Argentina partners pledge support

Mexican President Vicente Fox (l) promises to help

Argentina's partners in the Mercosur trading bloc on Friday expressed solidarity with the stricken Latin American republic, but refused to collectively lobby international lenders on its behalf.

The decision comes as a blow to Argentine President Eduardo Duhalde, who had hoped that the other three Mercosur nations - Brazil, Paraguay and Uruguay - would throw their weight behind its calls for a resumption of urgently-needed loans.

Mercosur members

Argentina

Brazil

Paraguay

Uruguay

The Mercosur leaders, joined by the presidents of associate members Bolivia and Chile, issued a statement pledging to overcome south America's "adverse economic and financial situation."

But Brazilian President Fernando Cardoso, appointed as head of the Mercosur bloc, said there was no common basis for a joint lobbying effort aimed at international lenders.

"Every country has its own specific situation. As such there is no need for a negotiating coalition," Mr Cardoso said.

The Mexican president, Vicente Fox, who also joined the talks, has already promised to use his influence to encourage the International Monetary Fund (IMF)to release billions of dollars in aid.

Crunch time

Argentina, facing a cash crunch after defaulting on its debts late last year, is in the grip of the worst economic crisis in its history.

The Argentine peso has lost more than 70% of its value against the dollar since December, and half the population is now living below the poverty line.

The IMF cut off emergency loans to Argentina in December, and has said it will not resume lending until the country draws up a credible recovery plan.

But Latin American countries fear that unless they act fast to stop the economic rot from spreading, they could all be dragged into a continent wide recession.

Brazil's economy is looking jittery while the IMF has said that Paraguay, Uruguay and Chile are all suffering from contagion.

Trade between South American states fell 19% in the first half of this year, partly as a result of Argentina's crisis.