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ANALYSIS-Andean crisis shakes hopes for regional unity

BRASILIA, March 6 (Reuters) - The crisis in the Andes ignited by a Colombian raid on a rebel camp inside Ecuador threatens to derail plans for South American integration and is a test for Brazil's ambitions as a regional leader.

In the most serious dispute among Latin American nations for more than a decade, Ecuador and its ally Venezuela have moved troops up to their borders with Colombia in response to the raid and suspended trade and diplomatic relations.

The Organization of American States (OAS) criticized U.S.-backed Colombia for its action on Wednesday but stopped short of condemning it.

Brazil, the major regional power, wants to bridge a rift between pro- and anti-U.S. camps while safeguarding its foreign policy objective to unite South America as a counterbalance to U.S. and European economic interests in the region.

"This crisis puts at risk South American integration and especially the expansion of the Mercosur trade bloc," said Virgilio Arraes, professor of international affairs at the University of Brasilia.

The Mercosur bloc includes Brazil, Arnetina, Paraguay and Uruguay. Venezuela, whose President Hugo Chavez is a foe of Washington and wants to lead South America down a socialist path, is in the process of joining but has met resistance from Brazil and Paraguay.

Chavez's involvement in the current conflict could renew concerns about Venezuela's membership, Arraes said.

The dispute also cast a cloud over the planned launch in coming months of a South American Union of Nations, modeled on the European Union.

"The dream of a South American political union will be delayed," said Jose Botafogo, head of the foreign policy think tank Cebri in Rio de Janeiro.

AVOIDING AN ESCALATION

Brazil has spent millions of dollars on building roads and bridges with neighboring countries and granted trade concessions to hold Mercosur together.

Brazil is eager to secure more clout in the global diplomatic arena and win a seat in the United Nations security council.

"Anything that threatens (Latin American) integration is serious because it weakens our position in the world, debilitates South America's position vis-a-vis other economic blocs," Brazilian Foreign Minister Celso Amorim said.

"The less united we are, the easier we'll be made victims in trade talks," said Amorim, although he said Brazil could gain in stature if it helped defuse the crisis and paved the way for a lasting solution.

The immediate task is to avoid a military escalation and aid an OAS commission that will investigate the March 1 attack by Colombia into Ecuador. But the larger challenge is to bridge a deeper ideological divide in the region, experts said.

The United States finances the Colombian military and counts President Alvaro Uribe as its strongest ally in a region where anti-U.S. sentiment is rife. Chavez sides with Ecuador and has poured money into leftist governments.

"The U.S. presence in Colombia complicates relations with its neighbors. Nobody in South America is comfortable with a strong U.S. presence there," Botafogo said.

Much of Latin America has sided with Ecuador.

Brazil said the U.S. government, which backed Colombia after the raid, should stay on the sidelines of the conflict.

"The more we can keep this within the Latin American sphere, the better the chance of a solution and avoiding a polarization in the region," Amorim said. (Editing by Angus MacSwan)

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