Peruvian president offers hydropower to Brazil as alternative energy source

Water cascading from Peru's Andes mountains toward the Amazon could be harnessed into electricity for power-hungry Brazil, freeing Latin America's largest nation from dependence
on natural gas producers, Peruvian President Alan Garcia said Friday.

Addressing some of Sao Paulo's most influential business and industry executives, Garcia said Brazil and Peru should boost bilateral energy and economic ties even though the two nations are members of separate South American economic blocs.

Without mentioning Bolivia and Venezuela by name, Garcia suggested the far-left governments of both nations represent a threat to Brazil's future economic growth because of their tight state-imposed control over vast natural gas resources that will eventually go dry anyway.

"The gas can run out or they can turn off the tap," Garcia said in a speech to members of the Sao Paulo Federation of Industries. But, he added, "water never stops flowing."

Brazil meets 50 percent of its natural gas needs for power generation from Bolivia, but Bolivian President Evo Morales is nationalizing the industry, pushing for higher prices from Brazil and Bolivian control of natural gas installations owned by Brazil's state-owned oil company.

While Brazil doesn't get any natural gas now from Venezuela, Venezuelan President Hugo Chavez wants to supply Brazil through the construction of a $20 billion peline through the Amazon that experts say could cost much more. Environmentalists also call it a potential
ecological disaster.

Venezuela has South America's largest petroleum and natural gas reserves, while Bolivia is second on the continent for natural gas reserves.

Garcia didn't outline any specific projects, but said it makes economic and political sense for Brazil to think about using Peru to meet some of its long-term energy needs.

With Brazilian investment for new hydroelectric plants near the Andes, Garcia said, "I could light up all of northwestern Brazil and give (the jungle industrial center of) Manaus all the energy it needs, instead of building a strange $20 billion natural gas pipeline."

A Brazilian company is already a key player in the construction of an $810 million paved highway that will link Peru's Pacific coast to Brazil's Amazon, making it logical for Brazil to invest more in Peru, Garcia said.

Garcia also announced that Peru will soon sign a memorandum of understanding with Petroleo Brasileiro SA, Brazil's state petroleum company, for Peruvian oil and gas drilling projects and the construction of a petrochemical plant in Peru.

And in a dig at Bolivia without saying that country's name, Garcia said Petrobras operations in Peru would never suffer a sudden nationalization similar to what happened to the company in Bolivia.

"I extend my hand to Petrobras and give my word that things won't change," Garcia told reporters after his speech.

Peru belongs to the Andean Community of Nations while Brazil is a member of the Mercosur trade bloc. Venezuela recently dropped out of the Andean Community in favor of Mercosur because Chavez opposed trade deals signed by Peru and Colombia with the United States.

Associated Press Writer Stan Lehman contributed from Sao Paulo.