The rapprochement is set to dominate the Summit of the Americas meeting, held in Panama, less than four months after they announced they would seek to lower tensions and boost trade and travel between the two Cold War enemies.

 Obama and Castro have separate agendas for most of the day but they will both attend the start of the summit along with other regional leaders on Friday evening.

Apart from a couple of brief, informal encounters, the leaders of the United States and Cuba have not had any significant meetings since Castro's older brother Fidel Castro toppled U.S.-backed dictator Fulgencio Batista in a 1959 revolution.

 But the two nations' top diplomats - Secretary of State John Kerry and Cuban Foreign Minister Bruno Rodriguez - held talks at a Panama City hotel on Thursday night, the first meeting of its kind since John Foster Dulles and Gonzalo Guell got together in Washington in 1958.

 Sitting face-to-face in a room visible through a large glass window, Kerry and Rodriguez talked for over two hours. A senior State Department official described it as a "lengthy and very constructive discussion" and said they made progress.

 Obama appears to be close to removing Cuba from the U.S. list of countries that it says sponsor terrorism. Cuba's inclusion on the list has exacerbated tensions and made it harder for U.S. firms to do business with Cuba.

 The U.S. State Department has now recommended that Cuba be taken off the list, a U.S. Senate Foreign Relations Committee aide said on Thursday.

Obama is expected to agree although it is not clear whether he will announce his decision during the summit.

 A U.S. official said Kerry and Rodriguez used their meeting to smooth the way for Cuba's removal from the list. The United States has pushed for Cuban assurances of no future support for terrorism, and Cuba has made the same demand of Washington.

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