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Last updated: 04 January, 2011 - Published 15:22 GMT
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Cuban layoffs begin
Many more small businesses like this one could take root under Cuba's economic reform plans
Some state workers in Cuba have begun feeling the impact of government plans to prune the country's public sector.

The first layoffs in the communist government's programme to cut the jobs of 500,000 state workers have started, according to the head of the Cuban Workers Federation.

Cuban state-run media quotes Salvador Valdes as saying that the initial job cuts are occurring in the sugar, agriculture, tourism, health and construction sectors.

The layoffs are expected to affect ten percent of the Cuban government's work force.

These job cuts are part of an economic overhaul the authorities in Havana say is aimed at slashing government expenditure.

Up to a million going

Last September, President Raul Castro announced plans to lay off around up to a million state employees, and encourage them to find work in the private sector.

President Raul Castro
President Castro is banking on the private sector to pick up the slack

Half of those posts are to go by the end of March, just weeks before a ruling communist party congress in April.

Restrictions on private enterprise are being eased, with small businesses allowed to employ staff, borrow money, and sell services to government departments.

They will also have to pay tax.

Thousands of Cubans have already been given licences to set up private businesses, and more are registering every week.

Since taking over from his brother Fidel in 2006, Raul Castro has taken steps to reduce the state's almost total control of the economy, which has been gripped by a severe crisis in recent years.

It has suffered from a fall in the price for its main export, nickel, as well as a decline in tourism.

Growth has also been hampered by the 48-year US trade embargo.

The government insists that the "socialist character" of Cuba's political system will not change.

But some observers say that Cuba could be entering a period of potential social upheaval.

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