Brazil, Paraguay agree on $360-million energy deal

Brazil and Paraguay reached a landmark agreement regarding operation of the jointly-owned Itaipu dam on their common border. Through the deal, Brazil would triple the compensation paid to Paraguay annually to around $360 million for the energy generated from the world's largest hydro-electric dam by output.

Brazilian president Luiz Inacio Lula da Silva announced the agreement at a special ceremony held in the Parguayan capital Asuncion on Saturday, after months of  negotiations which were stuck due to disagreement over the terms.

Lula said the agreement is part of Brazil's drive to promote economic development in the region. He also promised to fund various infrastructure projects through bank loans.

''It is not of Brazil's interest that it develops and our neighbours don't grow and progress simultaneously,'' Lula said. ''Bigger countries have the obligation to help smaller countries achieve a qualitative leap in their development and competitiveness,'' the president added.
Brazil has also agreed to provide another $450 million towards financing the construction of a 350 km power transmission line from Itaipu to Asuncion.

The Itaipu dam, constructed at a cost of around $19.6 billion, is located on the Parana river with a huge hydroelectric power generating capacity of 14,000 megawatts annually, which is second only to the Three Gorges dam being completed in China. Both the countries are legally bound by the 1973 treaty that laid the foundations for Itaipu, under which they share equally the power generated.

Itaipu with its 20 units of 700 megawatt each produced a record 94.68 billion kilowatt-hours of electricity in 2008. The dam supplies nearly 20 per cent of the power requirement of Brazil-for which it currently pays $120 million annually, and 90 per cent Paraguay's energy need.