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Brazil’s president offered Bolivia an olive branch on Thursday after relations between the South American neighbours reached crisis-point over La Paz’s plans to nationalise its gas sector.

Luiz Inácio Lula da Silva called on Evo Morales, the Bolivian leader, to meet him personally to resolve the dispute. On Globo Television’s Good Morning Brazil, Mr Lula da Silva publicly invited Mr Morales to Brazil to negotiate on gas or said he would “go to Bolivia to find a solution for the issue”.

The appeal from a regional leader traditionally seen as a strong ally of Mr Morales suggests that the Brazilian president is keen to calm the issue as it threatens to become a serious theme in his campaign to win
re-election on October 1.

Critics had called on the president to take a hard line on the threats to Brazilian investment, and Mr Lula da Silva joked last week that the only thing that would satisfy his opponents would be to declare war on Bolivia.

Bolivia-Brazil ties have been deteriorating since May, when the Morales administration declared its intention to nationalise the gas sector, the second biggest in Latin America.

But relations hit a low point last week when La Paz issued a decree transferring control of refining and the sale of oil and gas derivatives in Bolivia from Petrobras, the Brazilian state-owned company that is the biggest foreign investor, to YPFB, Bolivia’s state energy group.

Reaction in Brazil was furious. Petrobras said the decree would make its refinery operations in Bolivia “completely unfeasible” and threatened to take the Morales government to international arbitration, the first time the Brazilian energy giant had echoed a threat issued by most foreign investors in the gas sector.

Celso Amorim, Brazil’s foreign minister, said Petrobras would try to pull out of Bolivia if the decree were implemented and Mr Lula da Silva was said to be angered by Bolivia’s “unilateral decisions”.

The Morales administration quickly made a U-turn. The decree was suspended and Andrés Solíz, the Bolivian hydrocarbons minister who issued it, was sacked. The reversal was apparently enough to soothe Brasília.

Copyright The Financial Times Limited 2017. All rights reserved.
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