World’s Largest Hydroelectric Plant Drowning in Political Tension

After nine months of negotiations and two hours of official face-to-face discussions, Brazil’s President Lula da Silva and his Paraguayan counterpart, Fernando Lugo, failed to come an agreement over Itaipu Dam, Brazil’s O Estado do S√£o Paulo reported last night. Completed in 1991, Itaip√∫ is a joint venture between neighboring countries Brazil and Paraguay to generate hydroelectricity from the Rio Parana, the world’s 7th largest river.
According to a treaty signed in 1973, each country retains a 50% claim to the electricity generated. However, over the years, Brazil has dominated the consumption of the energy produced, using 95% of Itaip√∫’s output to power 20% of the country, leaving 5% for Paraguay. Though, O Estado clarifies that 5% amounts to 90% of the Paraguay’s entire energy needs.
Nonetheless, Lugo, who recently entered office, has cited growing global energy concerns and the financial crisis as among the principal reasons to renegotiate the concessions of Itaip√∫, threatening to take the matter to international courts in order to resolve the issue.

We’ve become more and more aware of water scarcity and the role it will play in the global economy as well as nations’ energy policy decision making. This issue is furthered intensified in a place like Brazil, that is at once being barraged by floods in certain parts of the country and hit by out-of-the-ordinary droughts in other parts. This isn’t even getting into the resultant effects damming rivers and other bodies of waters has on local eco-systems.
Nonetheless, as countries seek to diversify their energy policies (For example, we reported earlier this year that France aims to have nearly 1/4 of its energy generated from hydroelectric by 2020), hydroelectricity is viewed by many as a much more efficient and cleaner mode of energy production than more traditional methods.
Itaip√∫’s facility is a concrete, gravity dam capable of producing from 12,500-14,000 megawatts of power on average. PBS says that’s almost enough to constantly power the entire state of California.
The Politics of… Well… Politics
The Wall Street Journal reports that Paraguay has threatened to contest repayment of $4.2 billion in debt on the facility, which was practically completely financed by Brazil, in international courts. As a local reporter told the BBC, the Paraguayans feel that the debt has been paid off in terms of inequity of the power distribution.
Brazil, citing that it does no one good to have a “poor neighbor,” has in return offered Paraguay a series of concessions:
1) Increase the energy tariff Brazil pays from $1 billion to $2 billion for the exclusive rights to the energy Paraguay has claim to but does not use
2) The creation of a fund to finance social development projects
3) The freeing of credit to the Paraguayan Treasury for infrastructure development.
The latter two concessions could amount to over $3 billion in capital available to Paraguay. The concessions could be seen on one hand as an attempt to rectify an inequity that has existed for decades, or as a way for Brazilian to flex its regional influence to hit a fledgling country where it hurts–its development. Especially at a time, when its leadership is in mired in scandal of its own. Lugo, a former bishop, has been accused by three women in his former parishes of having fathered their children. The international press has had many field days with the juiciness of these stories, and Brazilian officials have made a point to (un)subtly refer to the scandal as they negotiate over Itaip√∫.
Michel Temer, the president of Brazil’s House of Representatives, said: “Dialogue is the best tool to overcome the major and minor problems our countries both face.” Even Lula remarked that the last thing they wanted was a “fragile” Paraguay. In effect, Brazil’s financial concessions are a way for Lugo to pull his name out of the gutter and create opportunities for some much needed domestic development. However, as the country grows, it’s energy demands will undoubtedly increase as well, and Brazil is in effect attempting to freeze Paraguay out of further claims to the dam that it counts so heavily on in its energy grid.
Geographically, Brazil is by far the largest country in South America, and has in recent years, become a major world player. And in many ways, in this case it has taken on a role similar to the United States’. Though an agreement has still yet to be reached between the two Latin American countries, many analysts hedge that Brazil will get what it wants. Itaipu has been a huge asset for the country, not only by providing energy, but jobs and development in that region as well.
The United States has also enjoyed the ability of affecting major international policy for years by protecting its own interests. And as our government reexamines our domestic energy paradigm–3P’s own Jeff Siegel summed it pretty well on his own site last December–we have a tremendous opportunity to set the tone and tenor of the world’s energy policy as we move towards a greater utilization of clean and renewable technologies. And this starts from the highest levels of global diplomacy and domestic policy to a much more a grassroots level, in the form of the many innovative start-ups you have begun to see featured on our site on Fridays.
But the other side of this story is how politics–both related and unrelated–can complicate and confuse the stories at hand. Things are never as simple as we all would like them to be. An issue of a power plant is also an issue of international diplomacy, third-world development, and sex scandals with the Catholic Church.
And so the parallels continue. Obama is facing more than just the need to combat global warming and ween our country off of fossil fuel dependancy, but also being the nation’s first black president who holds in his hands two costly wars in far-off places and a hobbling economy that has forced some of the country’s biggest and most established corporations to shut their doors. Energy isn’t just about energy, and getting to where we want to be in the future is, unfortunately, a whole lot more than just pointing our EVs or hybrids in that direction and driving.
Photo Source: Itaip√∫ Binacional Corporation

Ashwin is an Associate Editor of Triple Pundit. He recently returned to the Bay Area after living in Argentina, where he wholeheartedly missed the Pacific Ocean. He is a freelance editor and media and marketing consultant.After a brief stint working in the wine world, when not staring blankly at a computer screen, you'll find him working on Anand Confections or at 826 Valencia, where he has been a long-time volunteer.

Leave a Reply