(Recasts, adds Lula, detail, more quotes, byline)

By Raymond Colitt

BRASILIA, Dec 18 (Reuters) - Cuban President Raul Castro proposed on Thursday a swap of prisoners with the United States as a goodwill "gesture" to pave the way for talks with incoming U.S. President Barack Obama.

His offer to release political dissidents in exchange for the release of five convicted Cuban spies in U.S. prisons was the most specific proposal yet to ease ties with the United States since Obama, who takes office on Jan. 20, was elected in November.

Castro's comments are likely to fuel growing expectations in Latin America that the Obama administration will help thaw U.S.-Cuba ties that have been frozen since Washington imposed an economic embargo in 1962.

"Let's do gesture for gesture," Castro told reporters during a visit to the Brazilian capital Brasilia.

"These prisoners you talk about -- they want us to let them go? They should tell us tomorrow. We'll send them with their families and everything. Give us back our five heroes. That is a gesture on both parts," he said, referring to the convicted Cuban spies.

On Tuesday, 33 Latin American and Caribbean leaders urged Obama to lift the embargo on the Communist country as soon as he takes office. They also demanded the immediate lifting of measures taken in the past five years by President George W. Bush to toughen the embargo against Cuba, where Fidel Castro seized power in a 1959 revolution.

"It's not Cuba who has to ask for the end of the embargo," said President Luiz Inacio Lula da Silva, who held the news conference with Castro. "There is no more justification for the embargo."