Bolivian President Evo Morales and a military honor guard received Mahmoud Ahmadinejad at the airport, and a small band of Bolivian Muslims hailed the two as they arrived together at the presidential palace

"Evo, Mahmoud, one heart," they cheered.

The Iranian president's strained relations with Washington are shared by Bolivia's first indigenous president, who expelled the U.S. ambassador last year. Ahmadinejad previously visited in September 2007 as part of his effort to expand commercial and diplomatic ties in South America.

He travels next to Venezuela, where President Hugo Chavez has been a close ally in the face of international isolation over Iran's nuclear program.

During Ahmadinejad's trip to Brazil on Monday, President Luiz Inacio Lula da Silva urged Western nations to drop threats of punishment and instead negotiate a fair solution with Iran.

Silva also said Iran should negotiate with the West to find a "just and balanced" solution to concerns over its nuclear program.

Ahmadinejad made no promises and has repeatedly denied allegations by Washington and its European allies that Iran is trying to build atomic weapons.

After lunching with Morales, Ahmadinejad inaugurated a hospital and two milk-processing plants in other parts of the country by video conference from the capital, La Paz.

Tehran donated funding for the seven-story Red Crescent hospital in the indigenous city of El Alto and pasteurizing equipment for the plants in the coca-growing Chapare region and the high plain near Lake Titicaca.

Iran has also given equipment for a state-run TV station, sold Bolivia 700 tractors made in Venezuela and provided financing for a state-run cement plant.