Espionage scandal erupts between Brazil and Paraguay over Itaipu dam talks
A recent espionage scandal has intensified longstanding tensions between Brazil and Paraguay, casting a shadow over negotiations concerning the Itaipu Dam, a vital hydroelectric facility jointly managed by the two nations.
In early April 2025, Paraguay demanded explanations from Brazil following reports that Brazil's intelligence agency, ABIN, had conducted surveillance on Paraguayan officials during sensitive energy tariff negotiations in 2022. The Brazilian government acknowledged that the operation occurred under former President Jair Bolsonaro's administration and stated that it ceased in March 2023 upon discovery by the current government.
In response, Paraguay recalled its ambassador from Brazil and suspended ongoing discussions related to the Itaipu Dam, signaling a significant diplomatic rift between the two countries.
The Itaipu Dam, operational since 1984, is a cornerstone of energy supply for both Brazil and Paraguay. In 2024, the dam produced 67 million megawatt-hours (MWh) of electricity, accounting for approximately 6% of Brazil's and 80% of Paraguay's energy consumption.
In May 2024, both countries reached a new agreement on energy tariffs, setting the rate at $19.28 per kilowatt-month, a compromise between Paraguay's initial demand and Brazil's lower preference. This deal is expected to generate approximately $1.25 billion annually for Paraguay, with funds earmarked for critical sectors such as education, healthcare, and infrastructure.
Despite the espionage controversy, both nations had previously expressed a commitment to revisiting the financial terms of the Itaipu Treaty. In January 2024, Presidents Luiz Inácio Lula da Silva and Santiago Peña discussed future collaborations, including the construction of an integration bridge to bolster commercial relations.
Concurrently, the Itaipu Dam is undergoing its most significant technological upgrade since inception. A consortium led by GE Renewable Energy has embarked on a 14-year project to modernize the plant's equipment and systems, aiming to enhance efficiency and support the region's energy transition goals.
The espionage incident has undeniably strained Brazil-Paraguay relations, particularly concerning the management and benefits derived from the Itaipu Dam. While both governments have shown willingness to collaborate on energy and infrastructure projects, rebuilding trust will be crucial for future negotiations.
Political commentator on International Relations, Latin American and Southern Caucasus current affairs Peter Tase in an interview with News.Az said Brazil confirmed that ex-President Bolsonaro spied on Paraguay during Itaipu Dam talks, highlighting a long history of Brazil's exploitation and discrimination against Paraguay in energy, diplomacy, and trade.
“The government of Brazilian President Luiz Inacio Lula da Silva in mid March confirmed that Lula’s predecessor, former President Jair Bolsonaro, had spied on neighboring Paraguay. Specifically, Bolsonaro a military General had ordered the Brazilian intelligence agency to hack into Paraguayan government computer systems to gather confidential information as the two governments renegotiated energy tariffs and electricity pricing from the Itaipu Dam. Paraguay has always been scoffed and discriminated by the Planalto Palace every time there is negotiations towards administration of funds. Generated from energy production and sale of excessive energy produced by the ITAIPU dam—a jointly owned hydroelectric facility on the Parana River that forms the two countries’ border.”
According to Tase, the Government of Paraguay is actively working with a Congressional delegation in the United States Congress to share critical insights on the decades’ long discriminatory policies adopted by Brazil towards Paraguay: “The two South American nations have always been in spats over regional integration matters including administration of Itaipu Dam; and economic and trade cooperation that harm Asunción and are always favoring Brasilia. The president of Paraguay Santiago Peña Palacios, contrary has diligently defended the interests of Paraguay, unlike his predecessor Mario Abdo Benítez who engaged in a scandalous and disgraceful corruption scandal that inflicted a financial damage of over 250 million USD to Paraguay’s public coffers. The Secret bilateral agreement orchestrated by MAB and his MFA Luis Alberto Castiglioni Soria, continues to loom large in the complex relations of Brazil with Paraguay. Brazil is treating Paraguay as one of its provinces and maintains a posture of cultural imperialism and economic imperialism against Paraguay since the early XIX century but with a growing malignant campaign against the national interests of Paraguay.
Itaipu Dam provides a greater revenue now that the debt to finance its construction was fully paid off; however Paraguay has not received any additional monetary benefits over the last ten years. he Government of Brazil in a very abhorrent behavior decided to withdraw its support for the candidacy of Paraguayan Minister of Foreign Affairs Rubén Darío Ramírez Lezcano to become the new Secretary General of the Organization of American States, elections took place on March 10, 2025.”
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