Leaders of Peru and Brazil announced a US$700 million agreement to build a highway connecting Brazil's Atlantic coast to Peru's Pacific ports.

Brazilian President Luiz Inacio Lula da Silva and Peru's Alejandro Toledo said on Wednesday the 1,200-kilometer highway would connect Brazil's southeastern town of Assis with Peru's ports of Matarani, Ilo and Marcona.

"This is not a bilateral project. I am convinced that it is in the interest of all the countries represented here," Lula de Silva said at a ceremony in the ancient Inca sun temple of Coricancho attended by presidents and high-ranking officials from a dozen South American countries.

"It is the expression of our countries to overcome the distances that still separate us," he said.

"The integration of South America has begun," Toledo declared. "Together we will set forth from the Pacific and conquer the world."

The highway project will receive 30 percent financing from the Andean Promotion Corporation, and the remaining cost will be shared equally by the two nations, officials said.

Brazil has long sought access to the Pacific Ocean - and to overseas markets in Asia.

Although it has a paved road from the Atlantic coast leading inland toward Peru's southeast jungle town of Inapari, the path is mostly dirt and mud as it winds into the lush Peruvian jungle toward the Andes Mountains and the Pacific coast beyond.

Environmentalists fear a paved highway cutting through Peru's virgin rain forest will expose the Amazon to farmers and loggers who, with better access, could deforest the jungle with greater speed.

Heavy trucks can ford the Acre River along the Peruvian border during the dry season, with cars crossing makeshift wooden bridges.

But during the rainy season, which begins in late November and can last up to six months, the river cannot be crossed.