The Indians appear to have won the dispute - for now

Up to 3,000 Guarani and Kaiowa Indians had invaded 14 ranches in the state of Mato Grosso do Sul in recent weeks.

Violence had been feared after they ignored a judicial eviction order, but an agreement was reached on Saturday.

The Indians will retain a presence on three of the farms, while the government completes steps to declare the whole area a reservation.

However, the agreement is said to have angered farmers, who stand to lose the land, and will only be able to claim compensation for "improvements" which have been made upon it.

Threat remains

The Indians began leaving the occupied farms late Monday, reports said.

But some are staying on three farms and - according to a Brazilian newspaper - are intending to implement restrictions on who may enter the others.

An indigenous leader called Avatucamby who spoke to Folha de Sao Paulo said only four farm workers would be allowed to return to each farm to perform basic maintenance.

Pedro Fernandes Neto, the owner of Sao Jorge - one of the farms where the Indians intend to stay - demanded the full evacuation of his farm.

He said farmers accompanied by supporters would go there on Saturday to retake the land by force.

'Good faith'

The Brazilian Government has bowed to the Indians' demands that the 90 square kilometres (35 square miles) of land be demarcated as an Indian reserve.

Anthropologists have agreed that the lands did belong to the two tribes before they were appropriated by settlers.

The tribes now only inhabit about 1% of the state where they roamed freely until the 1940s.

The farmers counter that they bought the land long after its appropriation, and in good faith.