Brazil and Paraguay must decide rate in Itaipu within 2 months

Brazil and Paraguay must decide rate in Itaipu within 2 months
Brazil and Paraguay must decide rate in Itaipu within 2 months
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According to director Enio Verri, the issue has become a “diplomatic problem”; the president of Paraguay came to Brazil in January to talk about the subject with Lula

The Brazilian general director of Itaipu Binacional, Enio Verri, said this Thursday (Feb 1, 2024) that an agreement between Brazil and Paraguay on the new energy tariff for the hydroelectric plant should be reached within 2 months.

According to Verri, the discussions became a “diplomatic problem” and walk “in the time of international relations”which worries the Brazilian side of the energy producer.

“We have a big challenge. We are counting on a meeting that should take place very soon with the ministers of international relations and energy of the 2 countries. Unfortunately, the time we have is not the time for international relations. He should take the deal for another 1 or 2 months, which is a big problem. We need to pay our employees”said Verri in an interview with GloboNews.

Verri assessed Paraguay’s position as “hasty”since delays in the contract cause market distrust of the plant.

“I think it’s a very bad thing for the name of the plant. If we continue to delay salaries and payments, we will have a downgrade and our confidence rating in the market will drop. For Paraguay, this has a very large effect on the analysis of the country’s entire market, considering its dependence on Itaipu”, stated the director general.

THE IMPASSE

The neighboring country asks for an energy tariff of US$20.75/kW, while Brazil suggests a rate of US$16.71/kW. The Paraguayan proposal attempts to raise more resources for internal investment, while the Brazilian government negotiates for lower tariffs since the plant’s construction debt was paid off in 2023.

“Energy at a fairer price would allow a country to develop very quickly, but Paraguay doesn’t see it that way. What I see is an exaggeration, with great care in the use of this word, on the part of Paraguay in wanting to obtain resources very quickly to guarantee its development. The right thing to do would be to keep the plant running and create a group to discuss what is best for both countries”declared Verri.

UNDERSTAND

The president of Paraguay, Santiago Peña, came to Brasília on January 15 to meet with President Luiz Inácio Lula da Silva (PT). The meeting discussed the negotiation of the tariff for the Itaipu plant.

The rate, called Cuse (Unit Cost of Electricity Services), is defined every year, in an agreement between Brazil and Paraguay. The two nations divide ownership of the hydroelectric plant in half. As the Brazilian side consumes more energy than the neighboring country, the agreement provides for the purchase of the surplus left by the partner.

The rate for 2024, however, remains without a final answer. The same dilemma was faced in 2022 and 2023, but this time, Paraguay refuses to sign the document responsible for allowing the plant to operate provisionally, while the parties reach a consensus.

Given the impediment, both Brazil and Paraguay are prevented from paying their suppliers and employees. The measure directly affects Itaipu’s credibility in the financial market.

While there is no final decision on the matter, Aneel (National Electric Energy Agency) approved the maintenance of the Cuse value at US$ 16.71 per kW and a reduction of 12.69% in the hydroelectric transfer tariff for 2024 The regulatory agency’s decision is provisional. There is the possibility of an increase in the Cuse due to Paraguayan pressure.


The article is in Portuguese

Tags: Brazil Paraguay decide rate Itaipu months

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