The Itaipu dam on the River Parana is located on the border between Brazil and Paraguay in Foz do Iguaçu, 1,700 km south of Brasilia. Twenty 700MW generator units with an installed capacity of 14,000MW make Itaipu the world’s largest operating hydroelectric plant.

Jorge Samek, the director-general of the Itaipu Binational Hydroelectric Plant Company, explained that under the treaty the price of power produced has to cover costs; it is not the market price.

ASUNCIÓN, Paraguay – Thirty-six years after it signed the Itaipu Treaty with Brazil, Paraguay is insisting on renegotiating the price of the power produced by the Itaipu hydroelectric power station and the terms governing its use. The Itaipu dam, one of the world’s largest, is located on the border between Brazil and Paraguay.

According to La Nación, Paraguay owns 50 percent of the power produced at Itaipu but uses only five percent. Under the 1973 treaty, the surplus must be sold to Brazil at below market price to pay off Paraguay’s share of the estimated US$19.6 billion construction cost.

Paraguay has been insisting on renegotiating the treaty since 29 September 2008. According to ABC Color, Paraguay wants to be able to sell its surplus power to other countries, where it can get a better price. It also wants a fair price for its share of the power (Brazil is currently paying US$3 per megawatt, while Chile is offering to pay US$60), as well as a review of its Itaipu debt and equal joint management of the company.

Jorge Samek, the Brazilian director-general of the Itaipu Binational Hydroelectric Plant Company, told La Nación that “the price for the power generated at Itaipu is what is set out in the treaty. Under the treaty, the price has to cover costs. It is not the market price”.

The Brazilian government has responded to the demands by offering to double royalties to US$230 million, to open a US$1.5 billion credit line for Paraguay and to loan Paraguay US$1 billion for other purposes.

Brazil has also offered to set up a regional development fund that would provide US$100 million each year for binational projects, but is refusing to alter the price paid for the electricity or amend the treaty. According to O Estado de São Paulo, the Brazilian government is confident Paraguay will accept its proposal.

Paraguay’s President Lugo, however, is determined that “Paraguay will gradually regain its energy sovereignty”. His campaign promise to renegotiate the treaty played a key role in his election victory in April last year.