Brazil's proposals regarding the non renegotiation of the Itaipu treaty was rejected by the Paraguayan government. The accordÂ regulates energy production from South America's largest hydroelectric dam shared by the neighboring countries.
"We don't accept (Brazil's proposals) because they are not up to our expectations," said Paraguayan Foreign Affairs minister Alejandro Hamed Franco who anticipated a long negotiation process "comparable to that over the Panama Canal."
Brazilian ambassador Eduardo dos Santos was officially informed of Paraguay's decision earlier this week, added the Paraguayan official.
Brazil is contrary to a renegotiation of the Itaipu treaty dating back to April 1973, "when both countries were ruled by military dictatorships," and in exchange for Paraguay dropping the claim has promised infrastructure investment and credits.
However Paraguay insists in a "fair price" for the electricity generated by Itaipu and the free disposal of non consumed energy, which under current circumstances can only be sold to Brazil at "derisive prices."
Paraguay argues it only receives US$ 100 million annually from Itaipu (plus royalties and other compensations) for electricity sold at a rate of US$ 2.7 per Megawatt/hour when the international prices is in the range of US$ 60.
According to Paraguayan sources, Itamaraty (Brazil's Foreign Office) sent a high ranking official to Asunción, Samuel Pinheiro Guimarães, to try and persuade the administration of President Fernando Lugo not to insist with its claims of a "fair price" and free disposal of the Paraguayan share on non consumed energy.
Brazil absorbs 95% of the electricity generated at Itaipu since Paraguay only takes 5%, making the country one of the few in the world with an energy surplus.
Paraguayan sources said the Brazilian official failed to convince and the package he brought included promises of a high tension transmission line from Itaipu to the capital Asunción; construction of a second bridge over the mighty Paraná River plus the maintenance of the Friendship Bridge linking Ciudad del Este and Foz de Iguaçu.
Apparently Brazil also offered to plan and build an international bridge over the Paraguay river linking Puerto Murtinho and Carmelo Peralta.
However Minister Hamed Franco said Paraguay will continue to negotiate and compared the issue to the Panama Canal dispute between Panama and the United States, "which lasted thirteen years and we have been only been in negotiations for six months."