Brazilian President Luiz Inacio Lula da Silva has signed agreements with his Mexican counterpart, Felipe Calderon, on alternative fuels.
These focus on sharing technology for the production of biofuels such as ethanol. Brazil is the world's leading producer of ethanol from sugar cane.
President Lula's regional tour is intended to promote biofuels.
The Brazilian leader also urged Mexico to forge closer links with the South American trading bloc, Mercosur.
President Lula has been actively promoting ethanol as an eco-friendly alternative to fossil fuels.
This policy puts Brazil at odds with Venezuela, where President Hugo Chavez has argued biofuels use up valuable agricultural land and increase food prices.
Venezuela has been using its large oil and gas reserves as a foreign policy tool.
While President Lula embarks on his tour, Mr Chavez has gone to Argentina, Ecuador and Bolivia to discuss energy issues.
On Monday, President Chavez held talks with his Argentine counterpart, Nestor Kirchner, in Buenos Aires to finalise a $1bn loan in return for Argentine government bonds.
Deforestation fears
The talks between President Lula and President Calderon brought together the leaders of Latin America's two biggest economies.
The two men also signed a series of agreements covering justice and immigration policy, as well as energy.
President Calderon assured his Brazilian visitor that Mexico's "heart is in Latin America", despite its geographical proximity to the United States.
The remarks by both men reflect how the atmosphere between the two countries appears to have improved since Mr Calderon's election last year, says the BBC's Gary Duffy.
From Mexico, President Lula travels on to Honduras, Nicaragua, Jamaica and Panama, where talks are also set to focus on biofuel development.
They all, except Mexico, import oil and President Lula has said they could save a lot of money by switching to biofuels.
But convincing them to forget about fossil fuels will not be easy, says the BBC's Latin America analyst, Martin Murphy.
Ethanol production requires large-scale plantations of sugarcane or, as is the case in the United States, corn.
Many environmental groups claim that the growing production of sugar cane is exacerbating deforestation.
^ Back to top | BBC Sport Home | BBC Homepage | Contact us | Help | ©
~RS~q~RS~~RS~z~RS~49~RS~)