Government leaders and some 150 top businessmen from nations comprising the EU and Mercosur - Argentina, Brazil, Paraguay and Uruguay - gathered in a Rio beach hotel to discuss how to increase access to each other's markets.

During the opening ceremony, Brazil and Argentina were quick to criticise the EU for its widespread subsidies and import duties, which Mercosur exporters view as unwarranted barriers given that both blocs have said they are eager to start negotiating a free trade zone.

Agriculture is a particular stumbling block.

"The theme of protectionism is something that we have to overcome. It's a very big error ...and agriculture is very important," said Argentine foreign minister Guido di Tella, representing President Carlos Menem, whoremained in Argentina due to a respiratory illness.

Brazil's President, Fernando Henrique Cardoso, called on the EU to correct the "imbalance" of its agricultural import tariffs. "In the parallel meeting between Mercosur and the European Union, we are expecting to start wide-ranging negotiations on trade liberalisation," he said.

Argentina, Uruguay and Paraguay have made clear they want an EU commitment to drop agricultural subsidies before entering any Mercosur-EU agreement. Brazil says it wants free access to Europe's agricultural markets before striking a deal.

Some EU farm ministers have opposed freeing up trade with Mercosur, arguing that it would attract inexpensive beef, grains and sugar and undercut local farmers.

The EU is a top market for food goods flowing out of Mercosur and is its largest commercial partner, taking 25 per cent of the South Americans' exports. Annual bilateral trade is estimated at $46 billion and the EU is also the largest foreign investor in Mercosur nations.

Brazil,for example, sent nearly 29 per cent of its exports to EU nations in 1998, while Argentina sent 17 per cent to the EU and about a third to Brazil.

The meetings between ministers and key industry figures, to be held mostly behind closed doors, take place following a near 40-per cent devaluation in Brazil, whose economy -- Latin America's largest - makes it a powerful trade partner for both blocs.

The four presidents will be making a combined show of support for Mercosur after last month's devaluation strained relations with Brazil's regional partners, who fear that their markets could be under threat from cheap Brazilian goods.

A joint communique issued by the Mercosur presidents, referring to the Brazilian devaluation, said the bloc's ministers would be considering "possible measures to alleviate the commercial effects derived from situational changes and, if the case be, suggest consensual proposals of recommendable courses of action."

Representatives from the two blocs will also discuss the plannedFree Trade Agreement of the Americas (FTAA), a single market of 800 million people from Alaska to Patagonia, by 2005. Talks to set up the FTAA opened last year and are expected to be long and difficult.

"Holding the summit and starting negotiations will be a counterpoint to the discussions to form the FTAA, which include all the interested commercial sectors of the countries involved," Cardoso said.

However, at the Summit of the Americas held in Chile in April, the South Americans stressed they would not enter into the key final phases of the FTAA talks if the US President did not hold so-called fast-track trade negotiation authority.

Mercosur, the world's third largest trade bloc, which also groups associate members Bolivia and Chile, has seen internal trade rise fivefold since 1991 to around $20 billion annually.

The Rio meeting, which runs until Tuesday, is widely seen as a prelude to a full-blown Mercosur-EU summit in June -- also in Rio -- when the heads of state of both blocs will be present.