Leaders agree change is needed but not what form it should take

At a summit in Brazil, President Luiz Inacio Lula da Silva said national interests had to be put aside to tackle inequalities between Mercosur states.

Venezuela's Hugo Chavez went further and said the bloc needed to be "de-contaminated of neo-liberalism".

The bloc - which also includes Uruguay, Argentina and Paraguay - is discussing Bolivia's bid for full membership.

The leaders of associate and observer nations are also attending the two-day summit which opened amid heavy security in Rio de Janeiro on Thursday.

'Gigantic challenge'

President Lula has suggested that Brazil and Argentina - the two largest countries in the 16-year-old bloc - should take a leading role and address the huge gap between rich and poor.

MERCOSUR MEMBERS Argentina Brazil Paraguay Uruguay Venezuela Profile: Mercosur

He said on Thursday that the two nations should "relinquish" their personal interests for the sake of the bloc.

"That is the challenge confronting us. It is a gigantic challenge, which will require putting aside personal interests, and even the national interest, to share with someone more needy than we are," he said.

"Without integration, Latin America has no way forward.

"If we do not understand the imbalances among us we will walk away frustrated from every meeting," the Brazilian president added.

Much of the attention at Thursday's talks focused on Mr Chavez - whose country joined the bloc last year - the BBC's Steve Kingstone reports from Rio.

The Venezuelan president arrived at the summit saying he did not want to poison the trade bloc or contaminate it with ideology.

But he added that he did plan to "de-contaminate" it of the free market economic policies recommended to Latin America in the past by Washington.

Mercosur, he said, needed structural reforms and a resetting of goals.