Bolivia assures Brazil gas in wider reconciliation

By Raymond Colitt

BRASILIA, Jan 21 (Reuters) - Bolivia will honor gas supply contracts with Brazil, respect private property and not expel illegal immigrants as part of a broader reconciliation with its neighbor, Bolivia's ambassador said on Monday.

Following Brazil's pledges last month to invest around $1.5 billion in new gas production, roads, and farming assistance in the land-locked Andean nation, relations between the countries have improved substantially, Mauricio Dorfler, Bolivia's ambassador to Brazil, told a news conference.

"Obviously in recent months, the relationship between Brazil and Bolivia has become much more positive," Dorfler said in the capital Brasilia. "These new investments mark a relaunch."

Tough negotiations with Brazil's state oil giant Petrobras (PETR4.SA), the largest foreign investor in Bolivia, had strained ties between Latin America's largest economy and one of the hemisphere's poorest nations.

After the May 2006 nationalization of its gas industry, of which Brazil is the largest customer, Bolivia received aid fromVenezuela and Cuba, including major health and education programs.

Dorfler said Bolivia would comply with its contractual obligation in supplying Brazil with gas through the pipeline that links the countries.

"There is no supply risk for Brazil of Bolivian gas; the contract is entirely guaranteed," Dorfler said.

Bolivian authorities have said that domestic consumption could take priority over gas exports. In September it stopped supplying a gas-fired power plant in western Brazil. Dorfler said there was no contractual obligation to supply the plant.

Bolivian Energy Minister Carlos Villegas and Vice President Alvaro Garcia will travel to Brasilia in coming weeks to discuss energy matters and joint infrastructure projects with their Brazilian counterparts, Dorfler said.

Bolivia would also seek a negotiated solution to Brazilian farmers who illegally live in a 30-mile (50 km) security zone along the border and fear expulsion.

"The situation of vulnerability of these Brazilians needs to be addressed," said Dorfler.

The ambassador stressed that Bolivia's new constitution, which will be put to a referendum in coming months, fully guaranteed private property.

"We are aware of the importance of foreign investment and there is no doubt that the government will respect private property," he said.

(Editing by Vicki Allen)