left government for long hoped that the new generation of socialist leaders in South America would help it emerge as the dominant regional power by challenging US influence. Instead, Brazil's own political and economic interests in South America are being challenged by a wave of economic nationalism in the countries it has courted as allies. Ecuador's threat to default on a Brazilian loan and its earlier expulsion of privately held Brazilian construction firm Odebrecht over a contract dispute sparked widespread concern among Brazil's business leaders and diplomats. “It's very worrying, there's an increasingly negative view of Brazil in several countries,” said Roberto Abdenur, a former Brazilian ambassador to Ecuador. “This idea of a unified, leftist South America was an illusion and Brazil erroneously fomented it.” Paraguay's government is pushing for a debt renegotiation on the jointly owned Itaipu hydroelectric dam on its border with Brazil. Paraguayan peasants have also been protesting against Brazilian farmers, threatening to drive them out of the country. Brazil's state-owned oil giant Petrobras has been strong-armed into contract changes in Ecuador, Bolivia and Venezuela. Petrobras was also forced to sell two refineries at below-market prices after Bolivia nationalized its gas industry in May 2006. Brazilian companies have invested heavily in South America since trade barriers fell with the end of military rule in the region in the 1980s. President Luiz Inacio Lula da Silva, a former union boss once called “my big brother” by Bolivian President Evo Morales, has financed roads and bridges and granted trade concessions to his neighbors in the cause of regional integration since taking office in 2003. Now he is reconsidering. “We need to rethink. If we have to be more cautious, that in itself will slow integration,” Foreign Minister Celso Amorim told Reuters in an interview. Resentment and mistrust As a regional powerhouse with growing global clout and a major foreign investor all over South America, Brazil is often viewed with resentment by its smaller neighbors. Brazil runs a trade surplus of $13 billion in the region, and in the case of Argentina, the imbalance is a frequent source of political tension. Bolivia's total budget roughly equals Petrobras' annual investments. “When Brazil grows too much, it becomes a threat – that's a widespread attitude in the Andes and beyond,” said Jose Flavio Saraiva, professor of international relations at the University of Brasilia. “With such mistrust it's hard to integrate.” Leftist leaders like Morales in Bolivia, Paraguay's Fernando Lugo and Ecuador's Rafael Correa are under pressure to deliver results to the mostly poor supporters who elected them, and imposing tighter control over natural resources is a popular policy. Venezuelan President Hugo Chavez, who often rivals Lula for leadership in the region, helped Bolivia nationalize its gas industry to the detriment of Petrobras and is encouraging Correa and Lugo to challenge Brazil, some analysts say. “We made ourselves more vulnerable by bragging about our leadership ambitions and Chavez exploited this,” said Abdenur. Venezuela hit privately-held construction firm Odebrecht with a $282 million tax bill just after Ecuador expelled the firm over a contract dispute. Lula's government is unlikely to abandon its push for economic integration, which it believes opens doors for its businesses and gives it greater clout in international trade negotiations, but it says its neighbors are making a mistake. “We need to have a mix of patience and resolve,” said Amorim. “I think they may be choosing the wrong target because in the current situation Brazil is one of the few countries that has been trying to help.” Critics say Brazil should be tougher. “We don't need to burn bridges – they're our neighbors – but let's put integration into the freezer until they're ready and do more business in a less volatile region,” said Saraiva.
