Oil Report

UPDATE 1-Brazil and Chile woo Bolivia with joint roadway

(Updates with meeting, details on highway, quotes)

LA PAZ, Dec 16 (Reuters) - Two of Latin America’s moderate leftist leaders, the Brazilian and Chilean presidents, sought to strengthen ties with Bolivia on Sunday by pledging to build a highway linking the Pacific to the Atlantic by 2009.

Diplomatic relations between Chile and its poorer neighbor broke down three decades ago, but the relationship has improved since Chilean President Michelle Bachelet and Bolivia’s more radical leftist leader Evo Morales took office last year.

During his two-day visit, Brazil’s Luiz Inacio Lula da Silva aims to secure supplies of Bolivian natural gas and wrest influence in the Andean nation from Venezuela, diplomats say.

Morales, Bachelet and Lula signed an accord on Sunday to build a highway linking the Atlantic port of Santos in Brazil via Bolivia to the Chilean Pacific ports of Arica and Iquique.

Most of the route is already paved but the countries will invest a further $600 million to complete it by 2009. The project aims to boost trade and cut freight costs.

“This is much more than a highway, it’s a vision for the future of our region,” Bachelet said.

Bachelet’s trip to Bolivia is one of only a few by Chilean leaders in recent decades. The neighbors have been at odds since Bolivia lost its access to the Pacific in a 19th century war, and anti-Chilean sentiment remains strong in Bolivia.

However, Morales said the climate had changed.

“It used to be a bit difficult to be in permanent contact with our neighbor, Chile, but thanks to (President) Bachelet, we’ve established a great trust between two peoples,” he said.

Relations between Bolivia and Brazil were hurt by Morales' nationalization of the energy industry in May 2006. The measure irked Brazil's state-run energy company Petrobras PETR4.SA -- the biggest investor in Bolivian natural gas.

The company froze investments after the nationalization, but during Lula’s visit it will announce a $750 million project to increase gas output, and plans to study joint exploration ventures with Bolivian state energy firm YPFB.

In an interview with Bolivian daily La Prensa, Lula said the project would increase production by about 8 million cubic meters per day within four or five years. Brazil currently imports up to 30 million cubic meters per day.

“The investments will be made in a gradual manner and they do not account for everything that Petrobras could do in Bolivia in the coming years,” he was quoted as saying.

The energy deals were due to be signed on Monday.

Diplomats in Brasilia have said Lula wants to win back Brazil’s influence in Bolivia from Venezuela’s fiery left-wing president, Hugo Chavez, a close Morales ally.

Lula and Chavez have vied for the leadership of South America for years. (With additional reporting by Carlos Quiroga; editing by Todd Eastham)