RIO DE JANEIRO, Dec. 9 (UPI) -- All 12 South American nations have signed an agreement at a Peruvian summit to form a diplomatic and economic bloc, hoping to model their effort after the European Union.

The new South American Community of Nations, agreed to in Cuzco, is being heralded by some leaders as the beginning of true continental integration as once envisioned by South American patriot Simon Bolivar.

"We are here to give flesh, bone, soul, heart and life to the dream of Bolivar," said Peruvian President Alejandro Toledo this week at the summit.

The agreement unites nations from trading blocs Mercosur (Argentina, Brazil, Paraguay and Uruguay) and the Andean Trade Community (Bolivia, Colombia, Ecuador, Peru and Venezuela) as well as Chile, Guyana and Suriname.

Among the bloc's first goals would be to reduce, then eliminate, trade tariffs among member nations. Further down , leaders in attendance said they would like to create a single parliament, currency and South American Community passport.

On the surface, greater integration would appear to benefit many South American nations, particularly while dealing with first-world trading partners such as the United States, who many leaders here say bully them with unfair trade barriers, tariffs on their goods and subsidies at home.

Toledo made a point of stressing Wednesday during summit talks that the new community would help South America "confront the challenges of globalization so that it is fairer" for developing nations to compete with economic giants.

"It will allow us to act jointly and united on the international stage to increase our negotiating capacity and take the leap to conquer markets in the United States, Europe and Asia," he said.

The bloc gives South America quite a bit of heft with a combined gross domestic product of $1 trillion and 361 million people, ranking it among the world's largest political and economic grouping of nations.

That kind of power might come in handy in 2005 when South American nations return to the negotiating table with the United States to discuss the creation of the Free Trade Area of the Americas.

The FTAA is a proposed 34-nation free trade bloc stretching from Alaska to the tip of South America that would include every nation in the Western Hemisphere, except Cuba. The bloc was supposed to go into effect in 2005, but continuing criticism of U.S. subsidies and tariffs -- often led by Brazilian President Luiz Inacio Lula da Silva -- have hampered recent efforts for its implementation.

The leftist Lula has long envisioned a continent united, with Brazil at its head. During the FTAA talks, which Brazil co-chairs with the United States, South America's largest country and economy balked at Washington's unwillingness to budge on subsidies.

In April, Brazil made history when the WTO sided with its complaint that U.S. subsidies for cotton farmers unfairly increased production and lowered world cotton prices, making it impossible for Brazilian cotton growers to compete. It was the first time a developing nation registered and won a complaint in the WTO against an economic powerhouse.

Last month, Lula told regional leaders to fight for their domestic products' rightful places in international markets and asked them to "persist in putting an end to discriminatory commercial practices against our products" and continue working for "access to larger and more visible international markets."

While South American leaders like Toledo and Lula appear enthusiastic about the prospects for the Community of Nations, others seem more reluctant.

Argentine President Nestor Kirchner and other South American leaders did not attend the meeting, and instead sent representatives, a possible sign of their unwillingness to fully embrace the idea.

There are economic hurdles to overcome, too. While in October, Mercosur and the Andean Community did sign a free trade agreement, members of the individual blocs continue to squabble over economic relations.