Venezuela escalated its diplomatic row with Paraguay, expelling the remaining embassy staff of the landlocked country in a further blow to prospects for healing Mercosur divisions, caused by a June suspension of Paraguay and Venezuela's admission to the trade bloc.

Venezuela's admission to Mercosur was opposed by right-wing opposition lawmakers in Paraguay, a founding member of the organization, but the oil-rich socialist nation was fast-tracked into the bloc soon after Paraguay's exclusion.

Mercosur members Argentina, Brazil and Uruguay say Paraguay is no longer democratic because of the manner in which the country's Senate impeached and removed former president Fernando Lugo and appointed his deputy Federico Franco as the new president.

Mercosur called the government change a constitutional coup and tried but failed to convince the Organization of American States in Washington to support Paraguay's diplomatic isolation.

Franco argues Venezuela's admission into Mercosur was a backdoor maneuver, designed to give Argentina, Brazil and Uruguay greater access to Venezuela's lucrative consumer market. Franco continues to oppose Venezuela's accession to the trade bloc, much to the annoyance of the country's firebrand President Hugo Chavez.

Analysts said Chavez's recent re-election for a fourth term in office, despite reports of an unspecified cancer illness, triggered support in Caracas for a dramatic punitive gesture against Franco.

Franco's promise to hold new elections and steer Paraguay back to democratic rule has been ignored by Mercosur, which has ruled out an end to the country's suspension.

The mounting diplomatic row between Venezuela and Paraguay was an untimely surprise for officials in Brazil who had been hinting at a review of the suspension.

Paraguay's economy is projected to grow despite the government upheaval, and critics of governments in Argentina, Brazil and Uruguay say the three countries risk losing out on business opportunities in Paraguay.

Critics also say diplomatic moves to help Lugo back into power in place of Franco is a lost cause and warn that an attempt to reverse the June reshuffle, whether coup d'etat or not, could lead to a violent confrontation in Asuncion, the Paraguayan capital.

Former bishop Lugo achieved a historic victory in Paraguay's presidential election of April 2008, defeating the ruling party candidate, and ending 61 years of conservative rule. Lugo won with nearly 41 percent of the vote, but his moves to confront vested interests, to fight corruption and economic disparities were unpopular.

The president was also accused of having noble aims but not the competence needed to achieve his targets.

Paraguay's Charge d'affaires in Caracas Victor Casartelli said he and three other Paraguayan diplomats have to leave the Venezuelan capital by Friday.

Analysts said Paraguayan migrant workers in Venezuela feared reprisals, including expulsions and displacement from low-paid jobs that help them support their families in Paraguay.