The Itaipu Plant controversy

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It all started last Sunday (April 20th), after Fernando Lugo was elected president of Paraguay – his inauguration is scheduled for August 15th. The flagship of his campaign was the adjustment of the price that Brazil pays for energy generated in his country. For this to be possible, however, the treaty signed in 1973 by Paraguay and Brazil would have to be renegotiated.

Brazil has already made it clear that the treaty will not be Special Data renegotiated under any circumstances, but the Minister of Foreign Affairs, Celso Amorim, said that the amount paid to Paraguay for the plant's surplus energy may be readjusted. The treaty provides that the surplus energy of one of the partners can be sold to the other at cost price.

This same treaty also provides that the energy produced by the plant will be divided equally between Brazil and Paraguay. As the latter only uses 5% of this energy, the excess 45% is sold to Brazil at cost price. However, of the US$45.31 paid per megawatt to Paraguay, US$42.5 is intended to pay the debt that the country owes for the construction of the plant. The treaty is valid until 2023, when Paraguay's debt matures and its terms can finally be renegotiated.



Lugo insists that the price paid for surplus energy must be the market price and not the cost price. Currently, Paraguay's annual income from the plant is US$350 million and the president defends a price between US$1.5 billion and US$2 billion. The biggest problem is that the price, fixed in dollars, has lost its value and the country has experienced great difficulties, arising from a previous government that remained in power for 61 years.

Brazil does not find this proposal interesting because those who will pay for this increase are Brazilian workers. The Minister of Mines and Energy, Edison Lobão, stated that the country can help Paraguay build a new transmission line from the plant to the capital, Asunción. The biggest problem with this political “confrontation” is that the good relationship between the countries could be strained.

And you? How do you think this impasse should be resolved? Don't forget to give your opinion.