Already the government has promised landlocked Bolivia and Paraguay full use of the planned new port in return for electricity and gas supplies required to run the facility and an adjoining iron ore mine and extensive rail, air and water links.

Mujica hopes a regional partnership for the deepwater project will be more attractive for prospective investors.

Construction of the deepwater port was considered for a few years before it was set aside in response to the economic downturn. Mujica revived the plan when he took over as president, surprising many economists who thought him an unlikely pioneer of daring economic projects.

Mujica is a former left-wing militant who spent almost 15 years in prison during the country's military rule.

This week he was in active talks with Bolivian President Evo Morales and Paraguay's ailing President Fernando Lugo to pursue the deepwater project, which is seen as a potential major earner for Uruguay and a dream come true for Bolivia and Paraguay, both of which lack direct access to the sea.

The three leaders met in Asuncion, the capital of Paraguay, to cement their partnership in Urupabol, their tripartite regional grouping.

At the summit, Paraguay announced it was in the final stages of a project to sell electricity to Uruguay, and Bolivian officials said they were considering a deal to sell gas to Uruguay.

An existing pipeline network running through neighboring Argentina is expected to be augmented with international help for some of the planned fuel supplies. In addition, a gas pipeline from Bolivia would pass through Paraguay to reach Uruguayan points.

Uruguay's national port authority said Uruguay considered "essential" an early construction of the deepwater port. Plans for the port have already led to the relocation of a controversial projected pulp mill from the Uruguay River to the Rocha channel, raising prospects for the regeneration of the area.

An existing eucalyptus pulp mill near the Argentine border has already been the cause of a longstanding dispute between Uruguay and Argentina. The two countries recently decided to set up a joint commission for river monitoring to guard against environmental pollution.

Analysts said Uruguay also saw the planned deepwater port as an opportunity to promote the use of the Magellan Straits as an alternative to the Panama Canal.

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