MercoPress. South Atlantic News Agency

Chile helps Paraguay crack neighbours' “energy siege”

Energy rich Paraguay and Chile reached an agreement for the supply of electricity which will transmitted through Argentine territory and at “a considerable higher value than that paid by Brazil”.

The agreement was reached this week in the framework of the current Latinamerica and Caribbean leaders' summit in northeast Brazil, following a round of meetings Tuesday evening between Paraguay's Fernando Lugo, Chile's Michelle Bachelet and Argentina's Cristina Fernandez de Kirchner. The energy, 200 MW will be supplied from the Acaray dam in the Parana basin, jointly managed by Brazil and Paraguay, and Argentina will charge a toll for transmission. According to Paraguayan sources the deal represents 80 million US dollars for Paraguay, and is far more than the 3 million US dollars Brazil pays for a similar energy supply from the giant Itaipu dam surplus. "This is a significant breakthrough for Paraguay", said Ricardo Canese who leads the negotiation team that is trying to convince Brazil and Argentina to review the Itaipu and Yacireta dams energy contracts, dating back several decades, and which tie any surplus production to fixed prices and an only client, Paraguay's associates. Latinamerica's largest dam Itaipu, shared by Brazil and Paraguay is ruled by an agreement which splits in two halves electricity generated and any surplus can only be sold at cost price to the partner. Since Paraguay only consumes 5% of its share the rest is absorbed by Brazil at ridiculous low cost prices, which also helps to supply cheap energy to the Brazilian industrial hub of Sao Paulo. According to Canese Paraguay and Brazil are currently holding talks to review the contract of the jointly managed huge dam which cost over 20 billion US dollars to build in the late seventies early eighties. Apparently Presidents Lula da Silva and Lugo will address the issue in a private meeting at the end of the regional summit. Paraguay is one of the few countries in Latinamerica with surplus energy and one of the world's largest electricity net exporters. The country's Hydropower comprises nearly 100 % of electricity with 90% of generated energy exported to neighboring Argentina and Brazil. More over residential hydroelectricity tariffs are remarkably below the averages for the region, but despite the abundance of resources, the Paraguayan electricity system faces a difficulty due to the lack of investment in transmission and distribution networks. In addition, distribution losses are among the highest in the region. The two bi-national hydroelectric dams: Itaipu is operated with Brazil and has an installed capacity of 7000 MW. Yaciretá, the second largest hydroelectric facility, has an installed capacity of 900 MW and is operated with Argentina. A third plant, Acaray has an installed capacity of 210 MW.