Hu began a Latin America tour in Costa Rica Sunday, after attending a G20 summit in Washington, which will include Cuba and an Asia-Pacific summit in Peru.

China has increased diplomacy and investment in the region in recent years, with an eye on natural resources and developing markets for manufactured goods and even weapons.

Costa Rican "President Oscar Arias and I are launching bilateral negotiations for a free trade deal," Hu told journalists at a joint news conference here.

Hu and Arias, who visited China last year, also oversaw the signing of 11 cooperation deals, from building a joint oil refinery to setting up a Chinese language institute and opening a line of 40 million dollars in credit from China.

Costa Rica broke off more than 60 years of relations with Taiwan when it became the first Central American country to begin diplomatic ties with China on June 1, 2007.

The Central American exporter of computer components has dismissed fears of an invasion of Chinese products into the country under the trade deal, which could be signed in 2010.

Costa Rica last week approved a final law to ratify a free trade deal between the United States, the Dominican Republic and Central America, and Costa Rica and other Central American nations began talks with the European Union in 2006 on a free trade deal expected to be signed by 2010.

But Costa Rica is only the third Latin American country to negotiate a free trade deal with China, after Chile and Peru, which may conclude its accord during Hu's visit there later this month.

Both Taiwan -- a democratic self-ruled island that Beijing considers part of its territory awaiting reunification -- and China have been accused of using so-called "dollar diplomacy" to get nations to ally with them.

But Taiwan has lost allies in recent years.

"It's more than just symbolic that Hu Jintao has decided to come, because it is clearly making the point that it is no longer a Taiwan stronghold," said Costa Rican analyst Luis Guillermo Solis.

Part of China's incentives for Costa Rica's recognition came from its enormous foreign exchange reserves with an offer to buy 300 million dollars in bonds. It also donated 73 million dollars to build a new national stadium.

Hu was to travel to Cuba late Monday, before attending an Asia-Pacific summit in Peru on November 22.

The Chinese leader was to promote ties on his second visit to the communist-ruled island, just days before the arrival of Russian President Dmitry Medvedev.

China offered key support to former Cuban leader Fidel Castro when Cuba fell into dire economic straits after the 1991 breakup of the former Soviet Union, forging a divide with Russia.

China was Cuba's second business partner, after Venezuela, in 2007.

Current deals include Chinese oil prospecting and extraction in Cuba -- onshore and offshore -- and two Cuban eye hospitals in China and a third under construction.

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