer-thin. Quesadillas with oyster mushrooms and taleggio had cooled, the cheese congealing into a waxy gloop, though a Mexican chorizo version was smoking hot and pretty good.

Main courses were a similarly mixed bunch. Definitely superior to the chain-restaurant variety were the butter-soft beef fajitas, made with the traditional cut of grilled skirt steak and served with fresh, floury tortillas, and aubergine purée as a classy stand-in for refried beans. But tuna tacos, lightly grilled tuna loin with an oriental-tasting sauce, were bland, the tuna's texture not a particularly happy match for tortilla. Best was the shellfish with black bean rice, which paired clams, squid and sweet, chubby prawns with a glossy squid-ink risotto.

Topping the dessert menu are churros, the sugar-dusted doughnut sticks chomped in market squares across the Spanish-speaking world. Served with chocolate ice-cream, they were sweet, light and utterly irresistible. Together with capirotada, a Mexican spiced- apple pudding, they brought our bill to around £50 a head, including drinks and service.

Apart from one table of Latin American dignitaries, who approached each dish with the solemn discernment of the Man from Del Monte, our fellow diners were office-worker casual, as though expecting it still to be Down Mexico Way. If so, bill apart, they'll have had a nice surprise; the food is a cut above that of a typical Mexican-themed restaurant in London.

So why won't I be making another date with Destino? The dining room is gorgeous, with its opulent tiling and adobe-pink walls, the rosy darkness set aglow by candles and crystal-beaded lamps. But there's something missing, particularly in the service, which leaves the experience feeling more package tour than Condé Nast Traveller. We ended up on the top floor, in a club area which may have been designed to feel decadent but comes off as seedy. In the Down Mexico Way days, this was one of the noisiest and most popular salsa venues in London, much frequented by the Latin American community. Now a DJ with decks plays earbleed house to a scattering of seated gringos. You know, sometimes theme restaurants can just be much more fun.

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