The men had been accused of attempting to assassinate Cuban President Fidel Castro four years ago.

But Panama's new President Martin Torrijos has denounced the pardons granted by his predecessor, his Foreign Minister Samuel Lewis said.

Mireya Moscoso freed the four Cubans just six days before her term ended.

"This is a clear and effective step down the right path," said Mr Lewis, according to AP news agency.

He said the two sides would discuss the reopening of consulates next week.

Debt proposal

The reconciliation occurred as leaders and ministers from Spain, Portugal and 19 Latin American countries gathered in Costa Rica for the Ibero-American summit.

They are expected to approve a joint Declaration of San Jose focused on improving regional education funding, poverty reduction and international debt relief.

However, commentators said the promises on education were vague, with the most specific proposal being for multinational lending bodies to allow poor countries to replace some debt repayments with spending on education.

Cuba won approval for an anti-terrorism resolution condemning the pardons, though the language of the resolution is likely to be toned down.

"Cuba feels satisfied," Foreign Minister Felipe Perez declared.

Several leaders will be missing the summit.

Mr Castro is still recovering from breaking an arm and leg last month, while Chile's Ricardo Lagos and Peru's Alejandro Toledo are in Chile for the Apec summit.

Portugal's Jorge Sampaio and Brazil's Luiz Inacio Lula da Silva are also absent, while Venezuela's Hugo Chavez looks likely to remain at home after a car bombing killed a top prosecutor.

The summit will be the first trip to Latin America for Spanish Prime Minister Luis Rodriguez Zapatero.

Commentators say the trip is likely to signal renewed Spanish attention to the region, where it once held many colonies.

Mr Zapatero, a Socialist, is likely to feel some affinity with the region, in which many countries have taken a turn to the left, commentators said.