"It gives us a chance of advancing toward sovereignty which we must exercise and which is our right," Mr Menem said in a speech on Friday.

The decision to drop the arms embargo comes 16 years after the end of the Falklands war between the two countries over territorial claims to the islands.

President Menem also said London's decision was a direct result of his visit to Britain in October, the first by an Argentine leader since the war.

"That trip which was criticised so much is giving concrete, real results," he stated.

Post-war ban

The UK imposed a ban on the export of all arms and military equipment to Argentina in April 1982 after the invasion of the Falkland islands by General Galtieri's troops.

On Thursday Foreign Office Minister Tony Lloyd announced in a Commons written answer that in future licences would be granted for export of arms on a case by case basis.

Tony Lloyd announced the ban's relaxation in a Commons written answer

"Licences will only be granted for exports that we are satisfied would not now, or in the foreseeable future, put at risk the security of our overseas territories in the South Atlantic, or our forces operating there," Mr Lloyd said.

But the government made clear there was no change in its policy towards the Falklands Islands, which Argentina calls the Malvinas and has claimed as its own since 1833.

"The government remains committed to defend them and the right of self-determination of their people," a Foreign Office spokesperson said.

Mr Lloyd said in future exports of arms and military equipment to Argentina would be assessed against the UK's national licensing criteria and the European Union's Code of Conduct on Arms Exports.

"This is a logical modernisation of our export control arrangements. It reflects the changed circumstances since the embargo was put in place," he added.

During President Menem's bridge-building visit to the UK in October, when he laid a wreath to commemorate UK service personnel who died in the 1982 conflict, he disavowed the use of force against the Falklands.

Prime Minister Tony Blair held talks with the president and told him the UK would review its arms embargo in a positive light, mindful of security considerations, the Foreign Office said.