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Brazil Offers Paraguay a Loan But Not a Better Deal on Electricity

Electricity Paraguayan president Fernando Lugo, who is visiting Brazil, and his counterpart host Brazilian Luiz Inácio Lula da Silva ended Thursday evening, May 7, their first private meeting without any statements or having signed several bilateral agreements, which were ready to be stamped.

Brasí­lia diplomatic sources said conversations "would continue during the official dinner" and a joint press conference has been scheduled for Friday morning before the two leaders leave for Campo Grande where they will inaugurate a tourist train that tours the world famous Pantanal lowlands in the heart of South America.

The meeting lasted for over two and a half hours and the main issue of the bilateral agenda was the differences over the world's largest operational hydroelectric dam and shared by both countries, Itaipu.

Paraguay wants a review of the Itaipu 1973 treaty including prices and distribution of power generated. President Lugo made one of the focal points of his electoral platform.

Paraguay only absorbs 5% of the energy generated by Itaipu and wants a better deal since by contract it must sell the surplus to Brazil at 1973 prices. Brazil recalls that they paid for the huge dam and Paraguay must reimburse its share. The treaty can only be reviewed in 2023 and the whole issue has become highly sensitive for both sides.

Following the meeting at the Itamaraty Palace both leaders were supposed to sign several bilateral agreements for which all was set, the table, documents, pens, but the ceremony was suspended with no reasons given.

Earlier in the day the official Brazilian news agency released an interview with Energy Minister Edison Lobão who said the Brazilian government was willing to loan Paraguay up to US$ 2 billion for financing infrastructure and social programs.

The amount could include up to 500 million USD for the construction of transmission lines between the Itaipu hydroelectric facility and the Paraguayan capital, Asuncion.

Lobão said Brazilian officials were willing to listen to Paraguayan demands but didn't offer any guarantees on debt reductions or electricity rate increases proposed by Paraguay.

"Paraguay currently receives 600 million USD more annually in energy than before Itaipu's construction and has received 4 billion USD in royalties" said Lobão. "Itaipu has been of great benefit for Paraguay and not a detriment."

Mercopress

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