Mozambique and Portugal Monday agreed to start negotiations over the control of the Portuguese-dominated giant Cahora Bassa hydro-electric dam in the Zambezi Valley in central Mozambique.

"We will start negotiating with the aim of finding a technical and financial solution acceptable to both our countries," visiting Portuguese Prime Minister Durao Barroso told reporters after a meeting with Mozambican President Joaquim Chissano.

Barroso said the proposed transfer of the controlling stake in the dam company HCB (Hidroelectrica de Cahora Bassa) into the hands of the Mozambican government was "a very complex issue" since the project was conceived under two different government regimes.

Portugal recently agreed to cede control of the dam after a guarantee that Mozambique would pay HCB's debt to the Portuguese treasury. The dam holding company owes Portugal some 2.3 billion dollars (1.9 billion euros) related to the construction of the project.

The 2,000 megawatt-dam in the central province of Tete was built in the 1960s and '70s when the country was still under Portuguese colonial control with the aim of exporting power to neighbouring South Africa.

Roughly 60 percent of the power currently produced by the dam is sold to South Africa's power authority Escom.

Portugal holds an 82 percent stake in HCB, while Mozambique holds the remaining 18 percent.

Barroso, accompanied by eight ministers and representatives from 60 leading Portuguese firms, arrived in the southern African state Sunday for a three-day visit at the invitation of Chissano.

After Monday's meeting at the president's office, the two sides agreed on the need to boost political, economic and cultural ties.

Under a new cooperation agreement signed after the talks, Portugal, the fourth largest investor in Mozambique after South Africa, Mauritius and the United Kingdom, would also assist its former colony in the areas of health and education - Sapa-AFP.