CARACAS, Venezuela (AP) -- The presidents of Venezuela and Brazil called for creating a powerful South American trade bloc this year before continuing talks on a U.S.-backed hemispheric free trade zone.

Brazil's Luiz Inacio Lula da Silva and Venezuela's Hugo Chavez said Tuesday that integrating South America's two largest trading blocs, Mercosur and the Andean Community, comes before any hemispheric deal. They set a Dec. 31 deadline for a regional trade union.

Silva and Chavez argue the Free Trade Area of the Americas -- a proposal to create the world's largest trading zone -- will deepen Latin poverty by forcing local industry to compete against developed nations.

"We're not saying that we don't want to negotiate with the United States, because it is very important for Brazil. But we must integrate first to negotiate with that country," Silva said at a news conference.

South American nations can create "a power bloc" to confront the FTAA, Chavez said. "Only united can we break the chains that oppress us."

Silva and Chavez signed trade and investment pacts. Brazil also extended a $1 billion credit line to Venezuela for Brazilian products.

Venezuela's political opposition had hoped Silva would endorse a possible referendum on Chavez's presidency to end Venezuela's political crisis. Silva only said Latin nations were disposed to help Venezuela solve its problems peacefully.

Brazil has warned it won't continue with FTAA negotiations unless Washington relaxes trade barriers on Latin American exports such as oranges and sugar. Chavez claims the FTAA is the latest incarnation of economic "colonialism" and vows to put any deal to a popular vote.

The United States prefers agricultural matters be negotiated at the World Trade Organization and not in FTAA talks. Analysts increasingly believe the FTAA target date of 2005 is unrealistic.

The two presidents were visiting the southeastern mining town of Puerto Ordaz to inspect an Orinoco River bridge being built by a Brazilian firm before Silva returned home.

Mercosur includes Argentina, Brazil, Paraguay and Uruguay, with Bolivia and Chile as associate members. Peru and Venezuela are seeking associate membership.

The Andean Community of Nations includes Ecuador, Colombia, Venezuela, Bolivia and Peru.