After years of complex negotiations, Brazil and Paraguay have reached a significant agreement regarding the economic management of the Itaipu hydroelectric plant, a vital energy source located on the border between the two nations. The agreement was finalized on May 8, 2024, in Asunción, with Brazilian Minister of Mines Alexandre Silveira and Paraguayan President Santiago Peña signing the deal.

This new arrangement revises the terms of the longstanding energy-sharing agreement established over 50 years ago, which had historically guaranteed each country 50% of the energy produced by the plant. However, the previous terms required Paraguay to sell its unused energy to Brazil at a preferential rate, which has long been a point of contention for the Paraguayan government due to the lower-than-market prices.

Under the new agreement, starting in 2027, Brazil will only be responsible for the operating and maintenance costs of the Itaipu plant, potentially reducing its current expenses by up to 30%. This change is expected to have a positive impact on domestic energy costs in Brazil. Simultaneously, Paraguay will gain the ability to sell its surplus energy on the open market, rather than at the previously agreed-upon rates. This shift is anticipated to allow Paraguay to secure more favorable prices dictated by market supply and demand.

In the interim, until 2027, Paraguay will sell its excess energy to Brazil at a rate of $19.28 per kilowatt per month. This is a compromise between the $20.75 rate from 2022 and the $16.71 rate from 2023, which Brazil had hoped to maintain.

The agreement is seen as a win for both nations, addressing Paraguay’s concerns about economic losses from underpriced energy sales and allowing Brazil to reduce its financial burden in managing the plant. The deal also introduces mechanisms to ensure that the cost adjustments will not negatively impact Brazilian consumers, as the difference in costs will be managed by Enbpar, the public company overseeing Brazil’s share of the power station.

This accord marks a new chapter in the partnership between Brazil and Paraguay, setting the stage for a more equitable and efficient management of one of South America’s most important energy resources.

Source: Agenzia Nova