Protests over a planned Amazon highway led to a U-turn by the Bolivian president. Reuters

Bolivia's president, Evo Morales, has suspended the construction of a controversial Amazon highway a day after violent clashes between police and protesters.

On Sunday, police used teargas and batons to disperse an estimated 1,000 protesters who were marching to the capital, La Paz, to oppose the construction of a 185-mile (300km) road through Bolivia's Isiboro Sécure National Park and Indigenous Territory (Tipnis).

The march, which began on 15 August, was to highlight the social and environmental costs of the road, which campaigners say would wreak havoc on the wildlife-rich park and its indigenous populations.

The police response triggered widespread criticism, even from within Morales's government. The defence minister, Cecilia Chacon, quit in protest. "This is not the way. We agreed to do things differently," she wrote in her resignation letter.

On Monday night Morales finally gave into pressure and promised a referendum on the road's construction.

"While [we conduct] a national and regional debate, construction of the Tipnis road is suspended," he said, according to Bolivia's La Razón newspaper.

The suspension, which many believe will prove only a temporary reprieve, was nevertheless a U-turn for Bolivia's first indigenous leader, who has repeatedly vowed to push ahead with the project. "Whether they like it or not, we will build that road," he said in June.

Anti-road protests have highlighted tensions between his desire to improve infrastructure and boost investment and his image as a champion of indigenous rights and the environment.

"Our Mother Nature feeds us, gives us drinks and we respect her, we value her, we have to look after her," the country's foreign minister, David Choquehuanca, said earlier this year. "Development – the one implemented by western societies – has generated considerable imbalances between people and regions. It has created a million problems."

The road has also underlined resentment over Brazil's increasing role in the internal affairs of neighbouring countries, where it is financing and executing major and sometimes controversial infrastructure projects, including hydroelectric dams and roads in countries such as Bolivia, Peru and Paraguay.

In June, Peru's government cancelled a concession for a Brazilian company to build the controversial Inambari dam in the Peruvian section of the Amazon.

The Bolivian road was being funded with a $332m (£211m) loan from Brazil's development bank, the BNDES, and built by OAS, one of several Brazilian construction firms that operates across Latin America.

Critics complain that Brazil will be the true beneficiary of the road by allowing it to export products from Pacific ports in Chile and Peru. Bolivia, meanwhile, would be lumbered with debt and forced to deal with the resulting environmental destruction.

"The highway is being built for Brazil so that it can export its products to Bolivia," Ernesto Sanchez, one of the protest leaders told the Guardian. "Here we'd only be left with debts because all the benefits go to Brazil."

Brazilian authorities dismiss such criticism and argue that its growing presence in poorer neighbouring countries is part of mutually beneficial "south-south" co-operation.

On Monday, Brazil's foreign ministry released a statement defending its role in the road's construction. The ministry described the road as a "project of great importance for Bolivia's national integration and one which meets the social and environmental standards outlined in Bolivian legislation".

Kathryn Ledebur of the Andean Information Network, a thinktank, said Brazil was slowly replacing the role traditionally played in Bolivia by the US. "Brazil is rapidly replacing US influence and economic might, but in its own unique, Latin American way," she said. Ledebur said there were positive aspects to Brazil's growing role in Bolivia, pointing to increased co-operation in anti-drug trafficking efforts.

"Unlike the contentious history of impositions and the conditioning relationship with the United States, there is a greater degree of trust and collaboration [between Brazil and Bolivia]," she said.

Bolivia's former president Carlos Mesa painted a different picture.

"Bolivia sees Brazil as an expansionist and imperialist country," he said, according to Brazil's Valor Economico newspaper. "This is in the subconscious of Bolivians."