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BRAZIL: December 21, 2007

BRASILIA - Brazil's Supreme Court ruled on Wednesday that the government could restart construction of an irrigation project that has a Catholic bishop on a three-week hunger strike.

The opposition to the project was a setback for President Luiz Inacio Lula da Silva, the main defender of the venture, and could renew investors' concern about regulatory uncertainty surrounding infrastructure projects.
Brazil's largest public works venture aims to pump water from the Sao Francisco River through 435 miles (700 km) of canals to people and farms in the arid and poor northeast, where Lula was born.

The Supreme Court overruled a federal judge who last week questioned the government's authority for land and water use and ordered construction to halt. The court also rejected challenges to the project's environmental permit.

Bishop Luiz Cappio began a hunger strike on Nov. 27 to protest the project, which he and other critics say is too expensive and would benefit wealthy landowners more than poor peasants. Environmentalists fear reducing the river's level could affect navigability, fish migration and biodiversity.

The government has been trying to negotiate the end of Cappio's hunger strike by offering time for more public debate on the project. Lula also asked the Vatican to intermediate. (Reporting by Raymond Colitt; Edited by Elzio Barreto)