Brazil and Paraguay fail to reach agreement on Itaipu tariff

President Luiz Inácio Lula da Silva stated this Monday (15) that Brazil has differences with Paraguay regarding the value of the tariff for the Itaipu hydroelectric plant, which is a binational company managed by both countries, but that the issue will continue being handled by teams from both governments to reach a solution. The statement was given after meeting between the Brazilian president and the Paraguayan president, Santiago Peña, at the Itamaraty Palace, in Brasília. The meeting started in the morning and was followed by lunch. It was Peña's first official visit to Brazil since he took over the Paraguayan government in August last year.

“I told comrade Peña that we are going to re-discuss the issue of Itaipu’s tariffs. We have differences on the tariff, but we are willing to find a solution together, and in the next few days we will hold a meeting again. Now it is Brazil that has to go to Asunción so that we can continue negotiations to find a definitive solution”, highlighted Lula. “I am interested in this being done as quickly as possible and that we can work to present a definitive solution for new relations between Paraguay and Brazil in the management of our important Itaipu”, she noted.

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In April last year, the government announced that Itaipu's Board of Directors had approved the value of US$16.71 per kilowatt, in what would have been a consensus between Brazilian and Paraguayan advisors. Shortly afterwards, however, Peña was elected president. He has already made public statements in defense of an increase in the price of energy sold to Brazil.

This was at least the fourth meeting between Lula and Peña since last year. In all of them, the topic of the price of energy from Itaipu was at the center of the conversation, although so far neither country has announced an agreement on the topic.

After 50 years, Brazil and Paraguay are working to review Annex C of the Itaipu Treaty, which provides for the financial bases and provision of electricity services for the enterprise. The binational company has an annual budget of around US$3.5 billion, of which almost 70% was intended to pay Paraguay's debt for the construction of the hydroelectric plant on the Paraná River, which forms part of the border between the two countries. With the payment of the debt, in February of last year, Annex C may be revised, as provided for in the text of the treaty itself. Not all of the energy generated by Itaipu is consumed by Paraguay, and ends up being resold to Brazil. Therefore, the interest of neighbors in increasing the amount charged for the tariff.

“The vision of the agreement was the construction, operation and payment of the debt of Itaipu, and the objectives were achieved. It was built, it was operated and the debt was paid. There are many people who have studied the gains and losses, but the hydroelectric plant is there, and it is one of the largest in the world. We know that the biggest challenge of our generation is the production of sustainable electrical energy. Paraguay and Brazil are champions in electricity generation [sustentável], but we have to look to the future”, said Peña about the meeting. The Paraguayan president said the conversation was “sincere, open and constructive” and emphasized that the positions of both countries were shared.

Binational bridge

During the press statement, Lula mentioned the invitation made to Santiago Peña for a joint visit between the two to Porto Murtinho, in Mato Grosso do Sul, where a new binational integration bridge is being built between the two countries.

On the Brazilian side, work was resumed at the end of last year, by the Union, with an investment of R$472.4 million, and a deadline of 26 months for completion. A 13-kilometer stretch will be paved connecting BR-267 to the access to the bridge, along a road loop from Porto Murtinho to the Paraguayan city of Carmelo Peralta, where the part of the work under the responsibility of the neighboring country is being built. The construction of a customs center is still planned on the Brazilian side.