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Itaipu Dam

Brazil's financing of the US$19 billion Itaipu Dam on the Rio Parana between Paraguay and Brazil had far-reaching consequences for Paraguay. Paraguay had no means of contributing financially to the construction, but its cooperation—including controversial concessions regarding ownership of the construction site and the rates for which Paraguay agreed to sell its share of the electricity — was essential. Itaipu gave Paraguay's economy a great new source of wealth.

The construction produced a tremendous economic boom, as thousands of Paraguayans who had never before held a regular job went to work on the enormous dam. From 1973 (when construction began) until 1982 (when it ended), gross domestic product (GDP) grew more than 8 percent annually, double the rate for the previous decade and higher than growth rates in most other Latin American countries. Foreign exchange earnings from electricity sales to Brazil soared, and the newly employed Paraguayan workforce stimulated domestic demand, bringing about a rapid expansion in the agricultural sector.

There were, however, several drawbacks to the construction at Itaipu. The prosperity associated with the major boom raised expectations for long-term growth. An economic downturn in the early 1980s caused discontent, which in turn led to demands for reform. Many Paraguayans, no longer content to eke out a living on a few hectares, had to leave the country to look for work. In the early 1980s, some observers estimated that up to 60 percent of Paraguayans were living outside the country. But even those people who were willing to farm a small patch of ground faced a new threat.

Itaipu had prompted a tidal wave of Brazilian migration in the eastern border region of Paraguay. By the mid-1980s, observers estimated there were between 300,000 and 350,000 Brazilians in the eastern border region. With Portuguese the dominant language in the areas of heavy Brazilian migration and Brazilian currency circulating as legal tender, the area became closely integrated with Brazil.

When Hoover Dam was finished in 1935 it was the tallest dam in the world. From about 1938 until 1948 the Hoover Dam powerplant was the largest hydroelectric plant in the world. Since then, larger facilities have been built. Currently, the tallest dam in the world is Nurek Dam on the Vakhsh River in Tajikistan. It is 984 feet (300 meters) tall. Hoover Dam is 726.4 feet (221.3 meters) tall. Today, Hoover Dam still ranks in the top 20 of the tallest dams in the world, but only in the concrete gravity and arch categories. Many other rock and earthfill dams have surpassed Hoover in height. There is one dam in the United States taller than Hoover Dam, and that is the Oroville Dam on the Feather River in California. It stands 770 feet (235 meters) tall, but it is an earthfill dam, not a concrete structure like Hoover.

Itaipu's plant has a capacity of 12,600 MW, and has produced 90 billion KWh in a single year. The largest hydroelectric plant in the United States is at Grand Coulee Dam. Its three powerplants have a capacity of 6,809 MW, and it generates, on average, about 21 billion KWh, while Hoover Dam's powerplant has a capacity of 2,074 MW and generates approximately 4 billion KWh a year.

The major debate over Itaipu in the late 1980s revolved around the low prices that Paraguay had negotiated in the original treaty. What Brazil paid Paraguay for electricity was one-ninth what Paraguay was scheduled to receive from Argentina under the Treaty of Yacyreta, signed just seven months after Itaipu. After twelve years of indecision about how to adjust the Treaty of Itaipu, on January 25, 1985, Paraguay and Brazil signed five revisions to cover matters of financial compensation. Paraguay gained significantly from the 1985 revisions, but most analysts believed Paraguay deserved still greater compensation for its electricity.

The highly political, often emotional, issue of "fixing the wrongs of the past" by re-negotiating Itaipu was one of President Lugo's top campaign promises. Six weeks after assuming office in August 2008, President Lugo and his negotiation team presented Paraguay's requests on Itaipu to President Lula in Brazil. These points are: A) A "fair" price for the electricity ceded to Brazil; B) Flexibility to sell to other countries; C) Revision of Itaipu's debt; D) Joint financial management; E) Shared controller's functions; and F) Completion of pending infrastructure projects.

The 14 megawatts (MW) binational dam Itaipu generates over 90 million megawatts-hour (MWh) of electricity a year, equally divided between Paraguay and Brazil. Paraguay, however, consumes just 8 million MWh a year and cedes at below market price the remainder of its share (roughly 37 million MWh) to Brazil, which ends up using 82 million MWh of the total electricity generated. Excluding payments for ceded electricity, compensation is equally distributed between the two countries, with each country getting about 212 million USD in royalties, 32 million USD in administrative expenses, and 21 million USD in capitalized earnings for a total of over 250 million USD.

In 2012, the Three Gorges Dam in China took over the #1 spot of the largest hydroelectric dam (in electricity production), replacing the Itaipú hydroelectric power plant in Brazil and Paraguay. The Three Gorges Dam has a generating capacity of 22,500 megawatts (MW) compared to 14,000 MW for the Itaipu Dam. But, over a year-long period, both dams can generate about the same amount of electricity because seasonal variations in water availability on the Yangtze River in China limit power generation at Three Gorges for a number of months during the year.

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