MercoPress. South Atlantic News Agency

World's largest dam and energy deal triggers a major political scandal in Paraguay

The scandal was sparked by an energy deal related to the Itaipú dam, shared with Brazil which officials and lawmakers said would be hugely harmful for Paraguay

Paraguay's foreign minister and three other officials resigned on Monday amid a growing scandal over the signing of an energy deal with Brazil, a blow to President Mario Abdo who has forged close ties with Brazil, Latin America's No. 1 economy.

The scandal was sparked by an energy deal related to the giant Itaipu hydroelectric plant that straddles the two countries, which officials and lawmakers said would be hugely harmful for Paraguay and cost the state around US$200 million annually.

The deal was signed in May but was only made public last week.

Paraguay and Brazil are partners in Itaipu, the world's largest operational hydroelectric plant.

“The president has just received the resignations. ... He made the decision to accept these resignations and during the week he will communicate who will replace these people,” presidential adviser Hernán Huttemann told reporters.

Foreign Minister Luis Castiglioni had announced hours before his resignation that Paraguay would ask Brazil to suspend the agreement, which established a schedule for the purchase of energy from the hydroelectric power plant until 2022.

The three others who resigned on Monday are Alcides Jimenez, who had taken over as the head of state power company ANDE just days ago; Hugo Saguier, Paraguay's ambassador to Brazil; and José Alderete, the Paraguayan director of Itaipu.

The previous head of ANDE, Pedro Ferreira, a close collaborator of Paraguay's president, resigned last week after refusing to sign the document for the deal because he said it would increase costs for the state entity by more than US$200 million.

Opposition lawmakers had said the deal went against the country's sovereignty.

Congress on Monday demand an explanation from the government, while ANDE officials demonstrated in front of the legislative building with signs saying: “They will not have peace while violating the constitution.”

Abdo's government, which maintains a close relationship with Brazilian President Jair Bolsonaro, said the decision was finally taken via diplomatic channels after the failure of negotiations between state power technicians.

Paraguay and Brazil are preparing to negotiate Itaipu's future with a key annex to its founding treaty set to expire in 2023, on the fiftieth anniversary of its construction.