Ministers Alexandre Silveira (Mines and Energy) and Mauro Vieira (Foreign Affairs) traveled to Asunción to discuss with local leaders

02/07/2024

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Alexandre Silveira — Foto: Marcelo Camargo/Agência Brasil

The Brazilian government informed Paraguayan officials on Monday (5) that it will not increase the tariff for electricity produced at the Itaipu Binacional hydroelectric power plant. Energy Minister Alexandre Silveira and Foreign Minister Mauro Vieira had traveled to Asunción to discuss the matter with local leaders.

As Valor learned, the argument expressed to the neighboring leaders is that the Lula administration is concerned about the effects of a possible tariff hike on the electricity bills for the neediest population in Brazil. Messrs. Silveira and Vieira also pointed out that higher power costs could harm the industrial activity and Brazil’s economic development.

The tug of war over tariffs led the president of Paraguay, Santiago Peña, to Brasília two weeks ago for a face-to-face meeting with President Lula. At that time, the Brazilian leader became upset with his aides for failing to provide sufficient information on the matter.

At first, the Brazilian president acknowledged that the two countries had differences regarding the tariff, but promised to negotiate a solution. Shortly after, the government tightened its stance and showed signs that it would not agree with the price hike.

In April 2023, Itaipu’s board of directors approved the price of $16.71 per kilowatt after Brazilians and Paraguayans reached a consensus. Elected as the president of Paraguay shortly after with the promise to renegotiate the agreement, Mr. Peña has been pushing for the increase.

Paraguay wants an increase in tariff to around $20.75 per kilowatt. The price of energy fell after the debt resulting from the construction of the plant was paid off. On Monday, in Asunción, the two ministers delivered the message that Brazil would not “compromise” with the price of energy.

The increase is pivotal for Paraguay, as the neighboring country receives payment from Brazil for the surplus of unused energy from the plant. Under the Treaty of Itaipu, each country is entitled to 50% of the electricity generated by the hydropower plant, but Paraguayans never reached such amount, since the country consumes less than 20% of the total.

In 2022, for example, the neighboring country used 17% of the power generated by the plant. The remaining 33% of the Paraguayan part was purchased by Brazil for around $1 billion.

Enio Verri, the managing director at the Brazilian side, confirmed last week that discussions around the tariff had turned into “a diplomatic problem” and that the solution would come “in the timing of foreign affairs.”

Fueled by calculations made by the Ministry of Mines and Energy, Brazil’s Foreign Affairs Ministry started negotiating an agreement with Paraguay. Valor has learned that the possibility of increasing the tariff was not considered by the Brazilian side, which fears the effects on the economy.

The impasse resulted in halting the approval of the plant’s budget for 2024, which led to delays in payments of vacation plans and year-end bonus to employees. Without an approved budget, Itaipu could not make any payments for the 2024 financial year.

In response to the Foz do Iguaçu Electricity Trade Union (Sinefi), the Regional Labor Court of the 9th Region issued a provisional measure ordering the plant to make payments to employees on the Brazilian side. The decision did not include workers in the neighboring country.

*Por Murillo Camarotto — Brasília

Source: Valor International

https://valorinternational.globo.com/