Lula and Paraguay’s Santiago Peña discuss Itaipu, Mercosur, and Venezuela

President Luiz Inácio Lula da Silva of Brazil and Paraguayan President-elect Santiago Peña met in Brasília on Friday. It was their second meeting since Mr. Peña’s electoral triumph on April 30, and comes three weeks before his inauguration (which Lula will attend).

After their meeting, Mr. Peña told reporters that negotiations were underway to extend the treaty that governs the massive, binational Itaipu dam. As The Brazilian Report explained last year, the original 50-year treaty expires in April. 

Negotiations on the future rules of engagement will not begin until August 13, Mr. Peña said. “Itaipu must bring energy and development to both countries,” he added.

The treaty forces Paraguay, a sparsely populated country with an electricity demand dwarfed by Brazil’s, to sell the unused portion of its share to Brazil. Negotiations with other countries are explicitly forbidden. There is a push in Paraguay to take its surplus to the open market and sell it to the highest bidder. 

The two leaders also discussed Mercosur, the trade alliance between their countries, which also includes Uruguay and Argentina. 

Mr. Peña has supported Lula’s critical positions on additional environmental demands made by the European Union as part of negotiations for a free-trade agreement between the two countries. The Paraguayan politician has said that new requests that disrupt negotiations over the agreement are “unacceptable.”

Open for business

Earlier this week, Mr. Peña also met with Brazilian entrepreneurs representing the Latin American Business Council in São Paulo, inviting them to invest in his country. The Paraguayan economy has recently experienced lackluster growth coupled with soaring inflation. 

Brazil is Paraguay’s top trading partner, although trade between the two nations fell nearly 5 percent in the first four months of 2023 compared to the previous year.

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