Brazil will allow Paraguay to openly sell to Brazilian energy distributing companies its surplus share of the power generated by the Itaipú dam, the largest of its kind in the Americas.
The announcement was made by Foreign Affairs minister Celso Amorim during an interview with a financial publication in Sao Paulo and confirmed by Paraguayan Foreign Affairs minister Hector Lacognata. According to the financial daily Valor, the Brazilian proposal was delivered last week by its delegates to the Paraguayan counterpart at the formal round of negotiations.
Amorim said the issue will be addressed during the bilateral meeting next Saturday, in Asuncion between Brazil’s Lula da Silva and Paraguay’s Fernando Lugo, following the Mercosur summit.
“We can discuss how much energy Paraguay can sell openly (and not tied to the Itaipú contract of the seventies) in the Brazilian market and how the operations will work out”, added the Brazilian official. However there’s a natural concern about “how gradual is the process” since it can’t be agreed from one day to another. “The idea is to implement the process gradually and in compatibility with Brazil’s energy security”.
Selling Itaipú surplus power to other clients than Electrobras is one of the main demands from Paraguay in its negotiations with Brazil regarding the huge hydroelectric dam which both countries share. Itaipú was built in the seventies and Brazil claims Paraguay never finished paying its share of the construction costs. Therefore Brazil continues to absorb, according to contract, the Paraguayan surplus at prices closer to the seventies than currently.
Renegotiation of the Itaipú treaty contract terms has been the main electoral promise of President Lugo’s campaign and was a significant element in his victory. Itaipú generates 14.000 MW, half of which belongs to Paraguay, but since it only absorbs 5% of its share the rest is sold to Electrobras at cost price. The Paraguayan surplus helps supply 10% of Brazilian power energy demand, which makes the whole issue extremely delicate at both ends of the dispute.
Paraguay since Lugo took office has been demanding the right to sell the surplus to other clients, including other countries at market price. Brazil argues this is a violation of the original treaty which can only be reviewed in 2023, on the 50th anniversary of the signing of the document.
However, Minister Amorim said that the possibility for Paraguay of selling its power surplus to the Brazilian domestic market in not contrary to the original treaty.
Carlos Mateo Balmellli, Paraguayan director of Itaipú International said that if the Brazilian press report proves to be correct, “it would open incredible opportunities for Paraguay”. He added energy was a “motorizing” element for the economy and with a great “inclusion component”.
“Soy beans are a great motorizing element which helps Paraguay grow macro-economically but with social exclusion; this is not the case for power, rather the contrary”, added Mateo Balmelli. He also demanded a major effort from Brazil “to stimulate and design a strategic energy policy to increase generation”.
In related news the Paraguayan Senate declared its full support to the Executive in the negotiations on the Itaipú Treaty. “This is a national cause”, said Senator Miguel Carrizosa, president of the Upper House.
“We’ve spoken to all the leaders of the different congressional groups and all of us support negotiations based on the points presented by Paraguay. Let’s hope the Foreign Affairs ministry, our Itaipú representatives and the Executive feel they are well supported next Saturday when they sit to talk with the Brazilians”, said Carrizosa.