Brazil and Paraguay reach tentative agreement on Itaipu budget amid tariff dispute

With neither Brazil nor Paraguay able to reach a deal over the tariffs for electricity produced by the Itaipu Dam — the massive hydroelectric complex shared by both countries — the dam’s board managed to free up its budget until the end of March.

The dispute over tariffs, ongoing since the end of last year, had pushed Itaipu toward shutdown mode, delaying salaries and other financial commitments. This latest deal gives the complex some breathing room.

Paraguay is angling to get more money for its Itaipu surplus that it sells to Brazil, but the Brazilian government is unwilling to pay more and has suggested it may stop buying from its neighbor.

According to the Itaipu Treaty, signed half a century ago, Brazil and Paraguay are entitled to an equal 50 percent share of the energy produced by the dam complex. Due to its miniscule size in comparison with Brazil, this arrangement sees Paraguay left with a vast surplus of electricity, which it sells to Brazil at the same price it pays. 

Negotiations to revise the treaty began in August 2023, and Paraguay is hoping for a 24 percent hike in tariffs.

The dam’s budget had been frozen since January, as Paraguayan administrators purposely did not go ahead with the budgeting process, presumably as a way to strong-arm Brazil into accepting its tariff demands.

Presidents Luiz Inácio Lula da Silva of Brazil and Santiago Peña of Paraguay met in January to discuss the deadlock — the encounter led to nothing, as did a similar meeting between the pair last October.

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