* Region seeks to boost internal trade, avoid dollar
* No agreement reached on reserves fund to fight crisis
By Hilary Burke and Magdalena Morales
BUENOS AIRES, Nov 25 (Reuters) - South American officials made little progress on Friday on forging consensus to pool foreign reserves or launch currency swaps to protect the region from fallout from European and U.S. economic woes.
As the euro zone debt debacle soured, economic policymakers met in Buenos Aires, making headway on anti-crisis measures aimed at boosting trade in the region and encouraging increased use of local currencies.
But they failed to reach a deal on how best to pool reserves to offer financial assistance to countries facing a liquidity or balance of payment crunch. Colombia suggested expanding the Latin American Reserve Fund (FLAR), while Ecuador and Venezuela each proposed a new mechanism be created.
“I’ve got both a sweet and bitter taste in my mouth,” Argentine Economy Minister Amado Boudou told participants, saying he was pleased with progress on regional trade and local currency use but disappointed with the lack of agreement on reserves.
“On this third issue (of reserves), which is equally important because it also contributes to the sustainability of our economies and the region’s chances of developing autonomously, moving beyond the vicissitudes of other regions ... we haven’t reached an agreement to advance on a concrete path,” Boudou said, urging further discussions.
The meeting’s conclusions will be submitted to presidents for approval next week at a Latin American summit in Caracas.
Friday’s gathering was supposed to be of South American finance ministers and central bank chiefs, but few countries sent top officials, most notably Brazil. It is a follow-up to a previous conclave in August.
At that time, Brazil said it was considering whether to join the Bogota-based FLAR reserves fund to help boost its firepower. Argentina, South America’s second-biggest economy, is not a member either.
Argentina’s deputy economy minister, Roberto Feletti, said officials were also looking at currency swaps between central banks as a possible new way to safeguard the region against a renewed global crisis.
A punishing Italian debt sale on Friday capped a terrible week for the euro zone after a disastrous German bond auction and a continuing failure of European leaders to agree measures to combat the crisis.
Problems in the United States, exacerbated by a political stalemate over how to reduce Washington’s budget deficit, are also contributing to growing worries over the health of the global economy.
South America is better prepared than in the past to weather a global crisis, thanks to its healthy fiscal policies, abundant foreign reserves and strong global prices for its commodities exports.
But some countries, including heavyweight Brazil, are already feeling the impact of the developed world’s troubles.
“Some of the measures being taken (in the developed world) can worsen the problem, instead of solving it,” Boudou said, in reference to broad spending cuts. “Someone who is downsizing loses more and more capacity to honor his debts.”
“We are not optimistic and we are preparing ... to substitute demand from other places within our own continent,” the Argentine minister told a news conference.