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Moving forward with energy

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“It was a perfect storm,” says Benigno López, Paraguay’s minister of finance, of last year’s economic headwinds. A drought, then flood, combination hit production in the agricultural and protein sectors – still two of the most important sectors for the country’s economy, despite a drive for industrial diversification.

The drought also hit production of electricity at the Itaipu hydroelectric dam, the joint project between Brazil and Paraguay that once claimed the world record for water-generated power, at 103.1 million MWh in 2016. The energy produced by the Itaipu in 2016 would have been enough to supply the world’s energy consumption for two days without interruption, or power Argentina for more than a year (or Paraguay for 12 years).

However, in 2019 the dam produced 18% less energy than in the previous year, reducing revenues.

Nevertheless, the topic that tends to dominate conversations among business and finance professionals in Asunción isn’t so much about Itaipu’s generation capacity, but rather what agreement will be reached between Paraguay and Brazil when their current power-sharing agreement expires in 2023.

The existing agreement is very favourable to Brazil (the dam’s production is divided equally, but Brazil has exclusive rights to buy, at cost price, whatever Paraguay does not use – which is roughly 85% of the Paraguayan share).

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