President Rafael Correa of Ecuador has ordered troops to seize the assets of a major Brazilian construction company.
The move follows a dispute over the country's second largest dam, which was built by the Odebrecht company but shut down just a year after it was opened.
The government says this was due to construction faults and is demanding large sums in compensation.
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President Correa issued a presidential decree ordering the requisition of Odebrecht's assets and dispatching troops to take over the company's projects.
A national emergency was being declared, the decree said, to recover the operational capacity of the San Francisco hydroelectric dam and to avoid internal unrest as a result of power blackouts across the country.
Odebrecht's assets, amounting to around $800m (Ј431m), include a small regional airport, two hydro-electric plants and a rural irrigation project.
Four officials of the company have been banned from leaving Ecuador.
'Reasonable offers'
Ecuadorian press reports last week had suggested that the parties had reached an agreement on a compensation package amounting to nearly $30m (Ј16.2m).
Odebrecht was reported to have agreed to meet the cost of repairing the faults in the dam, so it is not clear what prompted this latest action, says the BBC's Tim Hirsch in Sao Paulo.
Brazilian Foreign Minister Celso Amorim said he understood the company had made offers to Ecuador which were "reasonable to us, at least at first sight".
Speaking on the sidelines of the UN General Assembly in New York, Mr Amorim said he believed Odebrecht was "a great company" but that Brazil could not "prejudge complaints by the government of Ecuador".
Mr Correa is widely expected to win a referendum on a new constitution under which the president would have greater control of Ecuador's economy.
Mr Correa says the reforms will tackle political instability and make Ecuador a more just society.
But critics say they will focus more power in the president's hands.
(BBC)
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