President Cardoso of Brazil said the Mercosur trading bloc - Brazil, Argentina, Paraguay, Uruguay and Chile - would begin concrete talks with the EU by July 2001.

Delegates posed in front of Rio de Janeiro's famous "Sugar Loaf Hill"

If successful, the negotiations would create a single market of more than 575 million people - potentially the world's largest.

President Cardoso made the announcement at a two-day summit in the Brazilian city of Rio de Janeiro, attended by more than 40 leaders from Europe, Latin America and the Caribbean.

He said all leaders had agreed on the importance of moving towards free trade and that the talks, rather than being delayed, would be speeded up.

According to the BBC's correspondent in Rio de Janeiro, Stephen Cviic, President Cardoso also said no sector of the economy would be excluded, which means that European countries have agreed to put the sensitive issue of agriculture on the table.

Cautious start

The document released at the end of the meeting between the EU and the South American countries was more cautious than President Cardoso's statements.

Rather than talking about a free trade area, it describes an inter-regional association between the EU and Mercosur and the date 2001 is not mentioned.

Instead it says that a further meeting will be held in November to agree on how talks will proceed.