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Last Updated: Friday, 12 May 2006, 19:45 GMT 20:45 UK
EU and Americas agree closer ties
Venezuela's Hugo Chavez embraces summit host Wolfgang Schuessel
Venezuela and Bolivia dominated the talks in Vienna
A summit of European Union and Latin American leaders has ended in Vienna with an agreement by leaders from both continents to build closer ties.

Central American countries agreed to start trade talks with Brussels but the commitment from the rest of Latin America was more lukewarm.

European concerns over energy policy overshadowed the summit of 58 states.

Bolivia's nationalisation of its gas sector and a planned new Venezuelan tax on oil firms dominated the agenda.

The Europeans saw a divided Latin America where their investments would not be secure, BBC Americas editor Simon Watts reports.

Jose Manuel Barroso, president of the European Commission, warned openly of the dangers of populism. President Vicente Fox of Mexico warned that the continent's progress was at risk.

And, our Americas editor notes, Brazil and Bolivia are barely on speaking terms since Bolivian President Evo Morales accused the Brazilian energy company of operating illegally in his country.

Stark divisions

In the summit's final statement, the EU and six Central American states - Costa Rica, Guatemala, Honduras, Nicaragua, Panama and El Salvador - agreed to open negotiations on setting up a free-trade zone.

French President Jacques Chirac kisses Chilean President Michelle Bachelet at a summit in Vienna
Jacques Chirac gave Chile's Michelle Bachelet a traditional welcome

All states at the summit also agreed to "further promote and strengthen [their] bi-regional strategic partnership".

But with their gas and oil initiatives, Mr Morales and Venezuelan President Hugo Chavez undermined the negotiating power of Latin America's majority, our Americas editor says.

Between them, the two leftist leaders have created enormous diplomatic tension, he adds.

They want Latin America to move away from seeking trade pacts with the rest of the world and towards internal economic alliances.

The rest of the region, including nominally leftist governments like Brazil's, are still interested in trading with a large market like Europe's and they want to encourage investors.

Market appeal

Mr Barroso called for Latin America to make its position clear.

A protester in a bikini at a summit in Vienna
Leaders were amused - mostly - by a Greenpeace protester

"If we want to fully develop the potential of our partnership we also need to know what is your strategic vision," he said at the opening of the summit.

The summit's host, Austrian Chancellor Wolfgang Schuessel, stressed the need for open markets.

"Open market societies are better in their performance than closed, restricted structures," he told reporters.

UK Prime Minister Tony Blair called on energy suppliers to act "responsibly".

"I don't want to go into the details of what is happening in either Venezuela or Bolivia but I mean all of us have a responsibility to the world community to try to manage this sensibly," he said.

But Bolivia's president remained in combative mood, telling Brazilian TV that some foreign oil companies were no better than "smugglers".

"We said we need partners, not masters," he said.

Brazilian Foreign Minister Celso Amorim said he had little confidence in any commitments made by Bolivia at the negotiating table.

"The Brazilian government will defend the interests of Brazilians in a firm manner, without shying away from dialogue, but we do not expect that any agreements reached through that dialogue will actually be respected, or that they will not be undone by a statement the following day," he said.

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