raul_and_babe.jpgCOSTA DO SAUIPE, Brazil – Latin American leaders on Tuesday blamed the global economic crisis on rich countries and welcomed Communist-run Cuba at a summit meeting designed to weaken U.S. influence in the region.

The presence of Cuban President Raul Castro at the meeting in northeastern Brazil was touted as a sign of Latin America’s growing independence from the United States, a far cry from the Cold War era when Cuba was expelled from the Washington-based Organisation of American States.

"Cuba returns to where it always belonged. We’re complete, we’re forming a team, a good team," said Venezuelan President Hugo Chavez, the region’s most vehement U.S. critic and Cuba’s closest ally.

"The most positive thing for the independence of our continent is that we meet alone without the hegemony of the empire," Chavez said in reference to the United States.

Previous summits of Latin American and Caribbean leaders have always included former colonial powers Spain and Portugal or the United States.

Castro, on his first foreign trip since taking over from his ailing brother Fidel Castro earlier this year, said an unfair, world economic order benefiting rich countries and multinational companies was in crisis. "It’s the demise of an economic model," he said.

Cuba’s admission on Tuesday into the long-standing Rio Group of more than 20 Latin American and Caribbean countries brought renewed calls for an end to the U.S. embargo against Cuba.

Castro said on the eve of the summit meeting here that he was open to meeting with U.S. President-elect Barack Obama to discuss the issue.

Progress at Risk

The global crisis, which has cut off credit lines and hit demand for the commodity exports of many countries, has threatened to undo years of economic and social progress in the region, Brazil’s President Luiz Inacio Lula da Silva said.

"Crises like the current one reveal the perversities of the current economic system," Lula said.

Ecuador’s President Rafael Correa, who defaulted on a foreign debt payment this week, said emerging market economies didn’t cause the crisis but would end up paying a high price for it.

He said Latin American countries should pool their international reserves and speed up the creation of a regional development bank to help overcome the global credit crunch.

"The answer is integration," said Correa.

Leaders also agreed to create a South American defence council aimed at preventing local conflicts and reducing dependence on U.S. weaponry. Brazil is the largest arms manufacturer in South America and could gain ground against U.S. manufacturers if the region’s governments came together on some defence issues.

"The idea is cooperation for the basis of a (common) defence industry," Brazil’s Foreign Minister Celso Amorim told reporters.

But behind the scenes, the show of unity looked fragile.

The newly-formed South American Union failed on Tuesday to agree on a secretary-general to lead it, and the regional customs union Mercosur failed to eliminate double taxation on imports that have held up negotiations with other trade blocs.

Paraguayan President Fernando Lugo said he was studying the legality of his country’s foreign debt, echoing the arguments made by Ecuador this week and raising the possibility of another default that would reinforce doubts about Latin America’s investment climate.

(Additional reporting by Carmen Munari and Julio Villaverde; Editing by Kieran Murray)

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