Brazil foreign ministry studies Itaipu compensation package for Paraguay

[Report Pedro Paulo Rezende: "Brazil To Offer Package of Benevolent Measures"]

Foreign Ministry studies compensation to be proposed to the country following inauguration of President-elect Fernando Lugo. Itaipu energy tariff might increase, but not to level demanded by neighbour.

The Foreign Ministry is preparing a "package of benevolent measures" that will be offered to Paraguay after the president-elect, Fernando Lugo, takes office next August. The proposal, ordered by Foreign Minister Celso Amorim, "will be quite broad, offering a varied range of compensation," according to a Brazilian diplomatic source. "It could even include a tariff adjustment, but not at the level desired by the transition team advisers in our neighbouring country, established on the basis of the rising price of barrel of oil," he continued. "Last year, according to the National Operator for the Electrical System [ONS], 300m dollars was paid for the surplus energy from Itaipu. The future head of State wants this sum to come to 2bn dollars."

During the campaign Lugo, a former bishop from San Pedro, one of the poorest regions in his country, promised a complete review of the Itaipu Treaty. Under the accord, the party unable to use up its energy quota is obliged to sell the surplus to its partner at cost price. Celso Amorim confirmed the intention to discuss the matter: "There is goodwill on Brazil's part, there is a sense of justice and, at the same time, there is realism. We will have to combine the two." The minister's statements came during a conversation with reporters at Planalto Palace, where he attended the ceremony to celebrate the 35th anniversary of the Brazilian Agriculture and Livestock Research Enterprise [Embrapa], in which President Luiz Inacio Lula da Silva participated.

The minister once again said that he never mentioned altering the Itaipu Treaty or raising the tariffs. "I used the term price in the sense of financial compensation for a service rendered, but I haven't yet spoken to any Paraguayan authority since Fernando Lugo's victory," he explained. On Monday, in Ghana, Amorim had said that the objective of the future talks will be to find out how Paraguay "can receive adequate compensation for its energy" without altering the Itaipu Treaty. At the time, the minister added: "We have to make sure that Paraguay obtains the maximum benefit in view of its partnership with us regarding Itaipu."

Secret

The compilation of the "package of benevolent measures" is in the hands of the Department of the Americas. The Foreign Ministry intends to keep the proposals under wraps until August. "Leaking them would be counterproductive. Lugo isn't president of the Republic yet, and we have to prevent them, at all costs, from being discredited before being officially introduced," said one source at the Brazilian Foreign Ministry. The only proposal already divulged is the financing of a transmission line to Asuncion, in the amount of 100m dollars, announced by Amorim during Lugo's visit to Brazil early this month.

"There are ways of increasing the compensation for the energy without breaching the terms of the treaty," reiterated the source. "In the past, we removed compensation clauses that linked interest rates to US inflation, and we were able to increase the amount paid to Asuncion. We can find a similar mechanism." According to the diplomat, Minister Celso Amorim believes that a good business deal is one in which everyone comes out ahead. "With that in mind, it is in our interests that Paraguay profit in its partnership with Brazil. In the past, together with Argentina, we created a fund to finance the smaller economies of Mercosur [Common Market of the South]. Uruguay and, principally, Paraguay have already benefited from this mechanism, which was extremely beneficial to the bloc."

Funny men

Bolivian President Evo Morales said that he had welcomed Fernando Lugo to the "axis of evil," a reference to the expression coined by George W. Bush. Hugo Chavez of Venezuela, for his part, asserted that the United States will no longer be able to call leftist leaders "devils," given that Lugo was formerly a bishop.

Source: Correio Braziliense website, Brasilia, in Portuguese 24 Apr 08

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