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September 09, 2008

Power Change in Paraguay

Cesar Cardozo '92
Chief Financial Officer, Yacyretá Paraguay
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Paraguay is at a turning point. Our new president, Fernando Lugo, was elected into office last spring, and his government’s economic plan and social approach are aimed at promoting development and reducing poverty. We have gross inequality in this country and more than 25 percent of our population lives in extreme poverty.

Last month, Columbia’s Professor Joseph Stiglitz was invited to advise the new government on how to reach these social and development goals. He recommended that Paraguay increase its revenues on all fronts. In particular, he suggested the country increase its revenues from the two bi-national hydroelectric dams, Yacyretá, shared with Argentina, and Itaipu, shared with Brazil. His speech received a standing ovation.

As the chief financial officer for Yacyretá Paraguay, I am in charge of negotiating the payments we receive from Argentina. We have approximately 1,400 full time employees and 600 others on a contract basis, and our current budget is about $100 million in operating expenses and $1.2 billion in investments to finish the dam in 2009.

We must increase our revenue from both Itaipu and Yacyretá to revert the years of unfair payments for the energy Paraguay has produced. For example, we are selling our energy to Brazil at the same price as a cup of coffee in Uris Deli ($2.67 for each megawatt hour sold to Electrobrás). However, the average price of energy in Brazil is $90 per megawatt hour in the wholesale market and $154.12 in retail. Clearly, we need to renegotiate a fair price.

I recently visited Panama, a country similar to Paraguay in many respects. On a trip to the Panama Canal, I was surprised by the huge economic growth of the country, which recovered its main revenue resource fully in 2000. The Canal contributes $1.5 billion annually to their economy. In the case of Paraguay, a newly negotiated solution for these dams can bring in much-needed revenue for our country; we can use that money to finance investments in education, healthcare, land reform and create more jobs.

We expect resistance from different sectors, especially those that will be affected by tax increases and land reform. But as a country with one of the largest inequalities in the world, Paraguay’s support of a well-reputed expert in the field like Prof. Stiglitz facilitates implementation of these measures. Our hope is that it will bring us to a solution before we have a crisis, and help us make an important change for the country.

Photo credit: Yacyretá Paraguay