By Steve Kingstone BBC, Sao Paulo, Brazil

The three presidents arrived for the ceremony in a pick-up truck

Work has begun on a stretch of road that will connect South America's Pacific and Atlantic coasts.

The foundation stone for the last section of the inter-oceanic highway was laid on Thursday in the Peruvian city of Puerto Maldonado.

The presidents of Peru, Brazil and Bolivia all took part in the ceremony.

Politicians and international organisations have stressed the importance of transport links for the region's economic development.

More than 500 years after the Spanish and Portuguese arrived in South America, it is still impossible to drive across the continent on a continuous paved road.

But that is about to change. Stretching more than 2,500 km (1 553 miles), the inter-oceanic highway will connect the Atlantic with the Pacific.

Economic necessity

The final phase of construction ceremonially begun by three presidents on Thursday will link the state of Acre in the Brazilian Amazon with three Peruvian ports at a cost of $800m.

Brazilian Minister for Trade and Development minister Luiz Fernando Furlan said: "This is a very important connection that will enable Peru and Brazil to connect the two oceans."

"We believe that within less than two years there will be a physical connection and there will be a lot of opportunities for development, including the industrialisation of raw materials that are abundant in Brazil and Peru."

Economists agree that improved transport links are essential if Latin America is to remain competitive economically.

In a recent study, the World Bank observed that the region's investment in this area had fallen well behind that of many Asian countries.

It is hoped the new highway will stimulate both exports and domestic industries which should benefit from reduced costs.

Final phase will link Brazilian state of Acre with three Peruvian ports When completed there will be more than 2,500km of continuous paved road