CANCUN, Mexico, Feb 22, 2010 (AFP) - Argentina rallied regional support at a summit in Mexico on Monday as a British oil rig began drilling in the disputed seas around the Falkland Islands.

After losing a short but bloody war over the south Atlantic islands with Britain in 1982, Argentina is furious over the British oil drilling operations in the potentially rich seabed around the archipelago.

Leaders from Latin American and Caribbean nations at the two-day summit in the Mexican resort of Cancun were expected to sign up for a resolution backing Argentina, the country's officials said here.

Earlier Monday, Desire Petroleum said in London that drilling had begun off the Falklands.

Venezuela's firebrand President Hugo Chavez led support for Argentina, labelling Britain as a relic of colonialism and demanding the return of the "Malvinas," as the islands are known in the region.

Argentine foreign ministry spokesman Javier Porta said that all 32 countries participating in the summit, due to end Tuesday, had offered their support.

London in January rejected Argentina's latest claim to the islands, which Britain has held and occupied since 1833.

The Argentine government would exhaust "all dispositions which reaffirm our sovereignty on the southern archipelago," President Christina Kirchner said in a summit address.

Deputy Foreign Minister Victorio Taccetti meanwhile voiced confidence that Britain would negotiate over the Falklands when its oil exploration operations run into trouble.

The Cancun summit, between the Rio Group and the Caribbean Community (Caricom), also discussed plans for a new pan-American alliance which would exclude Canada and traditional regional power player the United States.

The new grouping could serve as an alternative to the Organization of American States (OAS), which includes the North American neighbors and has been the main forum for regional affairs in the past half-century.

"It's time to realize the unity of Latin America and the Caribbean," Mexico's conservative President Felipe Calderon said, asking the attending leaders and foreign ministers to put aside their political differences.

But the move came as left-right divides were as wide as ever across a region struggling for consensus in the aftermath of a military-backed coup in Honduras.

Topics under discussion included whether to recognize Porfirio Lobo as the legitimate president of Honduras, after he was elected in November under a de facto government following the June 28 coup against Manuel Zelaya.

In Washington, US Assistant Secretary of State for Western Hemisphere Affairs Arturo Valenzuela said that the United States did not see the move to create a new regional grouping as a problem.

"Replacing the OAS? I don't think most of the countries are on that at all," Valenzuela told journalists at an event in Washington.

"This should not be an effort that would replace the OAS," he added.

Chavez led support from the region's hard left for the grouping as a move away from US sway in the region.

"The OAS isn't useful for anything," Chavez said, giving the example of the divided body's reaction to the Honduras crisis.

The OAS suspended Honduras and oversaw crisis talks as well as condemning the coup, but it did not push for the return of Zelaya to power.

The terms of the new grouping, and whether it aimed to replace the Rio Group, were not yet clear.