ANALYSIS-Andean crisis shakes hopes for regional unity

By Raymond Colitt

BRASILIA, March 6 (Reuters) - The crisis in the Andes ignited by a Colombian raid on a rebel camp inside Ecuador threatens to derail plans for South American integration and is a test for Brazil's ambitions as a regional leader.

In the most serious dispute among Latin American nations for more than a decade, Ecuador and its ally Venezuela have moved troops up to their borders with Colombia in response to the raid and suspended trade and diplomatic relations.

The Organization of American States (OAS) criticized U.S.-backed Colombia for its action on Wednesday but stopped short of condemning it.

Brazil, the major regional power, wants to bridge a rift between pro- and anti-U.S. camps while safeguarding its foreign policy objective to unite South America as a counterbalance to U.S. and European economic interests in the region.

"This crisis puts at risk South American integration and especially the expansion of the Mercosur trade bloc," said Virgilio Arraes, professor of international affairs at the University of Brasilia.

The Mercosur bloc includes Brazil, Arnetina, Paraguay and Uruguay. Venezuela, whose President Hugo Chavez is a foe of Washington and wants to lead South America down a socialist path, is in the process of joining but has met resistance from Brazil and Paraguay.

Chavez's involvement in the current conflict could renew concerns about Venezuela's membership, Arraes said.

The dispute also cast a cloud over the planned launch in coming months of a South American Union of Nations, modeled on the European Union.