Paulson urges boost in oil output

CANCUN, Mexico (Reuters) - U.S. Treasury Secretary Henry Paulson on Monday urged oil-producing nations to boost their output and warned that soaring energy costs threatened to prolong a U.S. economic slowdown.

"This is a very, very important issue because the high price of oil is creating economic issues...and is a heavy burden for people around the world," Paulson said at a press conference with Mexican Finance Minister Agustin Carstens ahead of a conference of Latin American finance chiefs.

"In my judgment, it's got a very real risk of prolonging this economic slowdown, but this is not a situation that avails itself to a quick fix," he said, adding that both producers

and consumers of oil needed to work together to cope with it.

"We call on oil producers everywhere to open up for investment...and then obviously this is about developing alternative sources of energy, new technologies," Paulson said.

Paulson, a devout believer in free markets, turned aside a question about the Mexican government's offering of subsidies for energy users to offset higher prices, by saying he wouldn't comment on an individual country's policies.

"But when we in the U.S., back in the 1970s, used price controls, it didn't work and I do believe the ultimate solution is to get more production and to do some things longer term that are going to lead to greater supply," Paulson said.

The U.S. Treasury chief flew in to the Mexican resort city

late on Monday for a day of talks with top finance ministry officials from 23 countries in the Americas region.

Carstens said the Latin American countries had stable economies but noted they were facing a "difficult" external situation because many developed countries were slowing

Also attending the meeting are leaders from the International Monetary Fund and World Bank, and Carstens said he hoped they would channel more capital to projects in the region that could boost growth and help quell inflation.

Mexico raised interest rates on Friday after inflation surged to its highest in more than three years.

(Reporting by Glenn Somerville and Jason Lange; editing by Carol Bishopric)

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