Friday, May 8, 2009

Leaders meet over power plant row

The presidents of Brazil and Paraguay are meeting to try to resolve a dispute over the Itaipu hydro-electric plant, one of the biggest in the world.

The two countries run the project jointly. But Paraguay uses less power than Brazil.

It says it is obliged to sell its surplus to Brazil at an unfair price.

President Fernando Lugo of Paraguay wants to renegotiate the deal, a demand opposed by Brazilian President Luiz Inacio Lula da Silva.

Source of tension

Paraguay is one of the poorest countries in South America and its president comes to Brazil keen to resolve what has been a long-running source of tension between the two sides.

The Paraguayan government believes it is not getting a fair share of the profits from the massive power project.

As the smaller of the two countries it only takes a limited amount of the electricity produced at the plant.

Under the terms of the Itaipu treaty which was negotiated in the 1970s, Paraguay says it is obliged to sell its surplus energy to Brazil at prices well below what it could get on the open market.

The Brazilians say they covered most of the cost of constructing this vast project, and argue that their smaller neighbour has to pay its fair share.

However the debt is huge and Paraguay has threatened to pursue an international court case to dispute the amount involved.

In recent weeks Brazilian ministers have been working on proposals to resolve these contentious issues, but so far there is no sign that what is on offer is enough to bridge the gap between both sides.

President Lugo made it a key part of his election campaign that his country would renegotiate the treaty of Itaipu, arguing that control over the country's energy was a question of national sovereignty.

For the moment talks are continuing, but with little sign of agreement, it may be one for the lawyers after all.