Brazil Reminds Paraguay that Itaipu Was Built with Brazilian Money

Itaipy hydroelectric plant The president of Brazil, Luiz Inácio Lula da Silva and the Brazilian ministerial cabinet will consider this Wednesday, May 6, a "fair and viable" solution to differences with Paraguay regarding the energy from the world's largest operational hydroelectric dam, Itaipu, announced in Brazilian capital Brasilia Brazil's Foreign minister Celso Amorim.

The meeting will take place in the eve of Paraguayan president Fernando Lugo first official two-day state visit to Brazil beginning Thursday.

"We must keep talking. President Lula is holding a meeting with several ministers and we are going to agree on a common position so that we can find a fair and viable solution to the disagreement with Paraguayan authorities," said Celso Amorim.

Paraguay under President Lugo has been claiming a review of the Itaipu accord, dating back to 1973, which according to contract has Brazil as the only buyer of the Paraguayan surplus power, but at energy prices of 35 years ago. However, Brazil argues Paraguay must pay its share of the construction of the gigantic dam.

Since Lugo took office last August there have been ongoing talks, hoping to honor his electoral promise, but no understanding so far has been reached with Brazil.

A "fair and viable solution means finding a way out which makes Paraguay feel compensated for their natural resources, half of which belongs to them, but that they also acknowledge that Brazil financed and built the dam," said Amorim.

Brazil all along has said it is willing to discuss different compensation mechanisms with Paraguay for the surplus energy (Paraguay only consumes 5% of its share) but is inflexible regarding its denial to review the treaty, which according to statutes can only be addressed in 2023.

In spite of the differences Amorim said he's hopeful of reaching a solution. "It's perfectly possible to find a solution, if we work with common sense and a solidarity spirit. If there are other ideas, we'll talk about them, we'll consider them."

Paraguay insists on an August deadline for an understanding, if not it will request an international arbitrage to the dispute. President Lugo insists Paraguay can obtain much better prices in the power spot market for its surplus, but Brazil alleges it pays a "fair" price given the non reimbursed share of the dam's construction cost.

"We want to consider with Brazil a new agenda, of solidarity integration which can remove the difficulties born out of the asymmetries of the two countries," said Lugo recently in Asuncion and added "our peoples want their legitimate aspirations to come true and become real facts."

The Paraguayan president is also expected to talk with Lula about the construction of two bridges linking both countries and extending the railway system in neighboring Paraná state to the farm areas of Paraguay.

However, President Lugo arrives in Brazil politically weakened by the paternity claims against the former Catholic bishop and growing dissent inside the catch-all coalition that helped him win last year's election, putting an end to sixty years of dominance from the Colorado party, which still controls most of the bureaucracy and the Judicial branch and has a significant presence in Congress.

Mercopress

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