Paraguay dividing over spending Brazilian millions

AP News
Posted: Apr 21, 2011 3:32 AM
Paraguay dividing over spending Brazilian millions

President Fernando Lugo is about to realize Paraguay's long-held dream of receiving millions of dollars more from Brazil for energy from their shared hydroelectric dam, money he promised would finance land reform and transform his impoverished, agrarian nation.

But now that the extra $240 million a year is about to arrive, that campaign promise seems as difficult to fulfill as ever. The ex-Roman Catholic bishop appears incapable of keeping the money from being directed elsewhere by the entrenched political party that controls congress and ran Paraguay as its fiefdom for 61 years before his election in 2008.

Fighting cancer and politically weakened in the final years of his term, the leftist president can count on only a few dependable votes in a congress still dominated by the right-wing Colorado Party, which intends to dictate how the windfall will be spent.

Meanwhile, the threat of social unrest among Paraguay's landless is growing and some of Lugo's allies even support invasions of private property as a solution.

In 2009, Lugo persuaded then Brazilian President Luiz Inacio Lula da Silva to sign a deal tripling Brazil's payments to Paraguay from the huge Itaipu dam _ from $120 million to $360 million a year. Lugo has campaigned quietly since then to make it a reality.

Brazil's lower house of Congress finally approved it April 6, and Silva's successor, Dilma Rouseff, is expected to sign it into law after it passes Brazil's senate by month's end.

Lugo praised Brazilian lawmakers for opening a new chapter in bilateral relations and repairing a long-standing "asymmetry" between the countries.

"These funds will be fundamental for the investments that need to be made to continue development" in Paraguay, he said after the April 6 vote.

While some Brazilians complain about the change, the governing Workers Party says helping Paraguay is a smart fiscal and political move.

"The agreement will strengthen the Paraguayan economy and this in turn can only benefit Brazil because bilateral trade will increase," argued Sen. Joao Pedro Goncalves de Costa, whose Foreign Relations Commission is discussing the measure this week. "It will be good for both countries."

That $240 million a year is a vast sum for Paraguay's revenue-starved government, which doesn't have an income tax and whose annual budget is $8 billion.

Paraguay's economy is dominated by large soy plantations, and 80 percent of the productive land is owned by just 2 percent of the population, leaving 42 percent of rural residents _ 3 million people _ in extreme poverty, said Belarmino Balbuena, who leads the Paraguayan Peasants' Movement.

Lugo, who won the presidency with 40 percent of the votes on a pledge of land reform, desperately needs the dam money to deliver on his promises, but he has been increasingly withdrawn while fighting lymphatic cancer, and often travels to Brazil for chemotherapy treatments.

While peasant leaders are already planning their land purchases, Colorado Party lawmakers insist any spending will be subject to their control. And Lugo has yet to offer a detailed spending plan, frustrating both ends of Paraguay's political spectrum.

"In his campaign he promised the reform, but since becoming president has not elaborated a plan," Colorado Party President Lilian Samaniego said in an interview. "If Brazil's senate manages to improve the increase in compensation, this money can only be put to use if the congress approves it, after analyzing projects, whether they be land purchases or construction of roads, schools, health clinics, housing, seed purchases and other purposes."

Balbuena and other advocates of land reform fear the money will be diverted.

The dam on the Parana River is jointly managed, generating up to 14,000 megawatts shared 50/50 by the two countries. But under the terms of a 1973 treaty, Paraguay must give Brazil any unused energy through 2023 _ more than 90 percent of its half _ and has never received a full market price for that energy.

The unequal deal was made because the initial $10 billion in foreign construction loans, to be paid off with proceeds from the electricity generated, were backed by Brazil's treasury.

The cost ballooned due to interest, inflation, currency devaluations, corruption and other factors over the years. Paraguay says it nearly doubled, while some Brazilians say it nearly tripled, to $27 billion. Disputes over just what each side owed sank every effort to increase Paraguay's revenues.

It took intense personal lobbying by Lugo and Silva to persuade Brazilian lawmakers to raise Paraguay's share _ a bill totaling $3.1 billion 12 years from now, complained Brazilian opposition congressman Eduardo Sciarra.

A Paraguayan government study, however, found Brazil's state-owned Electrobras power company will still make nearly $2 billion in profit annually after the increase in payments, given the markup it charges its customers in Brazil.

Once Rouseff signs the law, the money should start flowing almost immediately, da Costa said.

Yet Paraguay lacks consensus on how to spend it.

One of Lugo's closest personal friends in politics, Gov. Jose Ledesma of the northern San Pedro province, Paraguay's poorest, says the government must spend it on the rural poor as Lugo promised.

But even he acknowledges that Lugo hasn't made key decisions.

"In these moments the president doesn't have time to deal with this issue, which is why we've asked on numerous occasions for the creation of a multi-sector board to move forward with the purchase and distribution of properties," Ledesma said.

Facing unrest, Ledesma says he even supports invasions of private properties, "because society's leaders have to show their face and help the poor to achieve a more humane politics. The rich are self-sufficient, but the poor are completely unprotected."