Bolivia and Brazil agree gas deal

Bolivia has reached agreement on a price increase over its natural gas exports to Brazil.

The deal, signed by Brazilian President Luis Inacio Lula da Silva and his Bolivian counterpart Evo Morales, ends months of dispute over the issue.

Under the agreement, Brazil is expected to pay at least $100m more a year for its gas, officials said.

Negotiations began last year, when Mr Morales said an increase in the price would help lift Bolivia out of poverty.

Brazil depends on Bolivia for 50% of its daily gas supply. Last year, it paid nearly $1.3bn for Bolivian gas.

Complex formula

At a ceremony in Brasilia to mark the signing of the agreement, Mr Morales said: "This accord leaves us strengthened and allows us to deepen our democracy."

For his part, President Lula said natural gas was "of fundamental importance" for the integration of the Brazilian and Bolivian economies.

The deal does not actually increase the basic price that Brazil pays for Bolivian natural gas, which is already contained in the contract between the two countries.

However, Bolivia will now be allowed to charge more for individual components of the gas, such as ethane, butane and liquid petroleum gas, according to a complex formula based on calorific content.

Last year, the Bolivian government signed a deal that more than tripled natural gas exports to Argentina at increased prices.

Mr Morales was elected in December 2005, with his promise to nationalise Bolivia's energy industry being a key promise.