Brazil awards a domestic consortium the massive Belo Monte Amazon dam amid protests from environmental and indigenous rights activists Reuters

Indigenous leaders in Brazil are warning of imminent violence after a successful tender for the rights to construct a giant hydro-electric plant in the Brazilian Amazon which opponents claim will wreak havoc on the rainforest and its inhabitants.

The tender for the Belo Monte dam, on the Xingu river in the state of Pará, was won by a consortium of Brazilian companies on Tuesday, taking the government one step closer towards the construction of the £7bn dam, which would reputedly be the third biggest of its kind, with the capacity to produce some 11,000MW of power.

One Brazilian minister told reporters that the president, Luiz Inácio Lula da Silva, was pleased with the result. But environmentalists, indigenous leaders and their supporters, including Avatar's director, James Cameron, who has made two recent visits to the region, have vowed to fight to prevent construction.

The Kayapó leader Raoni Metuktire, who gained international exposure in the 1980s and 1990s touring the world with Sting, said indigenous men from the Xingu were preparing their bows and arrows in order to fight off the dam.

"I think that today the war is about to start once more and the Indians will be forced to kill the white men again so they leave our lands alone," he said. "I think the white man wants too much, our water, our land. There will be a war so the white man cannot interfere in our lands again."

Luis Xipaya, another of the region's indigenous leaders, told Reuters: "There will be bloodshed and the government will be responsible for that."

Plans to build a towering hydro-electric dam on the Xingu were conceived in the 1970s but have repeatedly stalled, partly as a result of international pressure. However, renewed attempts to push ahead with the dam, part of a massive government drive to boost economic growth, have revived fears for thousands of indigenous people who live in the region.

"I do not accept the Belo Monte dam," said the indigenous leader Mokuka Kayapó, who claimed the indigenous way of life would be destroyed. "The forest is our butcher. The river, with its fish, is our market. This is how we survive."

Many residents of Altamira, a sleepy Amazonian city on the banks of the Xingu near the site of the planned dam, also fear social chaos with the influx of thousands of impoverished workers.

Antonia Melo, a local human rights activist from the Xingu Para Sempre movement, described the dam as a human rights violation. "We will all be affected by over 100,000 people who will arrive in the region as a result of Belo Monte. There will be violence, a lack of food, of sewage, of health services," she warned.

Local newspapers report that immigrants have already started arriving in the region from as far away as Rio de Janeiro and Brazil's deep south in search of business opportunities and work.

Not all Brazilians oppose the dam. Many argue that Belo Monte will create jobs as well as electricity, while one major newspaper suggested that the plant would help attract foreign tourists to the region.

"I'm in favour of it and if the government does what it promises, giving us new homes, people will have more opportunities. It will be good for us because the city will develop more," Claudionor Alves de Oliveira, an Altamira carpenter, told the G1 news site.

On Tuesday activists from Greenpeace dumped several tonnes of manure outside the National Electric Energy Agency in Brasilia, where the bidding took place.

Sheila Juruna, an indigenous activist leading the anti-Belo Monte campaign, contrasted Brazil's attempts to restore order in Haiti, through its UN stabilisation force, with its treatment of the country's indigenous peoples. "Our government is helping other countries where disasters are happening. But here in Brazil they are destroying us," she said.

Speaking in Brazil last week, James Cameron called the dam an ecological disaster and said there were alternatives.