The American secretary of state, Madeleine Albright, has met the Panamanian foreign minister, Ricardo Arias, to try to resolve differences over a project to convert a US military base in Panama into a multi-national centre to combat illegal drugs.

They are both in Venezuela for a meeting of the Organisation of American States.

Washington is due to complete the handover of the Panama Canal zone to Panama by the end of 1999.

However, the Americans say some military personnel will be needed to help coordinate the centre's efforts in fighting drug-trafficking in Latin America.

US officials have warned that if there isn't agreement soon, the plan may collapse.