BRASILIA, Brazil (AP) – Brazil and Venezuela agreed to build a $2.5 billion oil refinery, the highlight of the opening of a South American summit to boost trade and cooperation.

Venezuelan President Hugo Chavez and Brazilian leader Luiz Inacio Lula da Silva were to sign the agreement during the two-day summit, which opened Thursday in the capital with the presidents of eight South American nations.

The South American Community of Nations was created last December, and the first summit drew the presidents of Argentina, Bolivia, Chile, Paraguay, Peru, Venezuela, Ecuador and Brazil. Delegates from Colombia, Uruguay, Guyana and Suriname also attended.

Chavez and Silva were in the spotlight Thursday, with plans to jointly build a refinery complex to process up to 200,000 barrels of heavy oil daily. The complex, in the Brazilian state of Pernambuco, will refine oil for the Brazilian market.

Financing will be equally split between state-run Petroleos de Venezuela (PDVSA) and Brazil’s government oil company Petrobras, and the refinery will be ready to operate in 2010 or 2011, said Venezuelan Foreign Minister Ali Rodriguez.

Petrobras also will be authorized to drill in Venezuela’s oil-rich Orinoco Belt area, he said.

Foreign ministers debated a Chilean proposal to speed up regional trade with a drastic cut in trade tariffs to sharply expand regional trade by the end of the decade. Chile puts an average tariff of 4 percent on imports, while Brazil’s levy is 14 percent.

But many countries, including Brazil, have reservations about the idea of creating a Free Trade Zone in South America by 2010. Brazil has led opposition to quick approval of a U.S. proposal for a Free Trade Area of the Americas.

Disagreements over free trade have stalled the full entry of Chile and Bolivia into the Mercosur trade bloc, founded by Brazil, Argentina, Paraguay and Uruguay. Chile and Bolivia are associate members, with import tariffs lower than what Mercosur demands.

Trade among South American nations totaled $25 billion last year and is expected to reach $30 billion this year. But the amount is less than a fourth of Brazilian exports.


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