“Brazil needs to create opportunities for neighbors to grow”, says Lula

President Luiz Inácio Lula da Silva travels this Monday (14) to the inauguration of the new president of Paraguay, Santiago Peña. Lula will participate in the ceremony to take place this Tuesday (15th) in Asuncion.

“Brazil needs to grow but its neighbors need to grow. Brazil needs to create opportunities for its neighbors to grow”, said Lula, in the Conversation with the President this Monday.

President Lula’s participation is part of the Brazilian government’s objectives of resuming foreign policy, undermined during the Bolsonaro years.

A government candidate, Peña was elected on April 30 with 42.7% of the votes against 27.5% for his main opponent, Efraín Alegre. Conservative, the new president of Paraguay is part of the Colorado party, which has ruled the country for almost 70 years (with the exception of former bishop Fernando Lugo, who was struck down in June 2012).

Peña has visited Brasilia twice since he was elected and had two agendas with Lula, on May 16 and July 28. On both occasions, the two discussed the Itaipu agreement.

“When we decided to build a 500 MW transmission line from Foz do Iguaçu and Itaipu to Asunción, there was a lack of electricity every day in Asunción. And we stayed here thinking, how can a country have half of Itaipu and still lack energy? The objective was that Brazilian companies would also produce in Paraguay to generate jobs, create job opportunities for those people because they deserve it as much as we do”, completed Lula

After 50 years, Brazil and Paraguay are working on revising Annex C of the Itaipu Treaty, which provides for the project’s financial bases and provision of electricity services. The binational company has an annual budget of around US$ 3.5 billion, of which almost 70% was destined to pay Paraguay’s debt with the construction of the hydroelectric plant on the Paraná River.

With the discharge of the debt, in February of this year, Annex C may be revised, as provided for in the text of the treaty itself.

Each country is entitled to half of the energy produced by the plant, but Paraguay only uses about 15% of the total. According to the treaty, Brazil has preference in purchasing excess energy from Paraguayans. This is one of the terms that Paraguay wants to review in the negotiation, so that the country has more autonomy over its surplus energy, opening up the possibility, for example, of selling it to other countries or even placing it on the free market in Brazil.

Itaipu Binacional is a world leader in the generation of clean and renewable energy, with 20 generating units and 14 gigawatts of installed power. In 2022, with 69.8 million megawatts of energy generated, the plant supplied 8.6% of the Brazilian electricity market and was responsible for 86.3% of Paraguayan consumption.

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Commercial partnership, security and other matters

Brazil is Paraguay’s main trading partner, a country that is home to the third largest Brazilian community abroad, behind only the United States and Portugal. It is estimated that 245,000 Brazilians currently live in Paraguay. The bilateral relationship covers issues of strategic interest to both nations, such as the Itaipu Binacional power plant, combating illicit acts and reciprocal trade and investment.

BILATERAL RELATIONSHIP – Brazil, with 36.9% of total exports, is the main destination for Paraguayan exports, according to information from the Central Bank of Paraguay. In 2021, Brazil moved to the first position among the origins of foreign direct investments in Paraguay, reaching US$ 904 million and surpassing the United States (US$ 892 million).

ENERGY – In the field of energy integration, Brazil and Paraguay are closely linked by Itaipu Binacional, which accounts for 8.72% of the Brazilian electricity demand and is responsible for 86.4% of the electricity consumed in the neighboring country.

On April 26, 2023, it was 50 years since the signing of the Itaipu Treaty and, on February 28, 2023, the debt contracted by Itaipu Binacional for its construction was settled, through the payment of the last installments of the loan assumed in the 1970’s.

INFRASTRUCTURE – The second international bridge over the Paraná River (Integration Bridge) and the international bridge over the Paraguay River are two of the highlights among the recent commitments assumed by Brazil and Paraguay.

The construction of the Integration Bridge, the result of a bilateral agreement signed in December 2005, began in August 2019. The stage of physical execution of the works exceeds 98.88% and for its conclusion, only finishing remains. The construction of road accesses is in progress.

The Agreement between Brazil and Paraguay for the construction of an international road bridge over the Paraguay River between Porto Murtinho and Carmelo Peralta, which is part of the Bioceânico Road Corridor, was signed in 2016. The work started in January 2022, with an estimate of Completion in December 2024.

DEFENSE – In 2021, the Agreement for Brazilian Military Cooperation in Paraguay was renewed for five years, which completed 80 years in 2022. In 2020, a complementary agreement between the Brazilian Air Force and the National Directorate of Civil Aeronautics of Paraguay was signed to repress the traffic of aircraft involved in illicit activities.

Signed in 2007, effective the same year, the Framework Agreement on Cooperation in Defense Matters encompasses the exchange of information, training of personnel, academic activities and the implementation of projects for the application of defense technology. The embassy in Asunción currently has military attaches from the three Forces.

Brazil and Paraguay also maintain extensive cooperation in the fight against illicit acts, with joint work between the police authorities of the two countries in matters of intelligence, institutional training, arrest of criminals, seizure of assets, among other joint actions. Paraguay, in cooperation with Brazilian authorities, has arrested, extradited or handed over fugitives wanted by Brazilian justice.