President Fernando Lugo on Thursday said he has decided to cancel plans for US troops to come to Paraguay next year for joint military exercises and development projects.
Lugo told reporters that he was no longer in favor of hosting visiting troops participating in the Pentagon's "New Horizons" program.
"Therse would be about 500 US military and other personnel in the country and that wouldn't go unnoticed," said Lugo, Paraguay's first leftist president after 61 years of conservative rule.
He said US troops were to have undertaken projects in 30 discrete areas, six of which are related to defense.
The decision comes in the wake of regional tensions over a US-Colombian deal that would see US troops undertaking anti-drug and anti-rebel operations from seven Colombian military bases.
Washington's ambassador in Asuncion, Liliana Ayalde, lamented the decision to cancel the arrival of US troops as "regrettable" but said she respected it.
She stressed that the US troops would have come to Paraguay as part of a humanitarian program whose projects include building schools and health centers.
The president's decision, she said, meant that 19,000 medical consultations planned for remote regions of the country would be canceled.
The New Horizons program in Latin America, operated by the US Southern Command, deploys active duty, reserve and National Guard forces from across the United States to work on projects ranging from building schools and medical clinics to paving roads.
Paraguayan officials denied the move would raise tensions with the United States. Some 30 other existing agreements with the United States in different sectors will not be affected, said Foreign Minister Hector Lacognata.
The decision to cancel the maneuvers comes after several South American countries, notably Venezuela, Ecuador, Bolivia, Brazil and Argentina, objected to a US deal with Colombia, allowing US troops to operate from seven Colombian military bases.
Critics of the deal say the US military deployment would be suspiciously large for its stated objective of fighting Colombian drug traffickers and rebels.
Meanwhile, Venezuelan President Hugo Chavez has announced a string of recent contracts with Moscow to buy 24 advanced fighter jets, 92 battle tanks and 300 surface-to-air missiles, among other weapons acquisitions, totaling more than six billion dollars.
A fierce critic of Washington, Chavez has said the arms are not to threaten neighboring countries but a response to threats he sees from the US "empire" wanting to invade his oil-rich nation.
Elsewhere in the region, Brazil has already agreed to spend 12 billion dollars to buy five French submarines -- one of which will be converted to nuclear power -- and 50 military helicopters.
Brazil has also opened contract negotiations to buy 36 modern French fighter jets for an additional four to seven billion dollars.