Brazil's president is visiting neighbouring Uruguay to smooth over strained economic ties.
Luiz Inacio Lula da Silva's visit comes amid heightened speculation over whether Uruguay will stay in the South American trading bloc Mercosur, or write its own deal with Washington.
A country of over three million, Uruguay is being courted by Brazil's president and George Bush, the US president, who will visit for several days next month.
Tabare Vazquez, the Uruguayan president, claims Mercosur favours bigger countries and is threatening to a free trade deal with US.
In Uruguay on Monday, Lula gave the Uruguayan president a bear hug and both said they had strengthened ties during talks.
Lula said he could assure smaller countries in the strained Mercosur trade bloc that they had the ear of the more powerful economies, like Brazil's.
"Brazil's relationship with the region is not one of hegemony," Lula told a news conference.
Vazquez, Uruguay's first leftist leader, said he spoke about the need to promote trade rules to protect smaller countries that will serve as more than "handouts".
He demanded a better deal for Uruguay.
"Lula Da Silva came to Uruguay to find an agreement. Uruguay doesn't want charity - we want justice so that the block will give benefits to all partners."
The Mercosur bloc includes Brazil, Argentina and Venezuela - South America's top three economies - and the smaller nations of Uruguay and Paraguay.
Lula wants the Mercosur members to trade with the United States as a single entity.
In Uruguay people are divided between those who want to strengthen the relationship with other Mercosur members and those who want to continue an independent bilateral relationship with Washington.
For now, the Uruguayan government is trying to do both.
In a glass factory outside Montevideo, one of its founders is excited about Lula's visit to Uruguay.
Bush will be visiting Uruguay for several
days next month [AFP]
Eight years ago Daniel Paredes was nearly homeless after losing his job there.
Today, thanks to a $3 million investment by Venezuela, Daniel and his eight co-workers are hiring 60 more employees and getting ready to export their products throughout Latin America.
"We see Lula's visit to Uruguay as a sign of Latin American integration," says Daniel.
"We need to be united among Latin Americans. In September we want to export to Brazil because they have the biggest market … then, who knows."
Jose Mugica, a former left wing guerrilla in the 1970s, is now the minister of agriculture and one of the most pro-Mercosur members of government.
"Uruguay depends on Argentina and Brazil ... But none of them depends from Uruguay... The only asset Uruguay has is that nobody wants it against them. We need to export small quantities to a lot of people but without losing our Latin American soul."
"President Bush's visit next month will probably increase the divisions within this country and within the region - between those who want to look up north towards Washington and between those who don't."