Today the dreams of 15 million Chileans are with us

Chilean President Ricardo Lagos

The EU also reached a historic trade agreement with Chile, which now stands to gain additional trade worth nearly $8bn once a formal accord is signed in the next few months.

The joint declaration came on the first day of the two-day meeting, amid reported disagreements over the focus of the discussions.

Brazil has argued that too much attention was being placed on security.

Colombian rebels

The joint declaration signed on Friday covers 33 points ranging from terrorism to the fight against poverty, human rights, education and historic ties between the two continents.

Hugo Chavez: Neo-liberalism is "the road to hell"

The leaders pledged to "combat terrorism in all its forms and manifestations", and they condemned recent rebel attacks in Colombia in particular.

Spanish Foreign Minister Josep Pique said European leaders were ready to add the leftist rebel group Revolutionary Armed Forces of Colombia (FARC) to the EU's list of terrorist groups at Colombian President Andres Pastrana's request.

Brazil's president had appealed at the start of the summit against "becoming uniquely obsessed by the security issue" at the expense of such issues as free trade and the fight against poverty.

Security fears took on an added dimension when Spanish police announced on Wednesday that they had foiled a car bomb attack by the Basque separatist group ETA to coincide with the meeting.

Globalisation concerns

Following the example of Mexico two years ago, Chile signed an association trade agreement with the EU on Friday.

If Latin America were able to take advantage of free trade for its produce, the region's external debt would disappear

Carlos Ruckauf Argentine foreign minister

"Today the dreams of 15 million Chileans are with us and also the hopes of all of Latin America, the natural area to expand this agreement," said Chilean President Ricardo Lagos.

Spanish Prime Minister Jose Maria Aznar, whose country currently holds the rotating EU presidency, said it was "the most complete agreement that the European Union has yet signed with a third country".

Other Latin American countries are also hoping to reach an association deal with the Europeans, if not generous financial aid packages, but observers say the EU is not ready to commit itself to further close partnerships.

Argentine Foreign Minister Carlos Ruckauf said Latin America was not asking for handouts but access to markets.

"If Latin America were able to take advantage of free trade for its produce, the region's external debt would disappear," he said.

Venezuela's President, Hugo Chavez, struck a different note, saying on the eve of the summit that neo-liberalism was "the road to hell".

For Brazil, President Fernando Henrique Cardoso expressed concern about globalisation, saying that it tended to be "asymmetrical".

Instability

The Latin American leaders have been keen to allay fears in Europe that South America is unstable.

EU leaders referred to the recent political tremors in the region, such as last year's unrest in Argentina and the failed coup against Mr Chavez in Venezuela, in speeches.

"Democracy and freedom are assets... to be preserved above all else," said Spain's Jose Maria Aznar.

President Jacques Chirac of France said that the Argentine crisis had shown that the EU had not "yet found the right way to handle the emerging countries and how they deal with their own problems".