A Secret Energy Deal With Brazil Plunges Paraguay Into Crisis

A Secret Energy Deal With Brazil Plunges Paraguay Into Crisis
President Mario Abdo Benitez speaks to the nation, accompanied by his wife Silvana Lopez Moreira, from the Palacio de Lopez in Asuncion, Paraguay, Aug. 1, 2019 (AP photo by Jorge Saenz).

Small, landlocked Paraguay has been engulfed in a political storm that has seen both its president and vice president nearly impeached in recent weeks. The crisis began on July 23 when Pedro Ferreira, the head of the National Electricity Administration, the state-owned energy company known as ANDE, resigned. Ferreira claimed that he was being pressured to add his signature to a secret energy deal with Brazil that had been negotiated behind closed doors by high-ranking officials in May. Ferreira described the deal as constituting “high treason.”

The agreement, which was cancelled by Paraguay and Brazil on Aug. 1 as the backlash against it rose, dictated unfavorable conditions for Paraguay’s electricity consumption over a period from 2019 to 2022 from the colossal Itaipu Dam, the second largest hydroelectric dam in the world, which is jointly owned and operated by the two countries. Under the terms of the deal, ANDE would have paid an estimated extra $250 million for Paraguay’s share of energy from the dam, while Brazil enjoyed major economic benefits.

President Mario Abdo Benitez initially moved to defend the secret deal, stating that it had been made to show Brazil that “the Paraguay of today is serious and doesn’t need anyone’s breadcrumbs.” However, after quickly intensifying criticism from Paraguayans and in the local press, his government changed its position, promising to demand that Brazil nullify the deal. On July 29, as outrage and anger mounted within Paraguay’s Congress, Abdo Benitez pushed four government officials linked to the signing of the agreement to resign, including Foreign Minister Luis Alberto Castiglioni and Ambassador to Brazil Hugo Saguier.

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