MercoPress. South Atlantic News Agency

Brazil insists on the political angle of the Itaipú agreement

Marco Aurelio: we can’t be an island of prosperity in an ocean of inequality”

The Brazilian presidency advisor in international affairs Marco Aurelio García said that the agreement between Brazil and Paraguay regarding the surplus power from the shared Itaipú hydroelectric dam (operationally the largest in the world) is “most important” and helps to normalize bilateral relations.

García made the statement Monday in Rio do Janeiro adding that the accord signed by presidents Lula da Silva and Fernando Lugo over the weekend in Asunción stabilizes relations “which were undergoing certain deterioration”.

“Our position has always been that it’s not enough with prosperity in Brazil when the neighbouring countries framework is that of economic and social crisis”, said García.

Insisting on the Brazilian official line to justify having admitted to treble payment for the surplus power from the Itaipú Paraguayan share, García argued “we can’t be an island of prosperity in an ocean of social inequality”.

He added that the agreement reached after ten months of intense negotiations at times “extremely sour”, is going to benefit Paraguay and will create no additional charge for the Brazilian consumer.

Under the agreement Brazil will pay for Paraguay’s surplus energy 360 million US dollars against the average 120 million.

Any additional costs will be absorbed by the Treasury and technical solutions are under consideration, which will be announced in the coming sixty days. In 90 days the two presidents are scheduled to meet again to address these issues and asses the overall functioning of the 31 points included in the Sunday release.

The agreement not only will mean 360 million US dollars for Paraguay as of 2010 (compared to the 107 million of 2008), but also contemplates another 450 million US dollars Brazil will provide for a high tension 500 KW line extending from Itaipú to the outskirts of Asunción, approximately 360 kilometres.

García admitted that Paraguay had demanded for more, “but when negotiations you always push and finally reach middle ground”.

Nevertheless the Brazilian presidency advisor said the agreement was well received in Paraguay and helps to stabilize the political situation of that country, “which is good for the whole region”.

Brazilian Planning Minister Paulo Bernardo also confirmed that the Itaipú agreement will not have an impact for Brazilian power consumers because “the bill will be picked up by the Brazilian government”. However he did not reveal further details.

Itaipú generates 14.000 MW and Paraguay consumes only 5% of its 50% share from the dam. The rest is acquired by Brazil, based on a 1973 treaty which can only be reviewed in 2023.

“Lula said that we are one step up in our relation with Paraguay, and that is what matters”, said Bernardo who recalled that Brazil’s policy is to participate and help with infrastructure projects with its neighbours.

However the most influential financial publication from Brazil, “Valor” questioned the “donation” of 450 million US dollars to Paraguay for the construction of high voltage transmission line from Itaipú to Asunción.

“Paraguay will receive free, the gift of a 500 KV transmission line”, was Valor’ main headline in its Sao Paulo Monday edition.

Valor Economico said that “Itaipú international will fund the 450 million US dollars mayor infrastructure project and will later endorse it to the Brazilian treasury”.

The controversy is part of the debate triggered by President Lula da Silva’s administration decision to treble payments for the surplus Paraguayan power agreed over the weekend.

Although the agreement still faces congressional approval, the debate in on as to how much more consumers and companies will have to pay for the additional bill. The debate is critical in Sao Paulo, Brazil’s powerhouse and main consumer of the Itaipú energy.