Brazil's environmental agency Ibama is rejecting a mega-dam project on the Tapajos river basin, handing a major victory to environmentalists and to the Munduruku indigenous people whose livelihoods and lands would have been harmed.

The 8,000-megawatt Sao Luiz do Tapajos hydroelectric dam would have been the first of 43 dams on the waterway, for which the Brazilian government has big development plans.  This includes transforming the river and some of its tributaries into industrial canals to be used for transporting soya from farms in the interior, which would only be possible by flooding the land that the Munduruku people call the Sawre Muybu. 

But the government's plans ran into strong opposition from the federal attorney's office (Advocacia-Geral da Uniao, or AGU), the indigenous agency (Funai), and the Environmental Agency (Ibama) itself.  Funai moved to protect the indigenous group by recognizing its claim to the Sawre Muybu in April of this year.  The Brazilian constitution forbids such uses of indigenous lands.

Local environmentalists and their allies from groups such as Greenpeace, indigenous groups are welcoming the news.  But it is not being well received by the energy sector, which still must provide power for rapidly growing megacities on the East Coast - and that could be expensive.  "To do without Sao Luiz do Tapajos necessarily implies finding other sources of supply, with different costs," said Luiz Barreto, president of EPE, Brazil's Energy Research Company.

The rejected dam would have been the country's second largest hydroelectric power station - after the controversial Belo Monte dam, which became operational earlier this year.  The federal government pushed that project through using special power left over from the past military government.  It could do so again with the Tapajos basin scheme - meaning that despite the Ibama ruling, concerns over the future of the Tapajos river basin are likely far from over.