Marco Aurélio Garcia, the Brazilian presidency advisor on international affairs. believes the agreement between Brazil and Paraguay regarding the surplus power from the shared Itaipu hydroelectric dam (operationally the largest in the world) is "most important" and helps to normalize bilateral relations.
Garcia made the statement Monday, July 27, in Rio de Janeiro, adding that the accord signed by presidents Luiz Inácio Lula da Silva of Brazil and Fernando Lugo of Paraguay over the weekend, in Asunción, stabilizes relations "which were undergoing certain deterioration."
"Our position has always been that it's not enough to have prosperity in Brazil when the neighboring countries framework is that of economic and social crisis," said Garcia.
Insisting on the Brazilian official line to justify having admitted to triple payment for the surplus power from the Itaipu Paraguayan share, Garcia argued "we can't be an island of prosperity in an ocean of social inequality."
He added that the agreement reached after ten months of intense negotiations at times "extremely sour," is going to benefit Paraguay and will create no additional charge for the Brazilian consumer.
Under the agreement Brazil will pay for Paraguay's surplus energy US$ 360 million against the average US$ 120 million that was being paid.
Any additional costs will be absorbed by the Treasury and technical solutions are under consideration, which will be announced in the coming sixty days. In 90 days the two presidents are scheduled to meet again to address these issues and asses the overall functioning of the 31 points included in the Sunday release.
The agreement not only will mean US$ 360 million for Paraguay as of 2010 (compared to the 107 million of 2008), but also contemplates another US$ 450 million Brazil will provide for a high tension 500 KW line extending from Itaipu to the outskirts of Asunción, approximately 360 kilometers (224 miles).
Garcia admitted that Paraguay had demanded for more, "but when negotiations you always push and finally reach middle ground."
Nevertheless the Brazilian presidency advisor said the agreement was well received in Paraguay and helps to stabilize the political situation of that country, "which is good for the whole region."
Brazilian Planning Minister Paulo Bernardo also confirmed that the Itaipu agreement will not have an impact on Brazilian power consumers because "the bill will be picked up by the Brazilian government." However he did not reveal further details.
Itaipu generates 14.000 MW and Paraguay consumes only 5% of its 50% share from the dam. The rest is acquired by Brazil, based on a 1973 treaty which can only be reviewed in 2023.
"Lula said that we are one step up in our relation with Paraguay, and that is what matters," said Bernardo who recalled that Brazil's policy is to participate and help with infrastructure projects with its neighbors.
However the most influential financial publication from Brazil, "Valor Econômico" questioned the "donation" of US$ 450 million to Paraguay for the construction of high voltage transmission line from Itaipu to Asunción.
"Paraguay will receive free, the gift of a 500 KV transmission line," was Valor' main headline in its São Paulo Monday edition.
Valor said that "Itaipu international will fund the US$ 450 million infrastructure project and will later endorse it to the Brazilian treasury."
The controversy is part of the debate triggered by Lula's administration decision to treble payments for the surplus Paraguayan power agreed over the weekend.
Although the agreement still faces congressional approval, the debate in on as to how much more consumers and companies will have to pay for the additional bill. The debate is critical in São Paulo, Brazil's powerhouse and main consumer of the Itaipu energy.