ASUNCION Paraguayan President Santiago Pena said on Wednesday he was "fully open" to trade deals with China via the South American trade bloc Mercosur, despite his country's diplomatic ties with Taiwan.

Paraguay's long-standing diplomatic support for Taiwan has hindered local farmers' grains exports to China, which claims sovereignty over the self-governed island. Paraguay is the only South American country with formal relations with Taiwan, which strongly objects to China's sovereignty claims.

Mercosur, a customs union that includes Brazil, Argentina and Uruguay, has been in talks to finalise a long-awaited trade deal with the European Union, but has also discussed a potential trade deal with China.

"Our position with China is one of total openness," Pena said of Paraguay's position within Mercosur, adding that the obstacle was rather China not accepting its recognition of Taiwan. "We are in favour of advancing trade agreements," he added in the interview with Reuters.

China hopes the Paraguayan government will "stand on the right side of history", its foreign ministry spokesperson Mao Ning told reporters at a regular news briefing on Thursday.

Mao said China views trade and economic cooperation with Mercosur nations and other Latin America countries as important.

Mercosur officials held a dialogue with Chinese counterparts on Aug 12 in Uruguay's capital.

"I see prudence on Brazil's side," Pena said of the possible China agreement, which he emphasised that he supported. "I think that the most interested is Uruguay and we accompany this effort to have a conversation as a bloc."

China's foreign ministry and the Chinese embassy in Uruguay did not immediately reply to a request for comment.

  - Reuters