Paraguayan President Mario Abdo Benítez (L) and President Bolsonaro

On the Paraná river, which divides Brazil and Paraguay, lies the Itaipu Dam, a hydroelectric complex which produces more energy than any power plant in the world. Co-owned by the two neighboring countries, Itaipu could now lead to the downfall of the sitting Paraguayan president, as well as political implications for the Jair Bolsonaro administration in Brazil.

The treaty which gave rise to the Itaipu Dam was signed in 1973, after intense negotiations between military dictatorships in both countries: led by Emílio Garrastazu Médici on the Brazilian side, and the infamous General Alfredo Stroessner in Paraguay.

</p> <p>The agreement was that the hydroelectric energy produced by the Itaipu plant would be divided equally between Brazil and Paraguay. However, as Paraguay&#8217;s energy demands are much smaller than its continental-sized neighbor, the treaty states that the country must sell its surplus energy to Brazil for cheap. However, Paraguay has adopted a different strategy in order to get the most out of the current arrangement. The country purchases less reserve electricity, and fulfills its energy demands by buying—considerably less expensive—surplus power.</p> <p>As an example, Paraguay consumed 1,717 average megawatts (MW) in 2018, but only 50 percent of this came from the normal production of the dam, at a price of USD 43.80 per MWh. The rest was acquired from excess stocks, and bought for just USD 6 per MWh.</p> <p>Brazil is not a fan of this arrangement, believing it is essentially subsidizing Paraguay&#8217;s electricity costs. With the <a href="https://brazilian.report/money/2019/02/04/energy-problems-itaipu-paraguay/">treaty up for renewal in 2023</a>, representatives from both countries met earlier this year to try and hammer out a new deal.</p> <div class="flourish-embed" data-src="visualisation/598371"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p>Brazil pushed Paraguay to start purchasing more reserve energy, which is more expensive. Negotiations ended in a deal foreseeing a progressive increase in Paraguay&#8217;s consumption of reserve power over the next three years, which would raise the country&#8217;s electricity costs by some USD 200 million—roughly one percent of Paraguay&#8217;s GDP.</p> <p>This agreement was finalized in May of this year, but was only made public in July, sparking outrage in Paraguay. Opposition politicians threatened to open impeachment proceedings against President Mário Abdo Benítez, claiming he had &#8220;betrayed his motherland.&#8221;</p> <p>The deal was canceled, and calls for Mr. Benítez&#8217;s head quietened—but only briefly.</p> <h2>Why the Itaipu deal sparked a crisis in Paraguay</h2> <figure class="wp-block-image"><img src="https://brazilian.report/wp-content/uploads/2019/08/Itaipu-dam-brazil-paraguay-crisis-1024x651.jpg" alt="Itaipu dam brazil paraguay crisis" class="wp-image-22278" srcset="https://brazilian.report/wp-content/uploads/2019/08/Itaipu-dam-brazil-paraguay-crisis-1024x651.jpg 1024w, https://brazilian.report/wp-content/uploads/2019/08/Itaipu-dam-brazil-paraguay-crisis-300x191.jpg 300w, https://brazilian.report/wp-content/uploads/2019/08/Itaipu-dam-brazil-paraguay-crisis-768x488.jpg 768w, https://brazilian.report/wp-content/uploads/2019/08/Itaipu-dam-brazil-paraguay-crisis-610x388.jpg 610w, https://brazilian.report/wp-content/uploads/2019/08/Itaipu-dam-brazil-paraguay-crisis-945x600.jpg 945w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Itaipu Dam</figcaption></figure> <p>Once tensions had calmed, major Paraguayan newspaper <em>ABC Color </em>released a series of leaked WhatsApp conversations involving Mr. Benítez, his vice president, and the head of Paraguay&#8217;s state-owned energy company (Ande), Pedro Ferreira, among others.</p> <p>The messages indicated that the deal was made without the support of Ande, principally in regard to the removal of one clause, which previously allowed Ande to sell surplus energy directly on the Brazilian market. Mr. Ferreira handed in his resignation once the deal was made public.</p> <p>Suspicions were raised further due to other leaked messages, between Mr. Ferreira and a 27-year-old lawyer named José Rodriguez, who claimed to represent Paraguay&#8217;s Vice President Hugo Velásquez. They indicated that a meeting took place with an envoy of Brazilian electricity company Grupo Léros, who were interested in removing the aforementioned clause and buying cheap energy from Paraguay to sell to Eletrobras, Brazil&#8217;s state-owned energy company.</p> <p>Present at this meeting was Alexandre Giordano, a member of Jair Bolsonaro&#8217;s Social Liberal Party (<a href="https://brazilian.report/power/2019/08/13/alexandre-frota-brazilian-porn-jair-bolsonaro-party/">PSL</a>) and the substitute to prominent PSL Senator Major Olímpio. According to Mr. Rodríguez, both Mr. Giordano and the Lerós representative claimed they were &#8220;speaking on behalf of the Bolsonaro family.&#8221;</p> <p>Mr. Giordano admits he did attend a meeting in the Paraguayan capital of Asunción, but denied presenting himself as a spokesperson for Jair Bolsonaro. &#8220;At the meeting, they asked me my name, they must have looked me up on Google or something and saw I was [Major] Olímpio&#8217;s substitute,&#8221; he <a href="https://piaui.folha.uol.com.br/suplente-do-psl-confirma-reuniao-no-paraguai-mas-diz-que-nao-citou-bolsonaro/">told</a> <em>Piauí</em>. &#8220;Some people are living in Narnia, someone tried to gain some vanity advantage over this, I don&#8217;t know.&#8221;</p> <h2>Political shifts in South America</h2> <p>Investigations are underway in Paraguay, with the country&#8217;s state prosecution calling key figures in for questioning. Suddenly, the risk of impeachment has once again become real for Mr. Benítez.</p> <p>The Paraguayan president&#8217;s platform is wobbly. With public rejection rates of 69 percent, he has struggled to build a base in Congress and has even seen members of his Colorado Party turn against him. Now, it is crucial that he retains the support of former president Horacio Cartes, who remains a serious power broker in the country. Convicted of currency fraud in the 1980s and notorious for his involvement in the contraband of cigarettes, Mr. Cartes holds the key to the president&#8217;s future. If he turns on Mr. Benítez, the impeachment process is almost certain to prevail.</p> <p>This has raised warning signs over the river in Brazil. Beyond the potential involvement of his party and the mention of his family&#8217;s name in negotiations, Jair Bolsonaro is facing the real possibility of losing an important ally.</p> <p>Mr. Bolsonaro is very close to Mr. Benítez, or as he calls him, &#8220;Marito,&#8221; or Little Mário. Like the Brazilian president, &#8220;Marito&#8221; was a parachutist in the Paraguayan army and the two see eye-to-eye on many ideological matters.</p> <p>With the <a href="https://brazilian.report/podcast-brazil/2019/07/17/argentina-presidential-election-brazilian/">impending defeat of Mauricio Macri in Argentina</a>—another of Mr. Bolsonaro&#8217;s allies—the current Brazilian government could soon see itself isolated in its own continent.</p> <h2>Digging up old hostilities</h2> <p>The case of the secret May agreement has seen the resurgence of Paraguay&#8217;s long-standing resentment toward Brazil, dating back to the Triple Alliance War of the late 1800s. The conflict involved disputes over territories which now make up part of the Center-West region of Brazil and the north-eastern portion of Argentina. With the total defeat of Paraguay against the alliance of Brazil, Argentina, and Uruguay, it is estimated that 70 percent of the adult male Paraguayan population was killed—demographic chaos from which the country took decades to recover.</p> <p>The most recent tensions between the two countries involve the Itaipu Dam, with Paraguayans believing they were short-changed by the energy deal signed back in 1973. With the outrage over this year&#8217;s secret negotiations, 2023&#8217;s renewal of the treaty is set to be a hot-button issue between Paraguay and Brazil.</p> <hr class="wp-block-separator"/> <p><em>Correction: The original version of the story stated that Paraguay had &#8220;the right to sell its surplus energy to Brazil for cheap.&#8221; However, the Itaipu treaty states that Paraguay has the obligation to sell this excess energy to Brazil, with negotiations with other countries being expressly prohibited. </em></p> <p>

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PowerAug 15, 2019

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BY Euan Marshall

Euan Marshall is a Scottish journalist living in São Paulo. He is co-author of A to Zico: An Alphabet of Brazilian Football.