Itaipu Dam on the boarder between Brazil and Paraguay

Paraguay plans to craft a deal that will allow it to use revenue from the giant Itaipu dam to finance an infrastructure bond, as it negotiates a new energy-sharing agreement for the binational hydroelectric project on its border with Brazil, Finance Minister Carlos Fernandez told LatinFinance.

“We are doing the financial engineering to see what is the best for Paraguay in financial terms so we can secure all the flows and issue a bond,” Fernandez said on the sidelines of the World Bank/IMF annual meetings last week. 

Paraguay can use revenue from the 14-gigawatt dam as a collateral for an infrastructure bond market, the minister said. A good deal would be to leverage the level of resources,” he said.

The Itaipu dam was built jointly by Brazil and Paraguay and each country is entitled to 50% of the electricity it generates, though in practice Paraguay only uses 20% of the project’s output. It sells the remainder to Brazil at below-market rates, a situation it plans to change as the energy-sharing deal is renegotiated.

Paraguay’s president Santiago Peña told LatinFinance last month that his country seeks a deal with Brazil that would allow it to use for Itaipu to finance the country’s economic development.

Both countries have been locked in inconclusive talks on the issue for years. Fernandez said Paraguay has lived up to its part of the 50-year-old Itaipu treaty, which expired earlier this year, and it should now be free to use the project’s proceeds as it sees fit.


“It is like our house. We finished paying the debt so now we are having the property title by ourselves. Now we can use the house only for living or for something else,” he said. “Itaipu is Paraguay’s most valuable asset by far.”

Negotiations with Brazil began two months ago and while they could be set back a little by Brazilian President Luiz Inácio Lula da Silva’s recent hip surgery, Fernandez said he was optimistic talks will be wrapped up next year.

“We agree with [Brazil’s] President Lula that Itaipu is not basically only a powerful factory to generate energy, it is a powerful factory for the development of both countries. So we have to go and think of it a bit beyond just a place where you generate cheap energy,” he said.

“By next year, for sure, we are going to have a concrete plan regarding it as a means of development,” Fernandez added.