Brazil's state-owned oil firm is taking advantage of the turmoil sweeping through neighbouring Argentina to make a commanding move into the power market there.

In a deal worth $1.13bn (�716m), its largest ever foreign adventure, Petrobras is taking a controlling 58.6% stake in Argentina's number one energy firm Perez Companc.

Argentina's economy has been in pieces after defaulting on its debts in December, with the peso spiralling lower against the dollar and unemployment shooting skyward.

Perez is widely seen as one of the best-run companies in the country, and its purchase almost wipes clean the roster of locally-controlled major corporations.

Beggar your neighbour

For Petrobras, the advantages are greater capacity and the chance to buy access to a major neighbouring market at rock-bottom rates.

"We believe that for a Brazilian company that wants to grow internationally, such as ourselves, Argentina has to be the first stop, particularly at a moment of crisis and opportunity like this one," Petrobras president Francisco Gros told a conference call.

The combined company would have sales of $23bn, he said, with an extra 1 billion barrels to add to its existing 10.6 billion barrel reserve and a chain of service stations across Argentina.

Perez' interests in Venezuela, Peru, Bolivia and Ecuador - as well as those in Brazil itself - will also come under Petrobras' control.

Tough market

But buying into an economic basket case like Argentina is risky, analysts said.

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"My impression is that long-term the deal is neutral for Petrobras," said Edmo Chagas, an analyst at UBS Warburg's Rio de Janeiro office.

"But short term I believe it is negative, because it adds concerns on Petrobras' exposure to riskier countries."

That certainly had influenced the decision of the Perez Companc family, whose shares Petrobras agreed to buy through its "unexpected" offer.

"It's a disinflated economy that has suffered for many years," a spokesman said. "That certainly had something to do with this decision."

Rocky road

And Brazil itself is hardly a haven of economic peace.

With left-of-centre candidates leading the pack in this year's presidential elections, big investors have become jittery about the prospects for Brazil's near-$300bn foreign debt.

The real, Brazil's currency, is at record lows, and the main leftist party - the Workers' Party of Luiz Inacio "Lula" da Silva, who leads the polls at the moment - is planning a roadshow to reassure investors in the US.