Itaipu budget frozen once again amid impasse

The massive Itaipu dam, co-owned by Brazil and Paraguay. Photo: Luis War / Shutterstock

The impasse between Brazil and Paraguay over tariffs for electricity produced by the Itaipu Dam — the massive hydroelectric complex shared by both countries — led to the binational company freezing its budget, Brazilian newspaper Valor published on Wednesday.

An email quoted by Valor instructs officials not to issue “documents that imply the incurring of expenses (…) even if the system allows it”.

The press office for Itaipu confirmed to The Brazilian Report that the budget “has not been approved yet because it depends on negotiations regarding the value of the tariff,” which are carried out by the foreign ministries of both countries.

Back in February, the dam’s board had managed to free up its budget until the end of March.

According to the Itaipu Treaty, signed in 1973, Brazil and Paraguay are entitled to an equal 50 percent share of the energy produced by the dam complex. Due to its tiny size in comparison with Brazil, this arrangement sees Paraguay left with a vast surplus of electricity, which it is obligated to sell to Brazil at the same price it pays.

Presidents Luiz Inácio Lula da Silva of Brazil and Santiago Penã of Paraguay met last October to begin a review of the so-called Annex C, the part of the Itaipu bilateral agreement that establishes its financial rules, such as the conditions for energy supply, cost, and revenue of the electricity service.

A second meeting of both presidents earlier this year failed to reach a new agreement.

Enio Verri, head of the Brazilian side of Itaipu, told senators last year that Paraguay “wants the highest tariff possible, because this surplus is what enables Paraguay to make investments in its country.”

According to Mr. Verri, Paraguay has proposed a return to the USD 20.75 tariff that was charged in 2022, a 24 percent hike in relation to the USD 16.71 tariff in place at the time of the Senate hearing. In late 2023, the tariff was hiked provisionally to USD 17.66.

The press offices for the Mines and Energy Ministry and the Foreign Ministry did not reply to The Brazilian Report for comment.