Bolivia passes Jindal iron ore contract law

File photo shows Bolivian President Evo Morales (L) holding the contract with Jindal Steel & Power as Jindal Chief Executive Vikrant Gujral (R) and Bolivian Mining minister Luis Echazu celebrate in Santa Cruz, July 18, 2007. REUTERS/Carlos Hugo Vaca/F

PUERTO SUAREZ, Bolivia (Reuters) - Bolivian President Evo Morales signed into law on Friday a contract for India's Jindal Steel and Power Ltd to develop a large iron ore deposit and make steel in a $2.1 billion project.

The law's approval had been delayed by weeks of squabbling between the ruling party and the rightist opposition, but was finally signed by Morales at a ceremony in the eastern city of Puerto Suarez, which lies near the El Mutun site.

Morales told residents and local officials gathered in the city's main square the passing of the law was "a victory by the people." The project represents the biggest single foreign investment in the poor South American country.

Morales said work on the project would be able to start once legal formalities had been completed.

The 40-year contract gives Jindal the right to mine approximately half the area of El Mutun, which lies near the border with Brazil some 1,240 miles (2,000 km) southeast of La Paz.

The site is estimated to contain iron ore reserves of more than 40 billion tonnes, though they are said to be of medium-grade quality. In comparison, proven reserves in ore-rich Carajas in Brazil's northern state of Para total 1.5 billion tonnes.

As part of the project, Jindal has vowed to develop an integrated steel plant with an annual capacity of 1.5 million tonnes, which would start up by 2010.

Jindal and Bolivia will share the profits generated by the project, which officials have said would guarantee about $200 million per year in taxes and profits for the impoverished Bolivian state.