Prime Minister Atal Behari Vajpayee shakes hands with President of Brazil Luiz Inacio Lula da Silva during a welcome ceremony at the presidential palace in New Delhi. (AFP)

NEW DELHI, 26 January 2004 — India and the Latin American trading bloc Mercosur yesterday signed a landmark agreement which was expected to pave the way for a free trade arrangement between the two.

The preferential trade agreement was signed in the presence of visiting Brazilian President Luiz Inacio Lula da Silva and Indian Prime Minister Atal Behari Vajpayee after talks yesterday evening.

Lula said global trading patterns could be changed if India and Brazil combined forces. “India and Brazil can together build a strong force that can change the trade geography of the world,” Lula told reporters after a ceremonial welcome at the presidential palace here shortly after arriving on a four-day official visit.

The pact was signed by Commerce Minister Arun Jaitely for India and ministers from Brazil, Paraguay, Uruguay and Argentina, an Indian official said.

Mercosur — including Argentina, Brazil, Uruguay and Paraguay, with Chile and Bolivia as associate members — signed a framework accord with India in Paraguay’s capital Asuncion last year.

Yesterday’s pact is a step that will lead to a free-trade agreement, according to Brazilian officials.

Six other agreements — on co-operation between space agencies and on visa arrangements, promoting tourism and increasing cultural exchanges — were also signed between Indian and Brazilian ministers, the Indian official said.

India and Brazil are leaders among a grouping of developing countries that banded together at the World Trade Organization talks in the Mexican city of Cancun last September to press the developed world to phase out their farm subsidies.

The Cancun trade talks collapsed after developing and developed nations failed to reach an agreement.

During talks with Lula, India said it was keen to participate in railway projects in Brazil, the Press Trust of India quoting a Foreign Ministry spokesman said.

Negotiations for a Brazilian micro-satellite to be launched from an Indian launch pad were also in an advanced stage, the spokesman said. Earlier this month, officials from India, Brazil and South Africa met in New Delhi to discuss trade, defense, aviation, shipping and rural development.

— Additional input from agencies