Brazil and Paraguay have finalized an agreement to revise the Itaipú Dam’s financial terms, addressing longstanding disputes over tariffs and revenue sharing. Set to be signed by May 30, 2025, the deal allows Paraguay to sell surplus electricity directly in Brazil while significantly reducing tariffs, promising economic benefits for both nations.
Brazil and Paraguay have reached a landmark agreement to amend the financial terms surrounding the Itaipú Binational Hydroelectric Dam, one of the largest hydroelectric plants globally. This agreement, anticipated for signing by May 30, 2025, addresses long-existing disputes over energy tariffs and revenue allocations between the two nations, marking a significant shift in their economic partnership.
Operational since 1984, the Itaipú Dam plays a crucial role in energy provision, meeting 86.4% of Paraguay’s electricity needs, while contributing 8.7% of Brazil’s energy consumption. The initial treaty signed in 1973 required Paraguay to sell surplus energy solely to Brazil at predetermined rates, a situation that created tension over revenue control and energy pricing.
The revised deal will take effect in 2026, ending Brazil’s payments related to the dam’s construction debt, which was settled in 2023. Energy tariffs are expected to decrease to a range of $10 to $12 per kilowatt-month, focusing solely on operational expenses. Before this change, tariffs stood at $19.28 per kilowatt-month, reflecting a 15.4% increase despite Paraguay’s initial rate request of $22.60.
Crucially, Paraguay will now have the opportunity to sell its excess electricity directly within Brazil’s competitive market, eliminating past restrictions. This new capability, which could increase Paraguay’s annual revenues by $600 million by 2026, enables more favorable negotiations based on market pricing, thereby bolstering Paraguay’s economic growth.
In Brazil, consumers could see reductions in electricity costs, potentially saving up to R$16.66 monthly per household due to lower tariffs. Although the agreement is celebrated as advantageous for both countries, it poses challenges; Paraguay will need to channel investments into infrastructure improvements, while Brazil must prepare for intensified competition in its energy sector. Overall, this agreement not only addresses historical issues but also enhances collaborative economic growth.
In summary, the new agreement between Brazil and Paraguay regarding the Itaipú Dam represents a crucial shift in their energy cooperation. Key highlights include the elimination of construction debt payments by Brazil, reduced energy tariffs, and expanded selling rights for Paraguay’s surplus electricity. These changes promise economic benefits for both parties while addressing decades of disputes over energy management and tariffs, setting a course for enhanced bilateral relations.
Original Source: news.az
