Bolivia wins first round of gas battle after Brazil backs down

Evo Morales, the first indigenous Bolivian President, was attacked by some as a "radical" and "populist" this week after he sent in troops to reassert sovereignty over the country's massive natural gas reserves. But leaders of Argentina, Venezuela and Brazil agreed to open talks on new prices for the impoverished Andean nation's natural gas at a summit in the Argentine city of Puerto Iguazo.

Brazil's President Luiz Inacio Lula da Silva suggested the state-owned energy company Petrobras could reverse its earlier decision to freeze investment in Bolivia after the takeover.

"As a company, Petrobras will always invest wherever it sees a chance to obtain a return for its investments," Lula said after meeting with President Morales, Argentine President Nestor Kirchner and Venezuelan President Hugo Chavez.

Petrobras is the company most heavily affected by Bolivia's sudden May Day move and faces the prospect of paying a lot more for the gas that Brazil badly needs.

Mr Morales was elected in December after campaigning on a platform of redistributing wealth in a country rich in natural resources but mired in poverty. A spokesman for the US think-tank, the Council on Hemispheric Affairs, said Mr Morales' move had laid down an important marker for regional governments. "This was not a hollow charade for simple political gain. It reveals a great deal about his likely political future."