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Europe, Latin leaders look for new partnership at Rio summit

RIO DE JANEIRO, Brazil (AP) -- Challenging the traditional economic and political dominance of the United States in the Western Hemisphere, European Union and Latin American leaders are talking about forging a new trade partnership.

At a two-day summit opening in Rio de Janeiro this afternoon, four dozen European, Caribbean and South American leaders will discuss a new free-trade zone and relations between the two continents."It's a big chance for Europe and Latin America," German Foreign Minister Joschka Fischer said. "We should use this historic chance. We are closely related by history, politically, culturally and economically, with Latin America."

Motorcades shuttled the leaders between the posh hotels crowding Rio's famed Copacabana Beach on Sunday and early Monday for one-on-one meetings.

German Chancellor Gerhard Schroeder, leading the 15-nation EU, met for an hour Sunday night with Fidel Castro, Cuba's enduring communist president who is a distinct outsider at this summit where free trade and open market economies are words on many lips.

Creating a new trade zone is a long-term prospect, closely tied to World Trade Organization talks that will take years, but the leaders are anxious to start the process.

"We see a lot more stability and democracy in this region," said Dutch Prime Minister Wim Kok. "It is important that the EU tries to strengthen the relationship to show that we value the relationship."

The European Union nations and the Mercosur countries -- Brazil, Argentina, Paraguay, Uruguay and associate members Bolivia and Chile -- are expected to announce that they will open free trade talks. An organizational meeting was to be held in November, officials said.

Spanish Foreign Minister Abel Matutes said the talks will start in earnest only in mid-2001 and will not be completed until after global free trade talks have been concluded under the auspices of the Geneva-based WTO.

"The negotiations will be complex, but I am convinced they will allow for an intensification of our trade relations," Matutes said Sunday.

The summit participants also are trying to reach agreement on steps to control the movement of capital -- an issue that is of particular concern to Brazil, which was among the nations hit hardest by the Asian financial crisis.

A group led by Brazil and Chile contend that making it harder for capital to skip across national boundaries will reduce the world economy's volatility and curb the spread of financial crises.

EU figures show capital flows from Europe to Latin American nations reached $73 billion in 1997, up from $26 billion two years earlier. Direct European investment in Latin America doubled from 1996 to 1997, going to $17 billion with Spain accounting for 33 percent, followed by Britain with 20 percent and France with 14 percent.

EU exports to Latin America reached $52.4 billion in 1997, double the 1987 amount, but well above EU imports of $38.1 billion.

Meanwhile, diplomats said Sunday that the condemnation of a U.S. law that punishes companies doing business with Cuba has "mysteriously" vanished from a statement to be signed by leaders at the summit.

Cubans had pressed for specific mention of the 1996 Helms-Burton Act, which punishes companies that do business with Cuban interests that involve seized U.S. property.

"We don't know what strange mechanism was used to suppress it," Venezuelan Foreign Minister Jose Vicente Rangel said, adding that the Cubans would try to reinstate it.