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Montevideo, September 24th 2018 - 17:34 UTC

Paraguayan Press Blasts 37 Anniversary of Brazilian “Imperial Itaipú Treaty”

Tuesday, April 27th 2010 - 23:09 UTC
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A request from Paraguay to Lula da Silva: “Mr. President gives us what belongs to us” A request from Paraguay to Lula da Silva: “Mr. President gives us what belongs to us”

Paraguay’s president Fernando Lugo said he is looking forward to the coming meeting next May 3 with his Brazilian counterpart Lula da Silva because he would be coming back with “good news” referred to the shared power from Itaipu, the world’s second largest hydroelectric dam belonging to both countries.

“There’s much to celebrate and much to be expected still”, said FernandoLugo.

Since taking office two years ago Lugo has been pressing Brazil for an improved deal on Itaipú power sharing (regarding price, pending debts and free marketing of electricity) and has managed some advances which still require Brazilian congressional approval (in an electoral year that will see the end of Lula da Silva’s eight years).

Lugo’s optimistic announcement tried somehow to shadow the 37th anniversary of the Itaipú project dating back to the seventies and ruled by an “imperial treaty” with values and conditions of the time and with little chance of a contractual review until 2023.

The Paraguayan press was particularly bitter about the anniversary recalling that in 37 years only two events stood out: a joint presidential statement and an only reversal note. “Not much for so many years of asymmetrical benefiting from the great dam”.

Furthermore, the Paraguayan aspiration of selling its 50% share of Itaipú power—currently saddled by contract to the Brazilian market—to third parties at spot market prices remains frozen until 2023.

Paraguay only makes use of 5% of energy from Itaipú; the rest is absorbed by Brazil’s industrial hub of São Paulo, for which the regional giant pays rates dating back to the seventies. The press also indicated that Brazil has hegemony over the crucial Itaipú Financial and Technical Departments and an in depth auditing of the 37 years under different governments and presidents also remains a promise.

According to accounting statements from 1989 to 1995, Paraguay received from Itaipú the equivalent of 4.5 billion US dollars, which works out as follows: 2.9 billion in royalties and 1.2 billion for power effectively sold to Brazil through Eletrobrás (NYSE:EBR); 204 million USD are profits from investment and 228 million USD in compensation for management and supervision.

“On first sight figures are impressive” but to have a real picture of the Brazilian market, the Paraguayan press invites readers to multiply Paraguay’s power surplus of 38 million MW·h by 60 USD (basic wholesale rate of the Brazilian market) and the final account in 2.28 billion USD.

“In other words in only twelve months, at the wholesale basic rate, the Paraguayan power surplus is double the sum paid by Eletrobrás to the true owners of Itaipú for 18 years of power imports”, argues the Asunción press.

The overall construction bill of the huge hydroelectric project is also mostly unknown to Paraguay since “to 31 December 2006, 30.7 billion US dollars were paid but until 2023 another 30.3 billion US dollars have allegedly to be reimbursed.”

In July 2009 Lugo and Lula da Silva signed a joint statement indicating that the sum for the Paraguayan surplus power consumed by Brazil will be trebled, plus the promise of a new grid from Itaipú to the capital Asuncion costing 500 million USD to be funded by the “generosity” of Brazil. So far only 10 million USD have been deposited.

Last but not least, the Paraguayan press recalls that the bilateral diplomatic instrument to implement the accord has yet to be considered by the Brazilian Congress, while strong business lobbies and even Itamaraty, Brazil’s Ministry of External Relations, are campaigning against it. And if it finally reaches the “Brazilian Senate labyrinth” by then the powerful neighbour will have a new government.

The Paraguayan press is particularly furious with a recent speech from Lula da Silva when he said it was Brazil’s duty “to extend a friendly hand” to its poor neighbours (and suppliers of power and natural gas, Paraguay and Bolivia). As the largest Latam economy, Brazil has to help its “brothers” from the region.

“The president of Brazil is wrong: Paraguay does need a friendly hand but rather justice and fairness. Instead of the paltry extra 240 million USD for Paraguayan surplus power from Itaipú, Brazil’s ‘generosity’ should be closer to the legitimate 2 billion USD annually”, reads an editorial from ABC Color.

Financial Tags: EBR, ELET3.

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