Stretching for five miles throughout the Paraná River between Paraguay and Brazil, Itaipu is likely one of the world’s strongest hydroelectric dams. In 2016 alone, the binational facility, which has an put in capability of 14,000 megawatts, produced sufficient vitality to satisfy Paraguay’s electrical energy demand for greater than seven years. Itaipu is the most costly single object on Earth, in line with Guinness World Information. Additionally it is some of the controversial—and now the middle of a spying scandal that’s citing a bitter, decades-old rivalry.
Brazil and Paraguay constructed the shared dam 50 years in the past to defuse a border disaster. However Itaipu’s development was mired in deep corruption, and the ultimate price (together with subsequent debt repayments) spiraled to greater than $63 billion. Paraguayans even have lengthy complained that the 1973 Itaipu Treaty, signed between two navy dictatorships, is unfair. Notionally, the dam is a joint mission, with the vitality it produces break up 50/50. But for many years, the treaty has obliged the smaller, much less industrialized nation of Paraguay (inhabitants 6 million) to cede its surplus energy to Brazil (210 million) at bargain-basement charges.
Stretching for five miles throughout the Paraná River between Paraguay and Brazil, Itaipu is likely one of the world’s strongest hydroelectric dams. In 2016 alone, the binational facility, which has an put in capability of 14,000 megawatts, produced sufficient vitality to satisfy Paraguay’s electrical energy demand for greater than seven years. Itaipu is the most costly single object on Earth, in line with Guinness World Information. Additionally it is some of the controversial—and now the middle of a spying scandal that’s citing a bitter, decades-old rivalry.
Brazil and Paraguay constructed the shared dam 50 years in the past to defuse a border disaster. However Itaipu’s development was mired in deep corruption, and the ultimate price (together with subsequent debt repayments) spiraled to greater than $63 billion. Paraguayans even have lengthy complained that the 1973 Itaipu Treaty, signed between two navy dictatorships, is unfair. Notionally, the dam is a joint mission, with the vitality it produces break up 50/50. But for many years, the treaty has obliged the smaller, much less industrialized nation of Paraguay (inhabitants 6 million) to cede its surplus energy to Brazil (210 million) at bargain-basement charges.
In 2023, each nations paid off the final installment of Itaipu’s development debt, and key phrases of the treaty elapsed. Since then, a bilateral renegotiation, carried out behind closed doorways, has held out a glimmer of hope that Paraguay might wrest a extra aggressive worth for its hydropower, together with the appropriate to promote it to personal vitality suppliers in Brazil. Brazil, in the meantime, has sought to retain entry to the cut-price vitality that has provided roughly a fifth of the nation’s demand.
The revision of the Itaipu Treaty is of “transcendental” significance for Paraguay, mentioned Mercedes Canese, a former Paraguayan vice minister of mines and vitality. “Brazil has harmed Paraguay enormously. This is a chance to see what was executed incorrect, appropriate it, and make amends.”
Outdoors gamers are additionally taking discover of the renegotiation’s potential dividends. Throughout a U.S. Senate listening to in Could, Secretary of State Marco Rubio talked about the talks, noting that Paraguay’s low cost, considerable energy offers it an “huge alternative” to turn into a frontrunner in synthetic intelligence, encouraging “sensible” buyers to ascertain knowledge facilities within the nation.
This febrile combination of geopolitical rivalry, technological competitors, and historic grievance burst into the open in late March. Brazilian information outlet UOL revealed that Brazil’s nationwide intelligence company, ABIN, had infiltrated the communications of some half a dozen Paraguayan officers concerned within the Itaipu negotiations.
A assertion from Brazil’s Ministry of Overseas Affairs sought to downplay the severity of the hack. It mentioned the digital snooping had begun beneath former President Jair Bolsonaro, who ruled from 2019 to 2023, and was halted as soon as President Luiz Inácio Lula da Silva grew to become conscious of it almost three months after taking workplace in January 2023. The Lula administration “categorically” denied any involvement in spying and highlighted Brazil’s “shut partnership” with Paraguay, together with through Mercosur, the South American commerce bloc. It additionally promised a complete investigation into the digital espionage.
Such reassurances weren’t sufficient for Paraguayan President Santiago Peña, who ordered an inquiry, recalled Paraguay’s ambassador to Brazil for consultations, and summoned Brazil’s consultant in Asunción, Paraguay’s capital, to demand an evidence. Paraguayan Overseas Minister Rubén Ramírez Lezcano suspended the Itaipu talks—which had been attributable to conclude by the tip of Could—till Brazil supplied a full accounting of the “intelligence motion ordered in opposition to our nation,” describing the hack as a “violation of worldwide regulation, the interference within the inside affairs of 1 nation in one other.”
The diplomatic disaster stirs up a deep resentment “within the nationwide imaginary” in opposition to Brazil, Paraguayan political scientist Miguel Carter mentioned. This dates again to Paraguay’s 1864-70 warfare in opposition to Argentina, Brazil, and Uruguay, which noticed half of Paraguay’s inhabitants die by some estimates, primarily from illness and hunger. Interviewed by Argentina’s Radio Mitre in April concerning the espionage case, Peña invoked the identical “warfare of extermination” and Brazil’s six-year occupation of Paraguay that adopted. “Sadly, this episode opens these previous wounds,” he added. “As a rustic, we’re extraordinarily involved.”
The scandal has continued to simmer as additional details about the dimensions of the clandestine exercise has come to mild. On June 18, UOL revealed that the spying wasn’t a one-off hack. Slightly, it was a long-standing Brazilian surveillance program named Operation Duque and had obtained categorized Paraguayan paperwork—together with a key speech by Paraguay’s then-foreign minister shortly earlier than he delivered it in March 2023—and that it continued till June of that 12 months, six months into Lula’s time period. The outlet additionally urged that at the very least one Paraguayan diplomatic official had collaborated with the info breach.
Peña and Lula met on the sidelines of a Mercosur summit in Buenos Aires on July 3. The Paraguayan president subsequently posted on social media that they’d a “frank and productive dialogue.” He mentioned they’d mentioned the Itaipu renegotiations and the necessity for a “truthful and balanced deal,” including that he had expressed his “concern over the espionage case” and repeated Paraguay’s demand for an evidence within the pursuits of “respect and dialogue.”
The blow-up has come at a delicate second for Mercosur, which is polarized between leftist governments in Bolivia and Brazil, the unconventional libertarianism of Argentine President Javier Milei, and Peña’s deepening social conservatism. Relations between the Lula and Peña administrations had already been plunged into the deep freeze earlier in March, earlier than the primary UOL investigation was printed, when 5 progressive governments—together with Brazil, Bolivia, and Uruguay—abruptly withdrew their help for Lezcano’s bid to turn into the following secretary common of the Group of American States. In an additional signal of widening ideological divisions, one ABIN official even accused the CIA of in search of to fire up Paraguayan public opinion in opposition to Brazil.
“If the falling out between the 2 nations grows and deepens, it might have an effect on cooperation on different points,” Argentine Paraguayan foreign-policy analyst Julieta Heduvan mentioned, citing joint efforts to deal with narcotrafficking. The deadlock over Itaipu-related espionage will even make it tougher to current a united entrance in opposition to U.S. President Donald Trump, who has imposed a ten p.c levy on most South American nations, together with these in Mercosur. In the meantime, Paraguay’s ambassador has but to return to Brasília. “It’s a severe second when an allied nation, negotiating an vital bilateral challenge, makes use of a [surveillance] software like this,” Heduvan mentioned. “There’s a really clear sufferer and perpetrator.”
But whereas Brazil advantages from prolonging the uneven establishment, time is working in opposition to Paraguay. Though almost 100% of the nation’s electrical energy demand is provided by hydropower, business our bodies now forecast that Paraguay’s leftover vitality will probably be completely accounted for throughout the subsequent few years. In 2024, the nation used greater than 30 p.c of the dam’s whole vitality, a pointy soar from 20 p.c in earlier years. Local weather change is sapping water ranges within the Paraná River, which drives Itaipu’s 20 generators, and demand for air con in Paraguay is spiking because the temperatures climb towards 100 levels Fahrenheit in the summertime. Power-intensive industries, together with cryptocurrency mining, are additionally consuming a higher share of the nation’s electrical energy.
The Peña administration is scrambling to discover further vitality sources, together with nuclear, photo voltaic, and smaller hydroelectric dams. “At the moment, we’ve a robust weapon within the negotiations: our electrical energy surplus. Tomorrow, we received’t,” mentioned Canese, the previous minister. “We should always demand market costs or refuse to promote it to Brazil.”
Paraguay’s skill to face on precept can be restricted. Along with being South America’s premier diplomatic participant and navy hegemon, Brazil is the highest vacation spot for Paraguay’s exports (primarily beef, soybeans, and vitality) and its main supply of international funding. “The issue with the connection between Brazil and Paraguay is the asymmetry between the 2,” Heduvan mentioned. “Paraguay all the time performs with the board tilted in opposition to it.”
However Heduvan sees some upside for the underdog: The spying scandal has generated worldwide sympathy for Paraguay. Brazilian diplomats interpreted the general public intervention by Rubio—who met with Peña in January—because the Trump administration placing its thumb on the scales in favor of Paraguay. The nation is a long-standing U.S. ally in South America, a staunch supporter of Israel, and the continent’s final remaining nation to acknowledge Taiwan. Within the last 12 months of the Biden administration, Peña and senior figures in his celebration “took a raffle in strengthening relations with the U.S. Republican Get together,” mentioned Heduvan, together with by inviting Rubio, then a senator, to go to Asunción final February. “The guess paid off.”
Nor has Paraguay completely squandered its hydroelectric bounty, Carter mentioned. Furnishing Itaipu with further generators, or refurbishing the 50-year-old equipment with new know-how, might add one other 4,000 megawatts in put in capability, producing income from vitality exports for years to return. Carter additionally thinks talks over the way forward for the dam, once they resume, must be widened to incorporate compensation for doubtful revisions to the Itaipu debt within the Nineties and early 2000s that the 2 nations agreed to after a monetary disaster in Brazil restricted its skill to pay its share. These added to the general price of the mission by tens of billions of {dollars}—cash that Paraguay might have in any other case invested in hospitals, roads, and colleges.
Indigenous communities in Paraguay are additionally calling for redress. Almost 700 Guaraní households had been displaced by the dam’s floodwaters—which additionally submerged the Saltos del Guairá, an immense chain of waterfalls. Paraguay is entitled to ask for “some form of reparations” from Brazil, mentioned Carter, the editor of a forthcoming quantity analyzing the dam’s murky historical past. “There’s an actual reckoning that must be executed.”
