Paraguay stopped selling energy to Argentina and a new bilateral conflict is unleashed

Since Santiago Peña took office as the new President of Paraguay less than a month ago, the bilateral relationship with Argentina has become increasingly tense. In addition to the collection of tolls on a section of the Hidrovía and the detention of ships flying the Guaraní flag for non-payment, a new source of tension has now been added: the use of energy from the Yacyretá dam.

The Paraguayan government announced that it will keep 50% of the energy generated by the Yacyretá hydroelectric power plant and will not sell it to Argentina as it did until now. The president of the National Electricity Administration (ANDE), Félix Sosa, publicly confirmed this measure and added that, in order to cushion energy use at national level, they reduced the use of the Itaipú dam, which Paraguay shares with Brazil.

Overall, the cost of energy from Itaipu is lower than that of Yacyretá. Therefore, the measure announced by Asunción does not respond in any way to an economic logic, but to a political one. "It is a political decision of the President", acknowledged the head of ANDE.

From both sides of the border they know that this measure is a kind of retaliation to the Argentine government's refusal to back down from charging a toll of 1.47 dollars per ton to foreign flagged ships transiting the Confluencia-Santa Fe section of the waterway.



Although under the agreement between the two countries Paraguay may withdraw up to 50% of the electricity generation of the Yacyretá Binational Entity (EBY), on average they used about 10%. There were times when Paraguayan demand increased, but it usually remained at around ten points. At present, Yacyretá has a total production of 2,068 MW.

With this last measure, of the 1,035 MW that corresponds to it, Paraguay began to make use of 850 MW that it used to sell to Argentina for 50 dollars per MW. Possibly now it will sell that surplus to Brazil, but at a lower price. Therein lies part of the economic loss that Asunción will have to prioritize the political decision.

Consulted by TN, the Energy Secretariat assured that for the time being Argentina will not need to replace that energy with a new supplier given the weather conditions of this time of the year. It will be different when summer arrives and air conditioners are turned on all over the country. "In these weeks the electrical system is stable," they confided.

In the fleeting trip that Sergio Massa made to Asunción on August 24 to meet with President Santiago Peña, the Minister of Economy and presidential candidate announced the agreement for the payment of a debt that Argentina has with Paraguay for a little more than 100 million dollars for the consumption and flow of energy coming from the Yacyretá dam.

Tolls on the Waterway, the origin of the conflict

The Paraguay-Parana waterway became the focus of diplomatic tension in the region, first, when the Argentine government, through the General Ports Administration (AGP), applied a toll of US$ 1.47 to foreign ships and the same amount, but in pesos, to those of national flag passing through the Confluencia-Santa Fe section.

The waterway is a navigable waterway of almost 3,400 kilometers long that connects Bolivia, Paraguay, Brazil, Uruguay and Argentina. It is the gateway for almost all of the region's exports, many of which are related to agriculture. In the case of Argentina and Paraguay, it represents the exit channel for 80% of exports.

Faced with the toll charged by Argentina and the retention of ships that refused to pay -some of which were carrying fuel-, Paraguay obtained the support of the rest of the countries to complain against the measure of the AGP. Thus, at the weekend they published a joint communiqué in which they described the situation as "worrying".

These four countries consider that Argentina took this decision unilaterally and illegally as stipulated in the Santa Cruz de la Sierra agreement, which is based on the 1980 Montevideo Treaty establishing the common regulatory framework for transport on the waterway.



The conflict over the Trunk Waterway, as the 1477 km corresponding to Argentina are called, was already discussed some weeks ago in the Intergovernmental Waterway Committee (CIH). There was no agreement between the representatives and the Paraguayan president announced that he will go to the Permanent Review Tribunal (TPR) of the Southern Common Market (Mercosur) to resolve the controversy.

This Monday there was a meeting in Asunción between the Paraguayan Foreign Minister, Rubén Ramírez, and an Argentine delegation made up of Flavia Royón, Secretary of Energy, José Beni, head of the AGP, Fernando de Vido, Executive Director of EBY, and Raúl Pérez, advisor to the Ministry of Economy.

On Tuesday, another meeting took place in Buenos Aires between the Undersecretary for Latin American Affairs of the Argentine Foreign Ministry, Gabriel Fuks, and the Chargé d'Affaires of Paraguay in our country, Juan Ramón Cano.

Beyond the "positive dialogue" that prevailed during the conversation, as reported to TN from both sides of the border, the dispute does not seem to be close to being resolved and the measures adopted by Paraguay only strain the relationship. Another technical meeting is scheduled for September 26 and 27.