Legalising drugs is not the answer to ending drug violence, says Obama

"Just as the world economy is integrated, so unfortunately the drug trade is integrated and we can't look at the issue of supply in Latin America without looking at the issue of demand in the United States. So, whether it's working with President Santos or supporting the courageous work of President Calderon in Mexico, I personally and my administration, and the American people understand, that the toll of narco trafficking on the societies of Central America and the Caribbean and parts of South America are brutal," Obama told a business conference in Cartagena with Brazilian President Rousseff and Colombia's Juan Manuel Santos.

"It is entirely legitimate to have a conversation about whether the laws in place are ones that are doing more harm than good in certain places. I personally and my administration's position is that legalisation is not the answer," added Obama.

There are growing calls from around the world for a fresh look at how to combat a violent, multibillion dollar illegal trade which decades of hard-line policies against producers and consumers have failed to curb.

"I am a big believer of looking at the evidence and having a debate. I think ultimately what we are going to find is that to solve this problem is both in the United States us dealing with demand in an effective way. But it is also going to be strengthening institutions at home," said Obama.

In South America, some believe decriminalizing the growing of coca - the raw ingredient for cocaine - would slash revenue for traffickers and encourage farmers to plant different crops.

Colombia's Juan Manuel Santos said that although Colombia has had great success in its own drug, acknowledged that the traffickers had only moved elsewhere in the region.

"We can say that all the indicators show that we have been successful, however we know that our success has created problems in other countries, the famous 'balloon effect', the effect of a water bomb where you squeeze and water goes to the other side. And sometimes we fight and fight and we feel like we are on a bicycle that is not moving. So I think we have reached to time to simply analyse to see if what we are doing is the best we can do," said Santos.

Although not quite the star act he was at the last Summit of the Americas in Trinidad and Tobago in 2009, U.S. President Barack Obama remains a focus for many Latin American leaders who hope he will pay them more heed if he wins a second term in November.

"I can speak, I think for the United States, to say that we've never been more excited by the prospects of working as equal partners with our brothers and sisters in Latin America and the Caribbean because that is going to be the key to our success," said Obama to rapturous applause.

During her speech to the business summit, Brazilian President Dilma Rousseff warned of the effects of expansionary monetary police on currency markets.

"I am saying that expansionary monetary policy contains a factor of protectionism that is characterised by the fact that these currencies, when they have nowhere to go, they go to those markets that are seen as being more stable where they may cause arbitrage," she said.

Last month Rousseff slammed rich nations for unleashing a "tsunami" of cheap money that was "cannibalizing" poorer countries such as her own, forcing them to act to protect struggling local industries.

Rousseff's words amounted to some of the highest-profile criticism to date of efforts by the European Central Bank, the Bank of Japan and others to spur their economies through low interest rates and cheap loans.

Without naming specific countries, Rousseff said these measures have damaged emerging-market nations such as Brazil by unleashing a wave of capital inflows. That has made their currencies overvalued and their exports more expensive.