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Itaipú The position of the Paraguayan Government

Itaipú The position of the Paraguayan Government . Binational Hydro-electricity Commission (CEBH) Ministry of Foreign Relations (MRE), Government of Paraguay Asunción, April 2009. Contents. A. Background and definitions B. Paraguay’s initial proposal to Brazil

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Itaipú The position of the Paraguayan Government

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  1. Itaipú The position of the Paraguayan Government Binational Hydro-electricity Commission (CEBH) Ministry of Foreign Relations (MRE), Government of Paraguay Asunción, April 2009 CEBH- Negotiation of Itaipú

  2. Contents • A. Background and definitions • B. Paraguay’s initial proposal to Brazil • 1. Hydroelectric sovereignty (freedom over the use of energy) • 2. A fair price • 3. Revision of the debt and elimination of the illegitimate part of that debt • 4. Parity in management • 5. Transparency and audit • 6. Completion of outstanding works • C. The Brazilian counter-proposal • D. Paraguay’s response to the Brazilian counter-proposal • E. The possibility of agreement • F. The examples of Panama and Bolivia CEBH- Negotiation of Itaipú

  3. In 1965 Brazil militarily occupied the area around Salto del Guairá waterfalls, the key source for the future Itaipú hydro-electric project. On 22 June 1966 the Act of Foz de Iguazú was signed. This put an end to the military occupation and established that: A. The energy to be generated would be divided in equal parts. B. Brazil would pay Paraguay a “just price” for its energy purchases from Paraguay. C. Brazil has a preferential right to purchase Paraguayan energy, by which it implicitly recognises Paraguayan hydroelectric sovereignty (i.e. the possibility of third-party sales) D. Legal problems exist with respect to navigation, buoy marking and dredging of the Platine river system. These problems were later resolved by the 1992 Hidrovía Agreement but the agreement has yet to be implemented because of disagreements between Brazil and Argentina. This Act provided the basis for the Itaipú Treaty, signed on 26 April 1973. Background and Definitions (1)The Act of Foz de Iguazú CEBH- Negotiation of Itaipú

  4. It incorporates the Act of Foz de Yguazú in its preamble. Article 13 states that the energy will be divided in equal parts between the two countries. It establishes the “right to purchase” the energy that is not utilised by the other partner (n.b. this does not include the word “preferential” that appeared in the Act of Yguazú. The treaty has three annexes. Annex A establishes the administrative structure of the bi-national entity, where energy and financial decisions are taken. Annex B establishes the works to be carried out, including the sectional sub-stations and navigation works. Annex C establishes the financial terms and delivery of electricity services, as follows: i) All of the installed capacity must be contracted. According to Reversal Note 5 of 1973, Brazil, through Eletrobrás, promises that the contracted load will be the same as the installed capacity. ii) Income must be equal to the cost of production (the net figure from the previous year’s accounts are to be included in the cost of production). iii) The calculation of total cost is based on total liabilities, including in the cost of production the interest and amortization payments on loans. iv) The adjustment factor of the surplus is based on unit weight in gold. v) The arrangements in Annex C concerning contracted load and the debt amortization schedule will be revised in 2023. A. Background and definitions (2)What the treaty and its annexes say CEBH- Negotiation of Itaipú

  5. The Itaipú hydro-electric plant is owned jointly by Paraguay and Brazil (Article 1). Paraguay and Brazil create, with equal rights and responsibilities, Itaipú Binacional in order to utilize the hydroelectric resource (Article 3). Itaipú Binacional is owned jointly by Ande and Eletrobrás, with equal capital shares, and it will operate in accordance with the treaty (Article 3). Paraguay and Brazil authorise Itaipú Binacional to utilise the hydro-electric potential (Article 5). Despite this, Eletrobrás issues shares on the New York and London stock markets as if it were the sole owner of Itaipú, without having the authorisation to do so from either the treaty or Paraguay. The legality of these actions by Eletrobrás should be investigated. A. Background and definitions (3)What the treaty says CEBH- Negotiation of Itaipú

  6. The original version of Itaipú envisaged the installation of 14 generating units of 700 MW each, then increased to 18 units prior to the start of construction, with space left for two more units (Reversal Note 20 of 30 October 1978). In 1979 a Tripartite agreement was signed with Argentina establishing the limits to the variation allowed in the level of the River Paraná and establishing that no more than 18 units could be operating at the same time. Consequently, it was agreed that the installed capacity was 18 x 700 =12,600 MW. At the same time, it was agreed that Itaipú should comply with the following rules: (a) there should always be two units inactive, for maintenance and repair; (b) some capacity should always be in reserve in order to maintain the frequency of the network (reserve capacity); and (c) some capacity should be retained for the operation of the plant itself. Because of these factors, Itaipú decided that only 10,787 MW of the 12,600 MW installed capacity could be contracted A particular objection is the fact that the Brazilian electricity companies do not pay for this reserve capacity (approximately 427 MW) although they are the ones who mostly use it. Following the addition of two more units the installed capacity is now 14,000 MW (20 x 700MW) and Itaipú has raised the contracted capacity to 12,135 MW. Background and definitions (4)The installed capacity CEBH- Negotiation of Itaipú

  7. Background and definitions (5) Commencement of generation and capacity • Article 26 of the treaty states that the first turbine should come on stream in 1981. But in violation of the treaty, operations only began in 1985 – four years behind schedule. • Following the installation of two more units in 2007 the installed capacity increased from 12,600 MW to 14,000 MW. • The contracted capacity increased correspondingly in 2007 from 10,787 MW to 12,135 MW. • According to Article 3, the treaty is supposed to be equitable. Yet for technical reasons (i.e. the non-fulfilment of construction of a sectional sub-station) Paraguay can only receive a maximum 1,350 MW of capacity. By contrast, Brazil received 11,422 MW of the capacity in 2007. CEBH- Negotiation of Itaipú

  8. According to the IECO/ELC project feasibility study, Itaipú was designed to a capacity of 61,920 GWh/year of “firm energy”. This refers to the amount of energy that the plant can produce with certainty, even assuming the lowest foreseeable river flow based on historical records. The commercial generation of energy came on stream from 1984 to 1 March 1985. Although not contemplated in the treaty, this so-called “trial energy” (i.e. that generated during the first 60 days operation of each turbine), was delivered free of charge, initially to Brazil, with an equal amount later delivered free of charge to Paraguay (up to 1997). Although not contemplated in the treaty, from 1997 to 2002, another batch of free energy, called “transitional energy”, was delivered in equal parts to both countries. Although not contemplated in the treaty, in 2002 Itaipú established the new concept of “guaranteed energy”, amounting to 75,000 GWh/year. This refers to the amount of energy that Itaipú can generate, with a statistical risk of less than 5% and that is delivered (with “guarantee”) as part of the “contracted load”. The price of this “guaranteed energy” is around $42/MWh. In fact, over the past decade, Itaipú has generated an average of 90,000 GWh/year. The energy generated above 75,000 GWh/year is called “additional to guaranteed energy”, and amounts to (90,000 – 75,000) = 15,000 GWh/year. Although not contemplated in the treaty, this “additional to guaranteed energy” is delivered at a reduced price of only $5.2/MWh. Background and Definitions (6)Energy CEBH- Negotiation of Itaipú

  9. Tariff or sale price of the guaranteed energy: this is equal to the service cost (SC), for the guaranteed energy of both countries when these consume it (at $41.6 /MWh). When Brazil buys Paraguayan energy, the compensation for cession of energy is added to the SC (= $45/MWh). Service Cost (SC): according to Annex C of the treaty, this is the sum of i) the debt service, comprising amortization and interest payments, ii) the joint benefits to both parties, which include profits, royalties and indemnification, (iii) operating costs, and (iv) any balance accruing from the previous financial year. Compensation for cession (of energy): this is the only benefit from the export of Paraguayan energy to Brazil. Total Benefits that Paraguay receives: this is the sum of (i) royalties, (ii) indemnification, (iii) profits on paid-up share capital and (iv) compensation for the cession of energy. Benefits (contemplated in the treaty): a generic term comprising royalties, indemnification, profits, and compensation for cession of energy. Joint benefits (for both parties): the royalties, indemnification and profits that are established in the treaty. Tariff or sale price of the “additional to guaranteed energy”: This is the sum of the joint benefits, when each country consumes its share (5.2 US$/MWh). When Brazil acquires such “additional to guaranteed energy” from Paraguay the compensation for cession of energy is added. Sale price to a third party of Paraguayan energy from Itaipú : to date there has not been any such sale but if it happened, this would be the sum of the service cost (SC) plus the profit arising from export by Paraguay. Profit from export (to a third party): this is the difference between the sale price to a third party and the service cost (SC). It is a concept comparable to the compensation for cession of energy. Background and Definitions (7)Definitions of price and costs CEBH- Negotiation of Itaipú

  10. Background and definitions (8)The joint service cost of the electricity supply (guaranteed energy) in $/MWh • The debt service obligations are equivalent to a unit cost of $27.8/MWh (for guaranteed energy). • The operating costs amount to $8.6/MWh and the joint benefits (royalties, indemnification and profits) amount to $5.2/MWh. • Hence the total joint service cost amounts to $41.6/ MWh. CEBH- Negotiation of Itaipú

  11. A. Background and definitions (9)While the sale price of guaranteed energy that is exported amounts to $45/MWh, the compensation is only $3/MWh • The benefit to Paraguay from exporting guaranteed energy is only $3.1/MWh. • The total service cost is, as shown before, $41.6/MWh. • This compensation is equivalent to only 7% of the total tariff, which amounts to $44.7/MWh. CEBH- Negotiation of Itaipú

  12. A. Background and Definitions (10)Non-guaranteed energy is almost free • The non-guaranteed energy has a tariff that covers only the joint benefits (royalties, indemnification and profits), totalling $5.2/MWh. • If Brazil buys non-guaranteed energy from Paraguay, an extra $3.1/MWh is added as compensation. • As a result, the sale price to Brazil of Paraguayan non-guaranteed energy is extremely cheap, at $8.3/ MWh. • By contrast, the price of guaranteed energy is $41.6/MWh. CEBH- Negotiation of Itaipú

  13. Background and Definitions(11)Brazil receives 80% of the non-guaranteed energy at rock-bottom price • Brazil buys 80% of the non-guaranteed energy (around 12,000 GWh/year). • Paraguay buys the remaining 20% (3,000 GWh/year). • Brazil buys its own share of the non-guaranteed energy (7,500 GWh/year) at $5.2/MWh and buys the Paraguayan share at $8.3 $/MWh. • As we have seen, the total cost of the guaranteed energy is $41.6/MWh. • The distribution of this almost free energy should be in equal parts (Art. 13 of the Treaty), which is NOT the case CEBH- Negotiation of Itaipú

  14. A. Background and Definitions (12) The Itaipú debt • The debt of Itaipú Binacional as reported in its 1986 accounts, after two years of operation, was $14,497m. • The outstanding debt reported in its 1991 accounts, when Itaipú was completed, had risen to $16,901m. • After more than 22 years of ‘debt amortization’, the outstanding debt in the 2007 accounts was even higher, at $18,701m. CEBH- Negotiation of Itaipú

  15. A. Background and Definitions (13) Amortization of the Itaipú debt • In its annual accounts, Itaipú reported amortization payments totalling $16,400m from 1987-2007 (in addition to interest payments of $16,188m). • Yet the reported outstanding debt rose from $14,497m in 1986 to $16,901m in 1991. • It is extraordinary that, despite amortization payments greater than the outstanding debt in 1986, this debt - instead of falling to zero - actually rose to $18,701m in 2007. CEBH- Negotiation of Itaipú

  16. A. Background and definitions (14) Sale price lower than the cost • In 1985 Eletrobrás calculated that, in order to pay off the debt by 2023, the sale price should be $17.4/kW-month in constant prices. • The finance department of Itaipú Binacional, which is under Brazilian control, came to the same conclusion (cost = $17 /kW-month) in 1986. • Yet under pressure from the Brazilian electricity companies, FURNAS and ELETROSUL, Itaipú fixed the sale price at $10/kW-month. • Because of that, the sale price today is $22.5/kW-month (because the debt was not paid on time). CEBH- Negotiation of Itaipú

  17. A. Background and definitions (15) Benefits that get smaller • When the treaty was signed in 1973, Paraguay could buy 19.5m barrels of oil with the dollars that it should have received as benefits in the form of royalties, profits, indemnification and cession of energy, as established in Annex C. • Today (April 2009), with a world oil price of $50/barrel, and with benefits of $360m/year, Paraguay can only buy 7.2m barrels/year, less than 40% of what it could buy 36 years ago. • This comparison highlights the fact that the requirement to maintain the dollar value of these benefits, as stipulated in Article 15 of the treaty, has not been met, a situation recognised in the annual accounts of Itaipu, as follows: • The parity of the US dollar to its weight in gold (Article 15 of the treaty) was modified by indices that did not ensure the obligation to maintain a constant dollar value. • The payment of royalties and compensation for cession of energy was not made on a monthly basis, as stipulated in Article 3, Annex C. • The total energy generated and measured in the power plant was not used for calculating the royalties and indemnification (as stipulated in Article 3, Annex C). Instead, a lower value was used. • The US dollars paid for the readjustment of profits should have been paid from 1985 (according to Article 15) but only started to be paid in 2002. CEBH- Negotiation of Itaipú

  18. 1. Recuperation of hydroelectric sovereignty (freedom over use of the energy), within the framework of preferential rights and regional integration. 2. A fair price for the energy exported to Brazil. 3. Revision of the debt and elimination of its illegitimate portion. 4. Parity in management. 5. Audit and transparency. 6. Completion of the outstanding works (sectional sub-station and navigation works). B. Paraguay’s initial proposalto Brazil CEBH- Negotiation of Itaipú

  19. Other markets pay much more (Paraguay would receive 20 times more in profits by exporting to Chile than the current compensation from Brazil - calculation based on a firm offer). The treaty does not need to be renegotiated, since: A. Paraguay has never renounced its sovereignty. B. The Act of Foz de Yguazú is incorporated in the preamble of the treaty and forms part of it. All that is required is to interpret the treaty correctly. This depends on the political will of the Brazilian executive. 1. Hydroelectric sovereignty (a)This depends on the will of the Brazilian president. CEBH- Negotiation of Itaipú

  20. Hydroelectric sovereignty (b)Chile pays much more • The Chilean market can pay a price ($120/MWh) that is much higher than the price at which Brazil buys Paraguayan guaranteed energy($45/MWh). • Even though the costs of exporting to Chile are higher ($60/MWh) than the cost of production of Itaipú ($42/MWh), the profit from exporting to Chile ($60/MWh) is 20 times higher than the only benefit that Paraguay gets from exporting to Brazil, namely the compensation of $3/MWh. CEBH- Negotiation of Itaipú

  21. Gradual reform could involve the following: A. As long as there is no interconnection between Itaipú and Yacyretá, let Paraguay export the “additional to guaranteed energy” to Brazil. B. When an interconnection does exist between Itaipú and Yacyretá, let Paraguay export to third parties, subject to the capacity of the regional network. C. From 2023, Paraguay should have the freedom to dispose of its energy as it sees fit. Hydroelectric sovereignty (c)Gradual reform is acceptable CEBH- Negotiation of Itaipú

  22. Paraguayan sovereignty should be viewed within the framework of regional energy integration within South America. Some 85% of the electricity exported in the region comes from Paraguay. And yet we are not allowed to dispose of it as we wish!!! There is no interconnection within South America so powerful as that which could be constructed between Itaipú and Yacyretá. Power outages already cause enormous losses to industrial output in Brazil ($15,000m in 2001) and in Argentina ($4,000m in 2007). These could be avoided by such an interconnection. Everyone would benefit. Hydroelectric sovereignty(d)A framework for integration – everyone is a winner CEBH- Negotiation of Itaipú

  23. Brazil says that Paraguayan energy from Itaipú is relatively expensive and that consequently it cannot afford to pay a higher price. If so, then the question of sovereignty is easily resolved, since Paraguay does not want to harm Brazil by making it pay for energy that it says is expensive. By selling its energy to third parties, it is these countries that would be paying Paraguay a just price. And as Brazil says that it has cheaper sources of energy (e.g. in the River Madeira), it will benefit. Furthermore, all parties benefit from the regional energy integrationthat would be created. Hydroelectric sovereignty (e)If Paraguayan energy is expensive, then the problem is easily resolved. CEBH- Negotiation of Itaipú

  24. Article 12 of the treaty states that the energy generated will be divided in equal parts. The cheapest forms of energy (such as the “test” energy and the “transition” energy) were shared in equal parts. By contrast, since 2002, Brazil takes 80% of the “additional to the guaranteed energy”, leaving Paraguay with the remaining 20%. Paraguay demands compliance with Article 12 of the treaty. Hydroelectric sovereignty (f)The right to 50% of the cheap energy CEBH- Negotiation of Itaipú

  25. The Brazilian electricity system has reserved a considerable amount of capacity in order to maintain the frequency of its network. In contravention of the treaty, it has not paid for this reserved capacity, which has been made available to it. Paraguay has also reserved capacity for its own network, but on a much lesser scale. Paraguay should be given an equal amount of free capacity. Hydroelectric sovereignty (g)The right to 50% of free reserve capacity CEBH- Negotiation of Itaipú

  26. Paraguay is demanding a just compensation (JC), which is equal to the difference between a just price (JP) and the service cost (SC). In order for the compensation to be just, the price should be that of the Brazilian regulated market and the service cost should not include the illegitimate portion of the Itaipú debt. We refer to the “regulated price” in the Brazilian wholesale electricity market because the “free market” price is unstable, while the “regulated price” is based on long term contracts. We also state that the service cost must be the legitimate one, in other words excluding the debts that should be paid by those who caused them, which are overwhelmingly Brazilian electricity companies. 2. A fair price (a)Definition of price and just benefits CEBH- Negotiation of Itaipú

  27. According to a study by ANDE, the “just compensation” for the export of Paraguayan electricity to the regulated market of Brazil, should be around $900m/year in 2009 ($800m/year more than current receipts, which are around $100m/year). This calculation was made without reducing the cost of service provision. But if the debt is halved, the cost of service provision could be reduced by $1,000m/year (total debt service costs are more than $2,000m/year). Consequently, the compensation to Paraguay could rise by $500m/year because of this factor. 2. A fair price (b)At the prices of the regulated Brazilian market and with reduced costs, Paraguay should receive an extra $1,300m/year CEBH- Negotiation of Itaipú

  28. 2. A fair price (c)Limited incidence in the Brazilian tariff • Brazilian electricity consumption is around 400m MWh/year. • If the just benefits to Paraguay were raised to around $900m/year, the incidence on the Brazilian sale price (without considering the reduction in costs) would at the most be (800 ÷ 400) = $2/MWh. • For an average tariff of $100/MWh (or a little more), the incidence would be only 2%, which is very small. CEBH- Negotiation of Itaipú

  29. The Itaipú debt has risen because: A. Much of the investment cost (85% in Brazil, 15% in Paraguay) was over-priced. In Paraguay, at least, we have evidence of considerable over-invoicing. B. The loans were expensive (interest rates of 12% and above per year, much higher than LIBOR and PRIME RATE). C. Debt repayments were not made on time by the Brazilian electricity companies (98% of the total). 3. The debt issue (a)Reasons for the growth in the debt CEBH- Negotiation of Itaipú

  30. Tariff Studies carried out in 1985 and 1986 by Eletrobrás and the Brazilian-controlled Finance Department of Itaipú calculated that the sale price should be just over $17/kW-month in real terms so that the debt could be totally paid off by 2023. The studies noted that if the tariff remained at $14.75 /KW-month (as had been fixed in February 1986) the debt would climb to $170,308m by 2023 (more than eight times greater than the current debt). However, following pressure from the Brazilian electricity companies, Furnas and Eletrosul, a tariff of only $10 /kW-month was agreed. The establishment of this tariff so far below the cost of production, and contrary to the treaty, gave rise to a “spurious” or illegitimate debt. This debt was assumed by Itaipú but should have been paid by Furnas and Eletrosul (98%) and by Ande (2%), as established by Article 4.2 of Annex C of the treaty. 3. The debt issue (b)Sale price below cost CEBH- Negotiation of Itaipú

  31. Article 13 of the treaty states that all available installed capacity must be contracted, a stipulation that has not been complied with in regard to the reserve capacity. The situation worsened from 1988 to 1990 when Brazil reduced the amount of capacity that it contracted in order to utilise more of its own energy. This failure to comply with the treaty, by not contracting the available installed capacity and by fixing a tariff below cost, were the two factors that led to the creation of a spurious and illegitimate debt up to 31 December 1996. The resulting accumulated liabilities of $4,193m were wrongfully assumed by Itaipú Binacional because it was the obligation of Furnas and Eletrosul (98%) and Ande (2%) to do so, according to Art. 4.2 of Annex C. In May 1997 the Bicameral Investigation Commission of the Paraguayan Congress concluded that the resolutions of the Administrative Board and the Executive Board of Itaipú Binacional were invalid because they repeatedly violated the treaty in this respect. 3. The debt issue (c)Illegitimate debt totalled $4,193m at 31 December 1996 CEBH- Negotiation of Itaipú

  32. The Itaipú debt can be analysed according to another criteria. The level of the debt as registered in the accounts for 1986, after two years operation, amounted to $14,497m. The accounts also register that loans totalling $16,400m were “amortized” from 1986 to 2007. According to the treaty, there must be no net deficit on the balance sheet. Therefore, it is inexplicable that the outstanding debt was $18,701m at end-2007, i.e. more than the 1986 figure. The outstanding debt today should be zero, because of the figure imputed for amortization. 3. The debt issue (d)According to the Itaipú accounts, the debt has already been paid off CEBH- Negotiation of Itaipú

  33. Since its commencement in 1974, Brazil has controlled the general, technical and financial management of Itaipú Binacional. Paraguay has never been enabled to control the energy and finances of Itaipú. By contrast, in Mercosur there is a rotating presidency. Paraguay demands: A. to head the technical and financial departments for the first time in 35 years. B. Simultaneous co-management in all the most senior posts in Itaipú Binacional. C. equal Paraguayan participation with Brazil in all physical investments and purchases as well as in the management of Itaipú revenues. 4. Parity in management CEBH- Negotiation of Itaipú

  34. Brazil has accepted that the National Audit Office of the Republic of Paraguay should be allowed to audit the bi-national debt of Itaipú. This is a decision of historic significance. Paraguay proposes, furthermore, that the two national audit bodies (of Paraguay and Brazil) should carry out regular (and separate) audits of the accounts of Itaipú Binacional. 5. Audit and transparency CEBH- Negotiation of Itaipú

  35. Paraguay has demanded that the outstanding works for Itaipú should be completed, as follows: A. The sectional sub-station, which would allow access to 7,000 MW of capacity (at present Paraguay can only access 1,350 MW (compared with Brazil’s access to 12,000 MW). B. The river navigation works, to enable the continuation of river traffic currently interrupted by the dam. Brazil has accepted these two demands but their implementation should be hurried up. 6. Completion of outstanding works CEBH- Negotiation of Itaipú

  36. 1. A doubling in the level of compensation for cession of energy (an increase of $115m/year) because “it cannot afford more”. 2. Creation of a regional development fund, amounting to $100m/year. 3. Opening of a $1,500m credit line, “tied” to infrastructure projects. 4. That Paraguay should contract energy according to a 10 year timetable (currently it is a two year timetable). C. The Brazilian counter-proposal CEBH- Negotiation of Itaipú

  37. C1. Increase in the compensation by $115m/year (a)Brazil says the increase is considerable yet it only amounts to 0.28% • Brazil argues that it cannot afford more than $115m/year because Paraguayan energy from Itaipú is already very expensive (and more expensive than from Madeira). • Given that 400m MWh/year are sold in Brazil, in fact the increase is only (115 ÷ 400)= $0.28/MWh. • Based on an average tariff of $100 /MWh, this represents an increase of only 0.28%. • So it is incorrect to argue that the increase is costly for the Brazilian electricity system. CEBH- Negotiation of Itaipú

  38. Paraguay does not accept such a small increase in the compensation for its energy ceded to Brazil. In addition, Brazil has not put forward any proposal concerning two of its fundamental demands: the debt issue and hydroelectric sovereignty. Any solution must be based on a recognition of Paraguay’s hydroelectric sovereignty. . D. Paraguay’s response to the Brazilian counter-proposal CEBH- Negotiation of Itaipú

  39. D1. Just benefits must match their 1973 value • At a minimum, the real value of the benefits to Paraguay should be equal to that which the Brazilian military dictatorship offered to the Paraguayan dictator, Alfredo Stroessner back in 1973. • Under the 1973 treaty, total benefits (from compensation, royalties, profits and indemnification), of around $40m/year at the prevailing world petroleum price of $2.18/barrel, would enable Paraguay to import around 19.5m barrels/year. • At a minimum, Paraguay insists that the real purchasing power of benefits today, as measured in terms of imported petroleum, should match that agreed by Brazil in 1973. • At today’s petroleum price of $70/barrel, in order to import the same 19.5m barrels/year, the benefits to Paraguay should be around $1,400m/year, i.e. $1,000m higher than what it currently receives (almost $400m/year). CEBH- Negotiation of Itaipú

  40. E. The possibility of agreement • Any agreement must be based on acknowledgement by Brazil of Paraguay’s hydroelectric sovereignty, thereby opening the door to correct interpretation of the treaty. • Paraguay must be enabled to decide the use of its 50% energy share, including the cheap “additional to guaranteed energy”. • Furthermore, the benefits to Paraguay must be genuinely just. • For that to happen, the sale price must be aligned with that of the regulated Brazilian market and the illegitimate debt must be eliminated. • Advances must also be made in other outstanding issues (co-management, audit and uncompleted investments). • Advances here depend exclusively on President Lula (and should not pass through the Brazilian Congress). CEBH- Negotiation of Itaipú

  41. For many years Panama tried to negotiate with the United States. It succeeded when the Panamanian people mobilised on a massive scale in demanding the return of the Panama Canal. In Bolivia, citizens mobilised and voted in a referendum in order to regain national sovereignty over its oil and gas resources. As a result, Bolivia was able to regain control over its natural gas. F. A final point The examples of Panama and Bolivia CEBH- Negotiation of Itaipú

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