Brazil’s Underpayment of Energy Is Strangling Paraguay

Itaipu hydroelectric plant in Brazil Fernando Lugo, Paraguay's President elect and Uruguayan President Tabare Vazquez agreed to work jointly in Mercosur affairs to help improve the bargaining power of the junior partners that have repeatedly complained that the block has become a two member club, Argentina-Brazil.

Lugo visited this week Uruguay and underlined the similarities between the two countries and the need for a close bond to help develop the junior members' economies.

"We are both disenchanted with the functioning of Mercosur and we are convinced there's no better strategy than unite to develop together," said Lugo adding that this strategy could be expanded to include associate members Chile and Bolivia.

The former Catholic bishop who won the Paraguayan presidential election supported by a coalition of left wing parties and grass root organizations, breaking the six decades long political hegemony of the Colorado party, said he "was inspired by several of the social programs and government reforms implemented by the Uruguayan government under President Tabare Vazquez" and which have helped to reduce poverty and increment the administration efficiency.

Regarding foreign policy Mr. Lugo said his administration, which takes office August 15, would support the incorporation of Venezuela to Mercosur and the creation of the Union of South American Nations, UnaSur, which will be formally created Friday in Brazilian capital Brasí­lia during a regional leaders' summit.

One of the advisors of the president-elect, Ricardo Canese said Paraguay would like to sign a contract with Uruguay for the sale of electricity, "which is our main export and is currently entirely almost absorbed by Brazil and Argentina."

"We're going to do our outmost to sign an agreement for the export of energy to Uruguay," said Canese who anticipated the energy would come from the Yaciretá dam which Paraguay shares with Argentina.

Paraguay also has a joint dam with Brazil, Itaipu, South America's largest and most of its production equivalent to 38 million megawatts is consumed by the landlocked country huge neighbor.

"Uruguay is buying the MW at US$ 300 while Brazil takes the 38 million MW for US$ 300 million, which is a fraction of market price. Paraguay is losing hundreds of millions of dollars. We must change that situation so we can develop Paraguay," said Canese.

However under contract rules, since Brazil financed the dam, price and conditions can only be reviewed if both sides agree. Similarly with the Yaciretá dam shared with Argentina.

"We would like to see Argentina match the price Uruguay is willing to pay for energy," said the Paraguay president elect advisor.

Mercopress

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