Anger as Brazil approves Amazon rainforest dam

Brazil awarded a domestic consortium rights yesterday to build the world's third-largest hydroelectric dam in the Amazon rainforest amid criticism that the dam will be catastrophic for the environment.

President Luiz Inacio Lula da Silva is likely to face a prolonged battle over the Belo Monte dam that he has heavily promoted despite opposition from a range of critics, including Hollywood director James Cameron.

Government leaders say the project, due to start producing electricity in 2015, will provide power for Brazil's fast-growing economy, but environmentalists and activists say it will damage a sensitive ecosystem and displace around 20,000 locals.

State power regulator Aneel said a consortium including state electric company Eletrobras and a group of Brazilian construction firms – considered the weaker of the two consortia that participated – won the bid.

News of the outcome was blocked for two hours because of a last-minute injunction trying to halt the project on environmental grounds.

The results are unlikely to affect overall electricity rates in Brazil because most of the energy is already set aside for specific clients, with only a small remainder entering power markets.