Renegotiating Itaipú Binacional: Paraguay's 6 Points, Brazil's Response

Fernando Lugo's presidential campaign included a pledge to renegotiate Itaipú Binacional with Brazil. Itaipú is the world's largest hydroelectric dam, producing 19% of Brazil's and 95% of Paraguay's electricity needs. Though owned equally by the two countries, Paraguay cedes its unused energy to Brazil and receives about 1/25 of the market price for that electricity. Popular outrage at this relationship has made the issue and the 1973 Itaipú Treaty now a "national cause." Brazil obviously benefits enormously from this situation and has shown itself quite opposed to altering it.

A team of negotiators was appointed by Lugo even before his inauguration as president on August 15, 2008, in order to clarify Paraguay's aims in its negotiations with Brazil. Brazil's president Lula agreed to discuss Paraguay's claims and thus began a series of formal meetings between representatives of the two governments that continues to the present. The Paraguayan negotiating team (Mesa Negociadora) presented Brazil with a list of 6 issues (6 puntos) it seeks to redress.

The 6 Points:
1. Libre Disponibilidad. The freedom for Paraguay to dispose of its half of the energy as it wishes. That means the ability to sell to whatever market it chooses at the price it chooses. Right now, Paraguay may only cede its unused energy to Brazil.

2. Precio Justo. A fair price for the energy. Currently, Brazil compensates Paraguay a little more than $2/mWh for electricity, a price that is anywhere between $40-$50/mWh below the Brazilian market price.

3. Revision de la deuda. Re-examining the debt incurred during construction of the dam. Electrobras, the Brazilian state electricity company, was responsible for financing the construction costs of the dam which are to be shared equally between both countries.

4. Cogestión. Equal administration of the dam, alternation of top positions. Itaipú is run by a team of directors, equal in number from both Paraguay and Brazil. The most powerful positions (technical and finance) have only been Brazilian.

5. Contraloría. Allowing the Paraguayan Comptroller access to audit the books of Itaipú. There has been no auditing ever done on how Paraguay administers its $300 million (annually) half of the agency.

6. Obras faltantes. Completion of pending projects that were stipulated during the negotiations of the 60s and 70s, such as the construction of an electricity substation.

To date, Brazil has agreed to points 4 - 6 and has flatly refused to budge on 1 - 3.

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One Response to Renegotiating Itaipú Binacional: Paraguay's 6 Points, Brazil's Response

Joel Fyke said...

Thanks for another great update. I always look forward to getting your perspective on what's going on.

Crazy running into you at the bar in November; keep up the good work.

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