After years of near neglect, Japan is now eager to cozy up to Brazil -- by far the largest Latin American economy.

In its attempt to shore up the flow of trade and investment across the Pacific, the government is also wooing MERCOSUR -- the Brazil-led regional customs union.

According to government sources, Japan and Brazil will agree next month to set up a joint dialogue forum of high-level government officials and private-sector business leaders to discuss ways to strengthen bilateral economic ties.

The agreement will be reached during a planned visit to Tokyo by Alcides Tapias, the Brazilian development and commerce minister; a specific date for the trip has not been set.

The sources said that among the Japanese government participants in the joint forum will be a vice minister for external affairs at the Ministry of Economy, Trade and Industry, and a deputy foreign minister for economic affairs.

The joint forum's first meeting is expected to be held in Tokyo around spring 2002, during the next meeting of the Japan-Brazil joint economic committee.

The committee consists only of business leaders. Since its establishment in 1973, it has met nine times. The last meeting was held in Sao Paulo in November, with participants holding an active exchange of views on the theme of "building a Japan-Brazilian alliance in the 21st century."

Separately from the joint forum of high-level government officials and business leaders, the high-level Japanese and Brazilian government officials will also hold talks among themselves during the 10th meeting of the joint economic committee, the sources said.

The Japanese move to beef up economic ties with Brazil apparently reflects a growing alarm about a continued weakening of its presence in the lucrative, resource-rich market of some 160 million people, amid a foreign-investment spree there by U.S. and European companies.

Brazil's gross domestic product is almost equal to the combined GDPs of the 10 Association of Southeast Asian Nations: Thailand, Indonesia, Singapore, the Philippines, Malaysia, Brunei, Vietnam, Laos, Cambodia and Myanmar.

The Brazilian economy grew a relatively strong 4.2 percent last year. The South American country, along with China, is now the world's largest recipient of foreign investment among developing countries.

Foreign direct investment in Brazil totaled $30.6 billion last year. Japan was the 12th investor with only $360 million. Although Japan was the third largest investor in Brazil at the end of 1990 in terms of the value of cumulative investment, it slipped into the 8th position at the end of 1999.

The sources also said Japan is considering proposing a meeting of business leaders from Japan and the MERCOSUR customs union as well as a joint meeting of government and business leaders.

MERCOSUR was inaugurated in January 1995 with Brazil, Argentina, Paraguay and Uruguay as full members. Chile and Bolivia joined the customs union as associate members later. A customs union is an advanced version of a free-trade agreement.

Although Japan has bilateral economic committees made up of business leaders with Argentina, Chile and Brazil, it does not have such a committee with Paraguay, Uruguay and Bolivia. Japan and MERCOSUR set up a regular dialogue of high-level government officials in the autumn of 1995. But no joint dialogue forum of government and business leaders exist between the two sides.

Latin America has emerged as the world's most dynamically growing region, along with East Asia, following the "lost 1980s," during which Latin American countries suffered dire economic hardships such as foreign-debt crisis and prolonged economic slump.

Since the end of the 1980s, Latin American countries -- with the sole exception of Cuba -- have moved toward democratic political systems after years of military dictatorships. They have also pushed ahead with free-market reforms and economic liberalization programs, as well as fiscal reform measures, including privatization of inefficient and unprofitable state-owned enterprises.

Those efforts have produced noticeable results. Latin America as a whole has been on a relatively sound growth path since 1991, despite a few hiccups, including the 1994-1995 Mexican peso crisis and the fallout from the 1997-1998 Asian financial turmoil.

The region's growth of the past decade has been driven by strong domestic consumption and investment and a smooth inflow of foreign capital. In many countries, the scourge of hyperinflation is now a thing of the past as sharp price rises have been tamed or brought down significantly.

Also in the 1990s, regional economic integration systems have cropped up across the hemisphere in the form of free-trade areas or customs unions, like MERCOSUR. The regional groupings already number more than 20, including those still under negotiation or on the drawing board.

At a summit meeting in Miami at the end of 1994, leaders of 34 Western Hemisphere governments also agreed to complete negotiations by 2005 on the Free Trade Area of the Americas, or FTAA, which would stretch from Alaska to the tips of Argentina and Chile. The same leaders will hold a summit meeting again in Quebec next month, during which FTAA will top their agenda.

Brazil has already been locked in a diplomatic tug of war with the U.S. over FTAA because it fears the Western Hemisphere might further fall into the U.S. sway.

The new U.S. administration of Republican President George W. Bush, who took office on Jan. 20, has expressed a desire to expand the 1994 North American Free Trade Agreement, which encompasses the U.S., Canada and Mexico, to include other Latin American countries.

In an apparent bid to strengthen its hand in FTAA negotiations vis-a-vis the U.S., the Brazil-led MERCOSUR have already agreed to open negotiations with the 15-nation European Union on forming a free-trade area.

Against this backdrop, there is a growing view within the Japanese government that Japan should strengthen economic relations with Brazil -- and with MERCOSUR -- as part of efforts to prevent the entire Western Hemisphere from becoming a protectionist trading bloc in the future and endangering Japanese interests in the region.

No matter how the Japanese government trumpets the importance of Brazil -- and MERCOSUR -- as a lucrative emerging market, however, it remains to be seen if Japanese companies will join their U.S. and European rivals in rushing to make investments there.

Many Japanese companies are struggling to survive amid an economic slump at home and still have a generally bitter memory of their business activities in Latin America before and during the region's "lost 1980s."