Business Wants Brazil to Renege on Agreement to Pay Paraguay More for Energy

Itaipu Business groups in Brazil are strongly lobbying members of the Brazilian Congress against a review of a recent agreement reached by President Luiz Inácio Lula da Silva to treble the money paid to Paraguay for power from the world’s largest operating hydroelectric complex Itaipu, shared by both countries.

“Private investors from the energy sector are visiting members of Congress to convince them not to alter the Itaipu treaty dating back to the 70s”, according to Rio’s daily O Globo, which if approved “would have an impact on energy costs and consumers’ pockets”.

The “pressure” is estimated to continue in the coming days to impede the initiative, which has already been approved in committee and must now face a vote on the floor of the Lower House, adds O Globo, quoting congressional sources.

The review of the Itaipu treaty supported by president Lula contemplates an increase from 120 million to 360 million US dollars in annual payments for the surplus power from the Paraguayan share which is totally absorbed by Brazil and the only possible purchaser, as stipulated in the original contract.

President Lula recently asked members of Congress to speed up approval of the review, which was agreed last year with Paraguayan president Fernando Lugo and is part of his very effective campaign for “energy sovereignty” that helped the former bishop win the elections displacing a long established (six decades) Colorado party coalition politically closely linked to Brazil.

Brazilian businessmen argue that if the initiative is finally approved it will represent an additional payment of 3.3 billion US dollars from now until 2023, when the 1973 Itaipu contract can be “legally” reviewed.

“This will have a negative impact on Brazilian energy costs and in consumers’ pockets”, argue the energy lobby.

The Itaipu dam built along the Brazilian/Paraguayan border has a production of 14/15 GW, half of which belonging to the junior partner, but since it only consumes 10%, the rest is sold to senior partner Brazil.

Paraguay has long complained of the very low prices paid for the power and the fact that the only buyer under the original contract is the other partner.

In July 2009 after months of discussions Brazil agreed to increase the annual payment to 360 million US dollars plus the financing of several major infrastructure projects.

However this is electoral year in Brazil and the review of the contract has been repeatedly stalled in Congress.

Mercopress

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