The signing ceremony was attended by Spain's defence minister (l)

However, the aircraft will be made with more expensive European parts because the US has blocked the use of its technology for Venezuela.

The US says Venezuela's Socialist President Hugo Chavez could use the planes to destabilise the region.

Both Madrid and Caracas have said the equipment - also including eight patrol boats - is for defensive purposes.

Deputy Prime Minister Maria Teresa Fernandez de la Vega said Spain "did not share" the US reasons for blocking the deal.

She said the deal would create 1,000 Spanish jobs over the next few years.

Drug-trafficking

Mr Chavez has condemned the US position as "horrific imperialism," Reuters news agency reports.

The US accuses Mr Chavez of harassing the opposition and spreading instability across South America.

Madrid said the US decision was based on commercial interests and insisted it would not damage relations between the two countries.

Spanish Defence Minister Jose Bono travelled to Caracas last November to attend the signing of the deal with Mr Chavez.

Mr Chavez had said the patrol boats and military transport planes supplied by EADS-Casa will be used to combat drug-trafficking on the Colombian border.

Earlier this week, Venezuela accused Washington of blocking the purchase of training jets from Brazil, because the planes contained protected US technology.