Arriving in Costa Rica after visiting Mexico, Obama sought to turn the spotlight on trade ties but the drug war was at the center of his talks with the seven leaders of Central America, plus the Dominican Republic.
"The important thing that I have tried to emphasize throughout is that this is a common problem, this is one where we will only solve it when we are working together. It has adverse effects in all our countries," he told a news conference alongside Costa Rican President Laura Chinchilla.
"But ... I think its' very important to make sure that our bilateral relationship and the United States relationship with the region as a whole is not solely defined by this problem, because when it is we're missing all the opportunities that exist out there," he said.
Obama had struck similar themes during his 24-hour trip in Mexico, highlighting the huge US-Mexican trade ties, vowing to push for immigration reform dear to Latinos and maintain the cooperation against drug cartels.
With the cartels wreaking havoc in their nations and turning the region into a hub for US-bound cocaine, Central American leaders wanted to discuss ways to improve the battle against narco-trafficking.
"The United States recognizes that we've got responsibilities, that much of the violence in the region is fueled by demand for illegal drugs, including in the United States," Obama said, adding that US demand was going down but that more progress was needed.
The United States has provided $500 million in security aid to Central America since 2008, but the murder rate has soared to 40 homicides per 100,000 inhabitants in the region, five times the world average.
The US military has sent ships to the Pacific and Caribbean to intercept drugs, deployed 200 Marines in Guatemala and shared radar intelligence with Honduras. But top US generals warned that budget cuts could hamper the mission.
Obama, however, said he was "not interested in militarizing the struggle against drug trafficking" and that part of the solution was through effective law enforcement and coordination.
But the US leader said human and economic development must also be part of the strategy to combat drugs and gangs.
"Now, even if a country is doing well, the scourge of drugs and drug trafficking will still be there, and there still needs to be a strong law enforcement component. But we can do better than we are currently doing," he said.
Chinchilla, whose nation does not have an army, said organized crime must be fought through a more "comprehensive and diverse approach" and "not just the instruments of war."
Nicaraguan President Daniel Ortega said: "It is clear that the fundamental issue of interest to all Central Americans is combating poverty. And this creates better conditions to combat drug trafficking."
Guatemalan President Otto Perez, whose idea of legalizing drugs is opposed by Central American partners, said he would insist on finding "other alternatives" to combat trafficking. Before arriving in Costa Rica, Obama reiterated his opposition to legalization.
Thousands of people greeted the US leader as his motorcade rolled across the capital, which was under tight security with many shops, schools and government offices shuttered. His three-day trip ends Saturday.
Before landing in San Jose, Obama addressed a young audience in Mexico City's Museum of Anthropology, saying a "new Mexico is emerging" and calling for an end to stereotypes that only see Mexican violence and illegal border crossings.
Turning to a US domestic issue dear to Mexicans, Obama said he was "absolutely convinced" the US Congress would pass immigration reform to bring 11 million undocumented workers -- a majority of them Mexicans -- out of the shadows.
With more than 70,000 people dead so far in the battle between Mexican drug cartels, Obama acknowledged that US demand for illegal drugs and US guns smuggled across the border were much to blame for the violence.
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