In the next six weeks, Bolivia’s government is expected to approve a $2.3bn bid by Jindal Steel and Power of India to extract one of the world’s largest untapped iron ore deposits.

It is the most significant example of a country with no record of financial involvement with Bolivia suddenly voicing interest to invest – at a time when relations with traditional investors such as Petrobras of Brazil and Repsol of Spain are close to breaking point. It highlights the extent to which the quest for natural resources is trumping other considerations.

Since Evo Morales, the radical leftwing president, announced in May he would nationalise the gas sector – the second largest in the region – Bolivia’s reputation with international investors has suffered. But now the country is attracting expressions of interest not just from India but also from Russia and Australia.

Jindal signed a memorandum of understanding with Bolivia last month and is negotiating the technical specifications of its development plan.

“This is the first big Indian investment in Latin America,” said Riewad Warjri, India’s ambassador to Bolivia and Peru. “It has opened the eyes of Indian companies to the potential for profitable investment in the region.”

Arvind Sharma, an Indian businessman who lives in Santa Cruz and who, as Delhi’s honorary consul, has been closely involved in the Jindal bid said: “Bolivia is being seen as the potential hub for Asian investment and production in South America. It has great natural resources but it lacks the expertise. It also has a good central location – and land and labour are cheap.”

Although publicly Mr Morales has stressed that mining is the next target of his nationalisation plan, foreign investors in the sector say they have been given private assurances over their projects.

Juan Cabrera, a former head of Comibol, the state mining company, expects the government’s forthcoming mining policy to raise taxes moderately and demand a small public stake in private mining operations of 3-4 per cent.

Mr Cabrera says high metal prices have prompted great interest in mining Bolivia’s large resources.

He said: “The sector is dominated by low-tech co-operatives that cannot exploit the low-grade deposits we have here. Also, there are many mines owned by Comibol that haven’t been in operation since the collapse of the tin industry in 1985.”

Mr Cabrera is now advising Republic Gold, the first Australian investor in Bolivia. Republic’s $26m Amayapampa gold mine, in the southern high Andes, is expected to start production next year.

It is not just mining that is attracting investment from non-traditional sources. Gazprom, the Russian state energy company, announced last month it was considering investing up to $2bn in Bolivia’s gas sector.

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