Hugo Chavez marked his country's formal entry into the organisation by holding a summit in Caracas on Tuesday attended by the leaders of Brazil, Argentina, Uruguay and Paraguay, the other Mercosur members, as well as Evo Morales, the president of Bolivia and a close ally of Chavez, who attended the ceremony as an observer.

"We are defeating the hegemonic pretensions" of the United States "and today we have placed a new cornerstone for the freedom and unity of South America," Chavez told a crowded auditorium.

Brazilian President Inacio Lula da Silva called on fellow Mercosur members to maintain political solidarity in the face of challenges from countries outside the region, but said that anti-Americanism was not a characteristic of the regional trade bloc.

"Today we are here to say to the world that we don't want to fight with anybody," he said. "We are peaceful countries."

Swelling coffers

Venezuela is the one of the world's leading oil producers and its entry into Mercosur will increase the economic power of the trading bloc by taking its combined GDP to $1 trillion, which is more than three-quarters of South America's total economic activity.

"Economically stronger countries have to understand the realities ... of smaller countries"

Tabare Vazquez, president of Uruguay

Under the entry agreement, Venezuela will have to adopt a common external tariff system within four years. The level of those tariffs will vary depending on the product but will average about 12%, said Eduardo Sigal, Argentina's undersecretary for economic integration.

Venezuela and the continent's two largest economies - Brazil and Argentina - will establish free trade zones by 2012. Paraguay and Uruguay will immediately benefit from preferential tariffs for their principal exports to Venezuela before gradually establishing free trade zones by 2013.

Not all agreed with Chavez that the outlook for Mercosur was so rosy.

Minor complaints

The president of Paraguay, Nicanor Duarte, raised concerns about alleged protectionist practices by Brazil and Argentina that have prompted Paraguay and Uruguay to question the benefits of Mercosur membership.

Duarte said the bloc's system of common tariffs "does not always agree with commercial practices that still pose many obstacles, especially for less developed countries like Paraguay."

Paraguay has complained that its products face long delays in entering Mercosur's two biggest markets and has also protested rules that prohibit it from signing bilateral trade deals with countries outside the bloc.

The Uruguayan president, Tabare Vazquez, agreed, calling for "a bigger and better Mercosur."

"Economically stronger countries have to understand the realities ... of smaller countries," he said. "In the process of integration, small nations count too."