Paraguay's president avoids impeachment over 'secret' Itaipu contract

Paraguay’s President Mario Abdo Benítez survived a serious push for his impeachment after less than one year in office.

The controversy involves an agreement with Brazil for the giant Itaipu hydroelectric plant, Latin America’s largest power generator.

In May, Abdo’s administration signed what local media called a secret accord with Brazil over the sale of the extra volume of energy produced by Itaipu to Brazil’s state-run electric company Eletrobras.

The agreement, recently revealed by the press, will cost Paraguay around US$300mn extra over the next three years, according to the country's legislators.

But the intense political pressure forced the two governments to suspend the controversial accord.

Abdo started his tenure in August 2018, promising to pursue business-friendly policies to sustain the rapid economic expansion of recent years.

As a key priority, he sought closer ties with Brazilian companies to attract more investment. In recent years, many international companies have gone to Paraguay to take advantage of low labor and energy costs, and low taxes.

DEVELOPMENTS 

Details of the accord sparked criticism.

Following the media reports, on June 25 Pedro Ferreira, then president of state power company Ande resigned and was replaced by Alcides Jiménez.

The political crisis then forced foreign minister Luis Alberto Castiglioni to resign earlier this week, along with the ambassador to Brazil, Hugo Saguier, and Alcides Jiménez.

Efraín Alegre, leader of the main opposition liberal party, demanded the president's impeachment, tweeting “this is the moment we're going to push for the impeachment of Mario Abdo. It was a big betrayal. We hope for the support of all of you to see justice done.” 

Abdo responded: “I accept the fight! For a Paraguay without mafias!”

But after the agreement was suspended, the opposition refrained from pursuing the impeachment process.

Calls for impeachment are not unusual in Paraguay, and in 2012 president Fernando Lugo was impeached on allegations of poor performance. He had also lost support in congress.

Lower house head Pedro Alliana had already played down expectations of Abdo’s potential impeachment. Alliana said the allegations of influence peddling were premature. 

“We still haven't talked about the topic; we just know what was published in the local media. But as a matter of fact, we're concerned about the situation [and] and as with all people and we have to make a careful assessment of the principles and arguments, and on that basis, make a decision, but for now there is no decision,” said Alliana, highlighting that congress will invite the vice president to explain the situation.

THE ORIGINAL ACCORD 

Brazil and Paraguay have equal stakes in Itaipu Binacional, the 14GW dam's operator.

When the deal for the power plant was signed in the 1970s, Paraguay did not have the necessary financial resources to build the plant so it arranged a loan from Brazil to meet the initial capital demand plus other future investment needs. Itaipu started operations in 1984 and cost US$20bn to build.

The two countries have an equal right to Itaipu’s production, but since Paraguay only consumes 15% of its share it is obliged to sell the rest to Brazil, with 70% of the price covering the financing of construction.

Paraguayans have always questioned several points of the agreement, claiming Brazil does not pay enough for the power, and want the right to sell the country’s share to other nations that would pay the market price.

Brazil agreed to pay Paraguay a fairer price for the energy in 2009, and also allowed the latter to sell power directly to Brazilian companies rather than through Eletrobras. The so-called secret agreement overturns that authorization, according to reports.

In photo: Paraguay's lower house in session.