President Luiz Inacio Lula da Silva (PT) invited Paraguay President Santiago Peña to a breakfast in Buenos Aires this Thursday (3), at 8am, with the objective of resuming the dialogue on Annex C of the Itaipu Treaty, which defines the financial basis of the Binational Plant Power Tariff.
The meeting will take place at the Brazilian Embassy in the Argentine capital, where Lula is hosted to participate in the 66th Mercosur State Chefs Summit.
Lula’s gesture is an attempted rapprochement after, motivated by the complaint that the Brazilian Intelligence Agency (Abin) has spied on Paraguayan authorities involved in the negotiations. The revelation, made by UOLgenerated diplomatic crisis, and Paraguay began to charge explanations of the Brazilian government before resuming the dialogue.
Espionage of Authorities
According to the report, the operation of ABIN was planned in the Bolsonaro government, but executed already under the management Lula, and. In a statement, Planalto denied direct involvement and said the operation ended in March 2023 by the agency’s then interim director. The justification, however, is contested by documents presented in the ongoing investigation in Paraguay.
Since April, Paraguayan Chancellor Rubén Ramírez Lezcano has formally suspended the negotiations, charging more transparency on the Brazilian side.
Tariff dispute
Annex C of the Itaipu Treaty, signed in 1973, expired in 2023. After successive extensions, Brazil and Paraguay signed a provisional agreement in May to keep the rate at $ 19.28/kW by 2026. Paraguay pressed for an increase to $ 22.70, then reduced to $ 20.75, while Brazil sought to maintain or reduce values.
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The Minister of Mines and Energy, Alexandre Silveira, has already signaled that he can review the 2026 rate if the definitive agreement is not signed, which would open the margin for a new round of negotiation – and possibly a lower rate, a scenario that does not interest Paraguay.
The agreement in force benefits Brazil, which, despite accepting the $ 19.28 fare, implemented a compensation mechanism to preserve the tariff changes to the national consumer. Paraguay, on the other hand, sees in the new Annex C a chance to increase its revenue from the sale of surplus energy, and accuses Brazil of lack of transparency in negotiations.
The crisis also represents a test for Lula’s foreign policy in Mercosur. The impasse occurs on the eve of the meeting with the other presidents of the bloc – Uruguay, Argentina and Bolivia – and puts the Brazilian government’s ability to preserve their strategic partnerships in the region.
