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Brazil Industry Enters Brazil-Uruguay Dispute over Itaipu Hydroelectric Plant

Itaipu plant At the heart of a debate this Wednesday, May 27, between Brazil's main industrial organization, FIESP, and Paraguayan authorities will be Itaipu, the world's largest operational hydroelectric dam and how the energy produced there should be distributed and traded. Brazil and Paraguay share the giant power station.

Paraguay is claiming, particularly since the new government of President Fernando Lugo took office last year, that the country's power surplus share should be sold in the Brazilian open energy market, instead of being totally absorbed by the Brazilian government at prices dating back to the seventies when the dam was built.

"Paraguay has a sovereign right to sell its surplus to Brazil. This aspiration is supported by the standing electricity integration policy between Brazil and Paraguay, with which Paraguay's two main claims could be addressed: to dispose of its surplus energy and at a fair price, which would considerably increase the country's resources," argued Carlo Mateo Balmelli, Paraguay's Director General of the Itaipu power station.

Mateo Balmelli said that the purpose of his presentation next Wednesday in São Paulo to the São Paulo Federation of Industries is "to enable greater revenue for Paraguay from its energy resources in the framework of a real and effective regional electricity integration policy, based on commercial criteria in the relations between the two countries power corporations."

However the successive Brazilian government interpretations of the Itaipu accord dating back to the seventies is that the Paraguayan share of the works, paid by Brazil, must be compensated by its partner. The debt according to Brazilian sources is close to US$ 18 billion and should be canceled by 2023.

Based on this Brazil keeps all Paraguayan power surplus and at prices which date back to the seventies, with the "difference" credited to pay pending debts.

The problem is that all Paraguayan governments until now, (known for their insatiable corruption) have accepted the Brazilian interpretation of the accord and its de facto application.

President Lugo campaigned on recovering Itaipu "sovereignty" and much needed resources to honor his electoral promises.

On Wednesday Mateo Balmelli will be facing the heavy weights of Brazilian industry and his Brazilian counterpart in Itaipu, Jorge Samek. The debate is sponsored by the federation of industries and Brazil's Center for International Relations, a think tank of foreign affairs.

Among the speakers scheduled are Carlo Cavalcanti, head of Energy Infrastructure from FIESP; Fernando Xavier Ferreira, head of the FIESP Infrastructure Council; Rubens Barbosa, head of FIESP's Foreign Trade Council plus several senators, Aloisio Mercadante chairman of the ruling Workers Party, Eduardo Azeredo from Minas Gerais and Márcio Pereira Zimmermann.

The issue which has surfaced strongly in Brasí­lia-Asunción bilateral relations recently frustrated President Lugo's first official visit to Brazil. All was ready to sign several cooperation agreements with all the ceremonial pomp prepared, but following the private meeting of Lugo with Brazilian president Lula da Silva, all was scrapped because of "no advances on the Itaipu issue."

It all turned out as an embarrassment for the ever so efficient Brazilian diplomacy and President Luiz Inácio Lula da Silva's personal charm. The Brazilian Congress has also joined the ring and the Lower House Mines and Energy, Foreign Affairs and Defense Committees have decided on an open hearing on the issue.

The motion was proposed by an opposition deputy, but no date was fixed. Member of Congress Arnaldo Jardim said the wanted to discuss with the ministers the controversy surrounding the US$ 18 billion Itaipu Paraguay debt which must be canceled by 2023.

However he also underlined that any modifications to the Itaipu treaty, the legal instrument ruling the shared power plant, must necessarily be considered and approved by the Brazilian congress.

In related news Paraguayan members of Congress congratulated Paraguayan Armed Forces for not having accepted an invitation from the Brazilian Army to witness military exercises in the Itaipu region.

Mercopress

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