MercoPress. South Atlantic News Agency

Lula and Peña agree to accelerate Itaipú treaty review

Annex C stipulates that both countries are entitled to 50% of the energy generated, but requires whichever party does not use its full share to sell the surplus to the other at preferential rates

The presidents of Brazil, Luiz Inácio Lula da Silva, and Paraguay, Santiago Peña, agreed on Sunday in Campo Grande to intensify negotiations over Annex C of the Itaipú treaty, the instrument that governs the financial terms and energy sales of the binational hydroelectric dam, one of the largest in the world.

Lula said in a statement that the two leaders decided to conclude the Annex C review “quickly.” Peña, for his part, said they discussed a “political vision” for Itaipú geared toward economic growth in both countries. “We analysed the details regarding the price of energy and its impact on the development of our nations in the short and long term,” the Paraguayan president said.

The bilateral meeting, held at the Campo Grande Convention Centre on the sidelines of the COP15 conference on migratory species, followed a four-hour session between foreign ministers Rubén Ramírez and Mauro Vieira held the previous Thursday in Asunción. On that occasion, the Paraguayan chancellor said negotiations pointed toward an agreement “in the short term,” as reported by EFE.

Annex C stipulates that both countries are entitled to 50% of the energy generated by Itaipú, but requires whichever party does not use its full share to sell the surplus to the other at preferential rates. Paraguay, which consumes only a fraction of its allotment, has long demanded the right to sell its surplus freely on the Brazilian market, including the unregulated segment. Brazil has maintained that the tariff should be limited to the dam's operating costs.

In May 2024, the two governments raised the tariff paid by Brazil to $19.28 per kilowatt/month, up from $16.71 in 2023. Peña has voiced opposition to any tariff reduction, arguing there is a “historical debt” owed to Paraguay. The negotiations, which should have been completed after the treaty's 50th anniversary in August 2023, stalled in April 2024 when Paraguay suspended talks after Brazil acknowledged an intelligence operation targeting Paraguayan officials.

Beyond energy, the two leaders discussed the international geopolitical situation and the importance of Mercosur. Peña said they addressed Venezuela and “the interest in collaborating on the reconstruction of democracy” in that country. Both presidents also exchanged invitations for state visits, with dates still to be set.

The Itaipú dam, with an installed capacity of 14,000 megawatts and 20 generating units, covers roughly 86% of Paraguay's electricity demand and 9% of Brazil's. Its regulatory future carries implications that extend beyond the energy sector and shape economic integration across the Southern Cone.