Speaking before a Senate hearing on Tuesday, Chief of Staff Rui Costa admitted that Brazil and Paraguay have reached a “deadlock” over tariffs for electricity produced by the Itaipu Dam — the massive hydroelectric complex shared by both countries.
Earlier this month, Itaipu told The Brazilian Report that the budget for this year had 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.
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.
“President-elect [Santiago Peña, who took office in August 2023] wanted to raise Itaipu’s energy tariff and the Brazilian government did not accept it,” Mr. Costa told the Senate Infrastructure Committee.
“Therefore, we are, to this day, without a definitive solution, as the impasse has arisen in relation to the tariff: the government of Paraguay seeking to increase the value of this tariff and the Brazilian government seeking to reduce it,” he said.
Enio Verri, head of the Brazilian side of Itaipu, told senators last year that Paraguay proposed a return to the USD 20.75 tariff that was charged in 2022, a 24 percent hike from the USD 16.71 tariff in place at the time of Tuesday’s Senate hearing. In late 2023, the tariff was hiked provisionally to USD 17.66.
Presidents Luiz Inácio Lula da Silva of Brazil and Santiago Penã met twice to discuss 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.
“Our focus today is to negotiate, as soon as possible, the so-called Annex C, and we are discussing, within the government, the changes that Brazil intends to make to Annex C, and this is directly linked to the tariff that we are discussing right now,” Mr. Costa added. He said that the negotiations of the rules are “more important” than the value of the tariff itself, and that the outcome will reduce it “in the medium and long term.”
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