Brazil to lavish power project on Paraguay

Lula met with Paraguayan President Fernando Lugo in a military barracks complex in this Brazilian border town mainly to resolve differences over the distribution of resources from the Itaipu hydroelectric complex, which is shared by the two countries.

Power generation from the complex is critical to energy supplies needed by Brazil's growing industrial base but Paraguay wants greater access to the electricity to modernize its society and develop its own industrial base.

Lula and Lugo agreed in July 2009 that Paraguay will receive Brazilian help with the electricity supplies but implementation was delayed.

At the heart of the agreement is Brazil's pledge to build a 500-megawatt transmission line from the Itaipu complex to the Paraguayan capital, Asuncion. The project has been discussed over and over again but delayed several times.

A Brazilian promise to build a bridge over the Parana River, which is shared by the two countries, also remains unfulfilled.

The July agreement is awaiting approval in Brazilian Congress and now seems unlikely to be ratified amid an intense electioneering campaign that has already drawn Lula into controversy for supporting his chief of staff, Dilma Rousseff, as the ruling Workers Party's candidate.

The agreement has drawn opposition also because of Lula's agreement to pay Paraguay more for the electricity it receives from the shared facility. The price increase was packaged with Brazil's offer to build the power line and the bridge and some other infrastructure projects. Critics in Brazil called the deal overgenerous.

However, Lula aides point out in defense of the accord that the Itaipu treaty already works in Brazil's favor, because it cannot be reviewed until 2023 while Paraguay receives prices frozen since the 1970s.

Paraguay consumes only 5 percent of its 50 percent share of electricity and sells the rest to Brazil. The frozen prices, however, have become a major sticking point between the two countries.

Lula has sought to assuage the Paraguayans' sentiment. At the summit in Punta Pora, he announced that he expected to visit Paraguay twice before withdrawing from presidency - one to open the power line and then again to lay the foundation stone for the Para bridge.

Critics called the projects ambitious with only a few months remaining before the October election and Lula's scheduled departure from presidency in December.