What’s Behind the Energy Deal Scandal Sweeping Paraguay?
Paraguayan Foreign Minister Luis Castiglioni and other officials, including the head of state power company ANDE, resigned last month amid a public outcry over the signing of an energy deal with Brazil in relation to Itaipú—one of the world’s largest hydropower plants, which the countries jointly manage. Paraguayan lawmakers and officials said the secret deal would be detrimental to Paraguay and cost the country some $200 million. Following the scandal, the two countries scrapped the deal. What is at the heart of the controversy, and what effects will it have on Paraguayan President Mario Abdo Benítez’s agenda? What did the energy deal consist of, and was it indeed unfavorable to Paraguay? How important is Itaipú for each country, and should Brazil and Paraguay work to integrate their power sectors more? To what extent does hydropower dominate Paraguay’s energy mix, and should it look toward diversifying it with other sources of power?
Ricardo Canese, president of the hydroelectric commission for Parlasur and general coordinator of the Commission of Binational Hydroelectric Entities (CEBH): “The fundamental issue is who appropriates Paraguay’s energy from Itaipú. According to the Itaipú treaty, 50 percent of energy generated is Paraguayan, which covers cheap energy of $6/megawatt-hour (MWh) and expensive (guaranteed) energy of $44/MWh. Paraguay’s position has always been to demand half of the cheap energy and export the rest to Brazil. This is what Bolsonaro is questioning, going against the treaty and agreements in 2002, 2007 and 2009. The Bolsonaro/Abdo pact is unfavorable to Paraguay, and it violates the Itaipú treaty, because it establishes that between 89 percent (in 2019) and 84 percent (in 2022) of Itaipú’s cheap energy will go to Brazil, which amounts to a loss of $200 million for Paraguay. It also delivers the very valuable reservoir energy (50 percent Paraguayan) in the same proportion to Brazil, without any benefits. As for the power-contracting schedule…”Read More
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