RIO DE JANEIRO, (Reuters) – Latin American leaders  and executives urged governments in the region yesterday to  stop erecting trade barriers, saying the financial crisis was a  chance to tackle problems that have long hindered the region’s  competitiveness.

Brazilian President Luiz Inacio Lula da Silva, hosting the  Latin America World Economic Forum in Rio de Janeiro, said  protectionist moves by some countries would only deliver  short-term relief from the economic downturn.

“Protectionism is like a drug, which offers immediate  relief but then puts its victim in a prolonged depression,”  Lula, a strong proponent of renewing world trade talks, said in  a speech opening the two-day meeting of business leaders.

The global financial crisis has slammed the brakes on five  years of buoyant economic growth in the region, knocking demand  for commodities from oil to copper, pushing economies into  recession, and driving millions of people into poverty. In a region with a long history of populism, leaders are  feeling pressure to shield their economies as trade flows  plunge and jobs are lost. Ecuador has sharply increased tariffs  on imports, Mexico has raised duties on a long list of American  imports, and Argentina tested Brazil’s patience by imposing  extra import restrictions.

Mexico expects its economy to contract 2.8 percent this  year, while fellow regional giant Brazil last month slashed its  2009 growth forecast to 1.2 percent from 3.2 percent.

U.S bank Morgan Stanley said in a report last month that  the region would contract at least 4.3 percent this year, its  worst showing since 1983.

But unlike in previous crises that have hit the region,  stronger government finances have enabled governments to  respond with “counter-cyclical” policies such as lower interest  rates and fiscal stimulus packages.

“Independently of ideology, every single government should  focus on counter-cyclical measures,” said Ricardo Villela  Marino, chief executive of Brazilian bank Itau.

“Also countries should focus on trade with their neighbours.  There’s scope for new initiatives in Latin America,  particularly in inter-regional trade.”

Despite five years of strong growth, the region still  suffers from poor infrastructure and low education standards  that economists say hinders its long-term potential.

“Maybe this crisis was the only way of making the needed  reforms,” said Marcelo Bahia Odebrecht, the executive president  of major Brazilian construction firm Odebrecht.

“Latin America was at a velocity we couldn’t sustain. There  is a lack of everything — engineers, capable people,  products,” he said.

Pamela Cox, the World Bank’s vice president for Latin  America and the Caribbean, said countries should use their  fiscal responses to the crisis to strengthen social safety nets  and tackle long-standing inefficiencies.