Energy War: Brazil Threatens to Stop All Investment in Paraguay

Itaipu dam shared by Brazil and Paraguay Paraguay and Brazil are preparing for a long dispute over prices from energy generated in South America's largest dam, shared by the neighboring countries, but which is almost entirely absorbed by the industrial hub of Sao Paulo.

The Brazilian director from the bi-national board that governs the Itaipu dam warned that Brazil could freeze all investments in Paraguay if the incoming government of elected president Fernando Lugo protests the treaty dating back to the seventies when the huge energy producing structure was built.

"I recommend the Paraguayan government not to follow on the steps of Bolivia that nationalized the hydrocarbons industry in 2006, but it's only now that Brazilian companies are returning." said Jorge Miguel Samek in an interview with the daily Folha de S. Paulo.

Brazil's Petrobras was the main investor in the Bolivian hydrocarbons industry and reserves, and virtually pulled out of the country when President Morales decided the nationalization of resources.

"Bolivia lost three full years of investment and jobs because of that decision," cautioned Samek, who this week traveled to Paraguay to meet with his future counterpart in the Itaipu board, Carlos Mateo Balmelli.

Balmelli traveled to Asunción with Marcos Aurélio Garcia who is Brazil's President, Luiz Inácio Lula da Silva's main advisor on international affairs.

Samek underlined that the Lula administration refuses to review the Itaipu Treaty of 1973, which governs the joint management of the complex, or for that matter the price Brazil pays for the electricity generated or authorize Paraguay to sell energy to third parties.

Incoming president Lugo, who takes office next August 15, during the campaign trail promised to fight for "better terms" in the Itaipu issue, committing the extra money for social investment.

Although Mr. Samek transmitted a clear "no" message it should not come as a surprise if President Lula da Silva yields some ground in the dispute to help his Paraguayan counterpart with a strong start for his administration, thus avoiding the long stand off experienced in Bolivia.

Finally in Bolivia, Petrobras recovered most of its assets and continues as the leading hydrocarbons corporation since most of the country's natural gas is pumped to São Paulo and Brazil has a strong political influence over La Paz.

Mercopress

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