All smiles but tension has been growing over Mercosur's direction

But he said Uruguay was not thinking of leaving Mercosur, contradicting earlier reports in which he seemed to suggest a possible exit for his country.

Mr Vazquez has long said the bloc benefits only Argentina and Brazil.

Mercosur, created in 1991, groups these countries together with Paraguay and several associate members.

Uruguayan television reported on Monday that Mr Vazquez, who is currently visiting Washington, favoured pulling out of the bloc or at least downgrading its membership to associate status.

MERCOSUR Argentina Brazil Paraguay Uruguay Associate members Mexico Venezuela Chile Bolivia Peru

But on Tuesday, Mr Vazquez stressed that Uruguay wanted a "bigger and better" Mercosur.

He did not want to break with the bloc but work had to be done to improve it, he said.

Mr Vazquez has repeatedly criticised Mercosur and has said that the bloc should be expanded.

There is also a background of bilateral diplomatic tension with Argentina to Mr Vazquez's remarks, the BBC's Americas reporter Will Grant says.

The two neighbours disagree over the proposed construction of two paper mills in Uruguay which Argentine protesters have been attempting to thwart.