Evo Morales, the Bolivian president, has said he was rescinding the contract awarded to Brazil's OAS to build a road through the Amazon forest, casting further doubt on a project that unleashed fierce anti-government protests last year.

Morales announced the decision to "annul" the contract on Wednesday, seeking to ease tensions over the $420m project that sparked strong opposition from within the president's indigenous support base.

"We've started a process to annul the road construction contract, which was granted to OAS, because the company hasn't complied [with the terms]," he said, adding that the company had suspended work "without justification or authorisation."

Morales partially halted work on the most controversial stretch of the road in September.

Morales suspended work on the most controversial
stretch of the road in September 

The Andean nation's first president of indigenous descent said the decision would affect the two stretches of road at either end of the route.

The contract for the middle section - which passes through the Isiboro Secure indigenous territory and national park (TIPNIS) - lapsed last year after work was halted there, Morales said.

He did not say whether OAS would be compensated or how the road's construction might continue. OAS declined to comment.

BNDES, Brazil's state development bank, was due to fund about 80 per cent of the project, which has been at the centre of Bolivian politics for nearly a year.

Morales, a close ally of Venezuelan President Hugo Chavez, has put the road scheme at the heart of his efforts to boost infrastructure investment.

But mass protests against road-building in the TIPNIS area have complicated his development push and raised questions about his commitment to indigenous rights and protecting the environment.

Source: Agencies