Paraguay's president has revoked plans for US troops to hold several joint military exercises and development projects in his country.
Fernando Lugo said on Thursday that no longer thinks that hosting troops taking part in the US department of defence’s "New Horizons" programme was worthwhile.
"There would be about 500 US military and other personnel in the country and that wouldn't go unnoticed [by other countries in the region]," Lugo said.
The U-turn by Lugo comes weeks after Washington reached a deal with Colombia that will see US troops conduct anti-drug and anti-rebel operations from seven Colombian military bases.
Venezuela, Ecuador, Bolivia, Brazil and Argentina have each criticised the deal as a plan by Washington to increase its influence over the region.
Liliana Ayalde, Washington's ambassador in Asuncion, called Lugo's decision to prevent the hosting of US troops by Paraguay "regrettable".
The US troops' would have undertaken a variety of humanitarian projects, including building schools and clinics, she said.
About 19,000 medical consultations that had been planned for remote regions of Paraguay will now be abandoned, she said.
Officials from the Paraguayan government said that Lugo's decision would not negatively affect relations with Washington.
Agreements with the United States in different sectors will not be affected, Hector Lacognata, Paraguay's foreign minister, said.
"We have an excellent bilateral agenda with the United States. We have more then 30 current agreements with the US in diverse areas, of which six are in the area of military co-operation," he said.