In an interview with the Brazilian financial publication Valor, Lula's advisor admitted that the Itaipu dam is a very sensitive issue in the political life of Paraguay and "we've tried to correct some practical distortions, but not the Itaipu Treaty, rather its implementation. Anyhow we are willing to examine other aspects of the treaty."
The Itaipu hydroelectric system, Latinamerica's largest electricity generating dam in the heartland of the South American continent is a joint undertaking between neighboring Brazil and Paraguay which was built in the seventies and finished in the early eighties.
The electricity is split in halves but Paraguay with 5% of its share has more than enough and the rest is sold to Brazil, under conditions set by the Itaipu Treaty dating back to the seventies. Basically, energy prices remain frozen, and partners can only sell their surpluses to each other.
Itaipu has turned landlocked Paraguay into one of the few countries in the world with an abundant surplus of energy but it can't reap the full benefits of that condition because of the Treaty, which has become a permanent demand from Asuncion to Brasília, particularly with the new administration of President Fernando Lugo, which ended sixty years of hegemonic rule from the Colorado party.
President Lugo campaigned strongly on the issue and wants the extra money for "social investments," a figure which at current world energy prices could reach hundreds of millions of US dollars.
Energy short Brazil on the other hand financed the whole several billion US dollars project and sustains much of its industrial base in São Paulo on electricity from Itaipu.
As happened with natural gas from Bolivia under President Evo Morales, who demanded from its two main clients (Brazil and Argentina) more "appropriate" prices, Paraguay's insistence on the issue is bound to complicate relations with Mercosur Big Brother Brazil and brotherly president Lula.
For an overwhelming majority of Brazilians the former union leader, now president, is the "father of the poor" but disenchanted radicals like to add "and the mother of banks."
Mercopress