UNITED NATIONS - Brazilian President Luiz Inacio Lula da Silva said on Wednesday he is ready to sign a trade agreement between the European Union and South America's Mercosur bloc, but that it is now up to the EU to conclude negotiations.

Speaking on the sidelines of the UN General Assembly, Lula said his country was surprising investors and credit rating agencies with stronger than expected growth, and offering new stability now that tax reform has advanced in Congress.

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"If the EU is ready we can sign the trade agreement during the G20 meeting in Brazil," he told reporters, referring to the Group of 20 rich nations summit in Rio de Janeiro in November.

"I have never been so optimistic about the EU-Mercosur accord," the Brazilian leader added.

A European diplomatic source said there had been progress towards resolving differences at a face-to-face meeting of negotiators in Brasilia on Sept 5-6.

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The diplomat said the plan was to close negotiations as soon as the opportunity allowed, but added that there was "still a gap".

Brazilian diplomats have said advances have been made in overcoming differences on environmental safeguards and government procurement that had stalled negotiations.

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Mercosur is comprised of Brazil, Argentina, Uruguay, Paraguay and more recently Bolivia. The bloc is a sought-after destination for EU manufacturing exporters, though European farmers, especially in France, fear the competition it will bring.