Paraguay’s Hydroelectric Wealth: Powering Neighbors, but Leaving Its People Behind

ASUNCIÓN, Paraguay: Ricardo Canese is a Paraguayan engineer and political figure renowned for his significant contributions to the country’s energy sector and his persistent advocacy for freedom of expression. He played a crucial role in renegotiating the Itaipú Dam power contract during Fernando Lugo’s presidency (2008-12), aiming to secure better terms for Paraguay. He has also been an MP in the Parlasur between 2008 and 2023. What has happened since 2012? What is the situation now? As a hydroelectric energy exporter Paraguay has some similarities to Norway – yet is in a very different situation.

The year was 2012. A red wave of leftist candidates had won elections and held power in several countries in Latin America. In some countries, their influence would last throughout the 2010s. But in Honduras (2009) and Paraguay (2012), the terms of Leftist presidents ended early.

In Honduras, the military had put President Manuel Zelaya on a plane out of the country, but he didn’t give up and a political movement was born that ultimately led to the election of Zelaya’s wife, Xiomara Castro, to become president of Honduras in 2021.

In Paraguay, the overthrow of Fernando Lugo was less dramatic – he stayed in the country and was removed employing a parliamentary coup rather than a direct military overthrow. So what is the situation now, 12 years later? I talked to some of those who were part of the movement back then and in the years since.

One of the things that makes Paraguay stand out is that it has a lot of hydroelectric energy production on the borders in two power plants shared with its neighbors Argentina and Brazil. The surplus is being sold to its neighbors and historically, Paraguay did not receive many of the proceeds. Paraguay had the longest dictatorship in the area, from 1954 to 1989, and even when democracy was restored, the same Colorado political party continued to govern up until the election of Fernando Lugo in 2008.

I asked Ricardo Canese what has happened since.

Q: Mr Canese, you have participated in many struggles and held many titles over the years. What is your current status?

I am an activist for human and social rights, advocating for equity and sustainable development.

Q: During those years you have been active, which part of your work has been the most significant from an international perspective?

Once Fernando Lugo was elected President (April 20, 2008), he appointed me as General Coordinator of negotiations with Brazil over the Itaipú Dam. This was undoubtedly my most important international work; I often spoke directly with Lula, accompanying Lugo in the negotiations, which culminated in the successful Lugo-Lula Agreement (July 25, 2009). Previously, the Itaipú Treaty (1973) was seen as neocolonialist, imposed by Brazil’s military dictatorship and accepted by Alfredo Stroessner. The new relationship we initiated with Brazil during Lugo’s government (2008-2012), and especially with Lula, brought hope to the Paraguayan people. Although that hope was soon diminished by the parliamentary coup that ousted Lugo (June 22, 2012), Lugo’s government remains fondly remembered for improving the quality of life.

Q: How is that now? Is Paraguay still benefitting from the changes introduced back then?

Paraguay is in a dire state, worsening over time. The 2012 parliamentary coup was orchestrated by drug trafficker Horacio Cartes, with the involvement of the U.S., to hinder progressive processes in the region that had improved employment and quality of life. Thanks to Cartes, who organized the coup and later won the presidency in 2013 as a candidate of the Colorado Party, we now have his puppet, Santiago Peña, further eroding our already fragile institutions. The narco-financial mafia effectively governs Paraguay, marking 70 years of autocratic rule. Today, although not an outright dictatorship, the country has limited freedoms and media heavily influenced by Cartes. This model exacerbates misery and migration through extractivism and systemic corruption.

Q: If we look at the struggles of the people of Paraguay. Has there been any change?

The primary struggles remain human rights—political, socio-economic, and environmental. Santiago Peña seeks to deepen the extractive model and discretionary management of public and pension funds, extending money laundering operations. Social discontent has grown, especially after Peña’s victory in passing a law for discretionary and predatory management of pension funds and consolidating budgets previously managed by municipalities, now centralized under Peña’s control.

Q: New negotiations about electricity prices with Brazil terminated this year. How do the terms negotiated under Lugo compare to these recent negotiations?

Under the Lugo-Lula Agreement, we were able to secure significant gains for Paraguay. Our annual compensation for energy ceded to Brazil was tripled from $120 million to $360 million. Additionally, we negotiated the construction of a 500 kV transmission line at no cost to Paraguay but valued at around $500 million, which greatly enhanced our infrastructure. Lugo’s government also secured an agreement that allowed Paraguay to sell its unused electricity directly into the Brazilian market, recognizing our sovereignty and aiming for regional energy integration.

With the new agreement signed in May 2024, it’s important to note that Lula, as the President of Brazil, has to respond to the interests of Brazilian entrepreneurs, especially in the absence of a progressive Paraguayan government like Lugo’s that demands fair hydroelectric sovereignty and treatment within an integration framework. In other words, if Peña offers a deal favorable to the Brazilian oligarchy, Lula won’t be able to reject it. That is what happened happened, and today Paraguay exports its guaranteed energy from Itaipú at $48.5 per MWh. Under the Lugo-Lula Agreement of 2009, the price in current dollars was $53 per MWh, which equates to $76.6 per MWh in today’s dollars, even as energy prices have risen globally.

Q: Besides exporting energy, how else could Paraguay utilize its electricity?

During Lugo’s government, the Canadian multinational Rio Tinto Alcan proposed creating an aluminum factory. Aluminum production requires substantial electricity but does not generate many jobs. Later came cryptocurrencies, which also offer few employment opportunities. This is the extractive model currently favored by Paraguay’s oligarchy.

Instead, we should industrialize Paraguay with labor-intensive industries, such as construction or the automobile industry. We could use our cheap energy to produce vehicles for the entire MERCOSUR market. However, the right-wing factions don’t want this. They do not want the establishment of a working class.

Q: With the global focus on sustainable electricity production, why isn’t Paraguay more prominent despite its large hydroelectric plants?

After Lugo, administrations including Horacio Cartes, Mario Abdo Benítez, and now Santiago Peña, prioritized illicit businesses over sustainable development. This disregard results in valuing the energy at low prices to maintain ties with the oligarchies of Brazil and Argentina, rather than leveraging it for national development.

Q: Paraguay’s left-wing movements appear weak compared to neighboring countries. Can you explain why that is?

Paraguay lacks a strong left-wing because of underdeveloped productive forces and the absence of a substantial working class, unlike other Southern Cone countries. Our political landscape is dominated by extractivism, contraband, and money laundering. Fernando Lugo’s election was an exception due to his reputation as the “bishop of the poor” and support from the traditional Liberal Party. Historically the Left obtained around 2%. I obtained 6% at the elections of the Parlasur. With Fernando Lugo we obtaind 12%. But overall, the Left continues around 2%.

Q: Despite Paraguay’s potential for solar energy, why isn’t it more utilized?

Currently, Paraguay’s hydroelectric power is very cheap, disincentivizing solar energy generation. Governments are not planning adequately for the future, potentially needing additional generation or imports within a decade. Solar energy should complement hydroelectric power for renewable energy longevity, but current mafioso extractive policies undermine this approach.

Q: Why is there so little investment in electric transport in Paraguay?

The resistance comes from vested interests in the status quo of vehicle importers and “chatarra” (junk) bus owners. While Lugo’s government planned and financed projects such as the fully-electric metrobus, which was going to be a high speed bus service with designated streets for the capital Asunción. Unfortunately, all such projects were obstructed by subsequent administrations and construction halted. The result is stagnation and ongoing pollution from conventional vehicles.

Q: Some argue that Paraguay mismanages financial aid and resources due to corruption, so it’s best if the investments go to Brazil or Argentina. What’s your response?

The oligarchic relationships between Paraguay and neighboring countries allow them to utilize Paraguay’s hydroelectric energy at minimal cost. During Lugo’s government, we broke this pattern, achieving a more equitable agreement that tripled Paraguay’s benefits. The 2012 parliamentary coup reversed these gains, allowing the oligarchy to regain control.

The collaboration with progressive groups in the neighboring countries must improve. During Lugo’s tenure, a region-wide progressive movement was in power. Recognizing Paraguay’s vulnerability within this chain, Lula supported us, allowing for beneficial negotiations. Future efforts should build on this solidarity.

If you had another opportunity to govern like Lugo’s term, what would you do differently?

The government should closely align with progressive parties and social movements that support it. Continuous popular mobilization with a strategic vision is necessary. We succeeded in many areas but failed to prevent the parliamentary coup due to lack of strategic coordination and robust defense against oligarchic forces.

Do you believe progressives will return to power?

Yes, we achieved it once unexpectedly, and we can do it again. The next government will differ from Lugo’s, requiring a left-wing coalition combined with parts of the bourgeoisie interested in national progress. The next opportunity comes with the 2028 elections.