After four days of meetings in this colonial city 65 miles southeast of Mexico's capital, some South American countries accused the United States of failing to yield on all-important farming subsidies.
"The negotiations have reached an impasse ... we have not agreed on any text," said Argentine negotiator Martin Redrado.
The talks in Puebla followed November meetings in Miami when negotiators came up with an outline for an accord that was dubbed "FTAA-lite," a two-tier approach in which all countries would sign on to basic trade rules, while those that chose to could open their markets further.
World Trade Organization talks in Cancun collapsed in September over the same farm-subsidies issue.
In the Puebla talks, the Mercosur nations -- led by Brazil and Argentina -- demanded measures like compensatory tariffs to protect their markets from the price effects of domestic U.S. farm payments. U.S. officials insist the farm topic should be negotiated within the WTO.
The Mercosur countries dropped twin demands for an end to all farm subsidies,and a 15-year phase-out of tariffs on all products. They reportedly offered to allow tariff or quota protections for about 10 percent of goods, something the United States had wanted.
"This is not a new Cancun, because (the negotiation process) will continue," Redrado said.
But referring to main sticking points, Redrado said without an agreement on agriculture -- and implicitly a U.S agreement to abandon most farm subsidies -- there would be no FTAA.
Instead of drafting and signing a final accord, negotiators agreed to try and call a new round of talks within 30 to 40 days to try and resolve their differences.
"We see this as a failure for them," activist Alberto Arroyo of the Continental Social Alliance said of the talks. "This is very similar to what happened in Cancun, as regards agriculture."
But other U.S. proposals, such as intellectual property protection, investment openings and government purchasing rules, were largely left out of the draft version of the accord in apparent retaliation for the U.S. refusal to yield on subsidies.
The Puebla talks had been intended to flesh out the Miami two-tier proposal, by setting a framework and timetable for more specific negotiations on second-tier issues. However, the talks were not able to get past the first level of basic issues.
Both Mercosur and the U.S.-led block of 14 nations accused each other of failing to make concessions.
"Some (progress) has been made on our side, but none on the U.S. side," Redrado said.
Mexican negotiator Angel Villalobos of the U.S.-led block countered that Mercosur was taking an all-or-nothing stance.
"The Group of 14 has been very flexible" in its demands, Villalobos said. "Mercosur is being very ambitious about agriculture."
Despite the lack of a final agreement, negotiators did decide to stick to their 2005 deadline for a final accord, and agreed that smaller, less-developed countries would need special help in order to compete in a hemispheric pact.
Agricultural subsidies have been a sticking point in free trade negotiations around the globe. The Mercosur nations say subsidies rob their dynamic farm sectors of foreign markets and make their own farmers unable to compete domestically.