The grouping is expected to serve as an alternative to the Organisation of American States (OAS), which includes Washington and Ottawa, and has been the main forum for regional affairs over the past 50 years.

Arturo Valenzuela, the US assistant secretary of state for Western Hemisphere affairs, said the US did not see the new grouping as a problem, but added that it "should not be an effort that would replace the OAS".

The Latin American and Caribbean leaders also called for fresh talks on the sovereignty of the Falklands-Malvinas Islands.

Support for Argentina

Expressing "support for the legitimate rights" of Buenos Aires in the dispute, they said it was in the region's interest that Argentina and the UK resume talks "in order to find a just, peaceful and definitive solution".

Luiz Inacio Lula da Silva, the Brazilian president, called for the UN to reopen the debate over the islands' sovereignty, which has re-ignited in recent days after oil drilling began off the remote, British-controlled southern Atlantic archipelago claimed by Argentina.

London recently rejected Argentina's latest claim to the islands, which Britain has held since 1833.

Argentina lost a short but bloody war to Britain over the south Atlantic archipelago in 1982, which cost around 1,000 lives.

Tensions

Meanwhile, regional tensions were also highlighted at the summit as Evo Morales, the Bolivian president, accused his Colombian counterpart Alvaro Uribe of being a US agent looking to stall the creation of the new regional bloc.

Morales said Uribe provoked a heated discussion with Hugo Chavez, the Venezuelan president, during a private meeting on Monday.

The dispute highlights the left-right divides in the region and drew calls for unity by leaders such as Michelle Bachelet, the Chilean president.

"We must protect our people, be more inclusive … construct the paths and networks necessary so we don't live with our backs turned toward each other," she said.

Colombia, a close ally of the US, and Venezuela, whose president is one of the fiercest critics of the US in the region, are locked in a growing political and trade dispute.

Chavez has repeatedly accused the US of planning to invade Venezuela with the help of Colombia, a charge Washington and Bogota deny.