Mercosur is pushing a free trade deal with Canada which, if signed, will confront Ottawa with the ticklish issue of dealing with continued U.S. embargo on the regional pact's future partner Cuba.

Cuba's membership of the regional trade network has been in the cards since Brazil, which signed generous aid packages in Havana last year, began canvassing for an early entry of the communist state.

Cuba is under wide-ranging U.S. sanctions, the longest in history. Although Washington has softened somewhat toward Havana it still wants the Castro brothers' regime to go through rigorous democracy tests before it'll let up on the embargo.

Cuban President Raoul Castro began an economic liberalization program but, with elder brother Fidel in the background and watchful against any capitalist trespass, progress has been slow.

In the meantime, however, support for Cuba and opposition to U.S.-led sanctions and other curbs on Cuba has grown in Latin America.

Some analysts say Cuba's entry into Mercosur is only a matter of time. Where, they ask, will that leave Canada if in the meantime it signs free trade deals with Mercosur and continues to face U.S. disagreements on Cuba.

Canada and Cuba have close trade and travel links despite U.S. exhortations to Ottawa to shun the Caribbean island state. The number of Canadian businesses active in Cuba is known to be at least 85, if not more.

The bilateral trade, however, is different from Canada sharing a free trade zone that eventually may include Cuba as well as sharing the border with the United States.

Mercosur founding members are: Argentina, Brazil, Paraguay and Uruguay. Venezuela, associate member since 2008, became a full member in July 2012 as Paraguay was suspended. Bolivia and Chile are associate members and Colombia, Ecuador and Peru want to join as does Cuba.

Uruguay this week indicated it will work toward finalizing a free trade agreement with Canada when it assumes Mercosur chairmanship this year.

Uruguayan Foreign Minister Luis Almagro made the announcement during the signing of a tax information exchange agreement with Canada.

Canadian Ambassador Claire Poulin hailed the accord as a way toward closer fiscal cooperation. Canada will host a senior Uruguayan delegation for talks in Ottawa later in the year.

"Hopefully negotiations will find their natural course and then we can sit at a table and exchange proposals based on each side's ambitions," Almagro said.

Canadian Foreign Trade Minister Ed Fast visited Argentina, Brazil and Chile in March 2012 as part of a Canadian effort to advance the country's economic links with Mercosur member countries.

"Deepening and broadening Canada's economic relationship with high-growth markets like Mercosur is a key part of our pro-trade plan for jobs, economic growth and long-term prosperity," Fast said.

Mercosur 's 250 million consumers command national earnings of $3 trillion. It also accounts for almost three quarters of total economic activity in South America. Bilateral trade between Canada and Mercosur totaled more than $9.7 billion in 2011, a 213 per cent increase over the previous decade.

Like Canada, the European Union has its eyes on the Mercosur market. The European Union is Cuba's largest trading partner, with a third of all trade, almost one half of foreign direct investment and more than half of all tourists coming from Europe. Cuba also gets preferential treatment in EU trade.

Cubans interviewed in recent media reports said they dreamed of having the United States back as a regular partner.