SAN PEDRO, Paraguay (Reuters) - Oil-producing Venezuela promised to provide fuel-deficient Paraguay with all the oil it needs, Venezuelan President Hugo Chavez said on Saturday.

Paraguay's President Fernando Lugo receives a gift from Venezuela's President Hugo Chavez in the city of San Pedro, 340 km (211 miles) north of Asuncion, August 16, 2008. REUTERS/Ivan Alvarado

Chavez, who has used his country’s oil wealth to spread his influence in Latin America, was visiting San Pedro in the poorest area of Paraguay to sign agreements with Paraguayan President Fernando Lugo, who took office on Friday.

“We’ve signed the first agreement to supply Paraguay with all the oil it needs, right to the last drop... for the development of Paraguay’s people, industry and agriculture,” Chavez said at a public event.

One of several agreements signed by the two presidents raised the amount of oil Venezuela supplies Paraguay to 25,000 barrels a day from the current level of 18,600 barrels a day.

Paraguay is a big generator of hydro-power but produces no fossil fuels and consumes about 28,000 barrels a day of oil.

Chavez and Lugo, a former Roman Catholic bishop whose election broke with 61 years of one-party rule in Paraguay, did not mention any price agreement for the oil imports.

Lugo has insisted that he is more moderate than Chavez and his socialist allies in Latin America. But in his first two days in office the Paraguayan leader showed interest in tightening ties with the region’s leftist.

On Friday evening he and Chavez held a news conference with Ecuador President Rafael Correa, who celebrated the socialist revolution he said they all belonged to.

Chavez, Correa and Bolivian President Evo Morales have turned back the free-market reforms that swept Latin America in the 1990s and have increased state control of their economies.

“People say, ‘Don’t trust Chavez, be careful with Chavez, be careful with Evo.’ I’m not scared of Chavez. I’m not scared of Evo. I’m not scared of anybody ... We are going to be true Paraguayans and have respectful relations with all countries,” Lugo said on Friday.

And in San Pedro on Saturday Lugo said again that ties with Venezuela did not mean Venezuela was imposing anything on Paraguay.

Chavez has helped his closest allies -- Ecuador and Bolivia -- with energy investments, sent cheap oil to the Caribbean and fertilizer to Nicaragua and made direct purchases of billions of dollars of bonds from Argentina, which has not been able to access international debt markets since a massive default.