Paraguay hopeful eyes energy export prices

Paraguay hopeful eyes energy export prices

By Jude Webber in Asunción

Published: April 15 2008 04:04 | Last updated: April 15 2008 04:04

Sitting in the sparse office where he is planning his bid for the presidency of Paraguay, Fernando Lugo picks up his campaign bible, a book called Itaipú: waters worth gold.

“Venezuela sells its oil at market prices, not cost price. Chile sells its copper at market price. We want a fair price for our electricity,” says the former bishop, whose power-to-the-people message of charging more for his poor country’s vast energy exports has dominated a race he hopes will end 61 years of one-party rule.

But Mr Lugo, who also preaches radical land reform in the world’s fourth-biggest soyabean exporter, refuses comparisons with the region’s most radical populists, Hugo Chávez in Venezuela and Bolivia’s Evo Morales, whose unpredictable styles and investment-unfriendly policies have polarised their countries and sparked civil unrest.

“The government of Fernando Lugo isn’t going to be a one-man band but a collective,” he told the Financial Times, alluding to the 10 parties, ranging from liberals to socialists, and myriad organisations that make up his Patriotic Alliance for Change. “I don’t consider myself a leftist,” he added.

Poverty remains in spite of growth

One in three of Paraguay’s 6.7m people lives in poverty and about 1.5m have emigrated. The economy grew 6.4 per cent in 2007, the highest in 20 years, but gross domestic product per capita is still $4,000. The soya boom helped boost 2007 exports 77 per cent, but a vast informal economy and entrenched corruption leave Paraguay 11th lowest in the world competitiveness stakes.

But though he is the frontrunner, victory in the election on Sunday is by no means assured. Opinion polls show outgoing President Nicanor Duarte Frutos’ preferred candidate, Blanca Ovelar, closing the gap and one has even put the two neck and neck, with retired General Lino Oviedo in third place. A new poll by Coin published in Ultima Hora newspaper gave Mr Lugo 34.5 per cent, Ms Ovelar 29.5 per cent and Mr Oviedo 28.9 per cent, but notes that a low turnout would favour Ms Ovelar.

“It’s not a walkover for Lugo,” says Andrew Nickson, reader in public management and Latin American development at the University of Birmingham. Ms Ovelar’s Colorado party, riven by an unprecedented split after a murky party primary in December, could still win if it manages to pull together, he says.

Nevertheless, Mr Lugo set the agenda with an audacious pledge to renegotiate a 1973 treaty that requires Paraguay – the world’s third-biggest electricity exporter, in a region where energy is scarce – to sell Brazil excess power from their jointly owned Itaipú hydroelectric dam at well below market prices. Itaipú supplies a fifth of Brazil’s electricity and is a cornerstone of energy in the country’s industrial south-east. Although Brazil is offering to finance a new transmission line from Itaipú to Asunción to bring more power to the Paraguayan capital, it says renegotiating the treaty is out of the question.

Nonetheless, Mr Lugo says he will take Brazil to the World Court in The Hague if necessary to win a “fair” price for electricity from Itaipú, the world’s biggest hydroelectric plant. Brazil pays Paraguay just over $100m a year but resells the electricity domestically for at least 10 times that, Mr Nickson says.

Mr Lugo wants a similar review of the Yacyretá hydroelectric project co-owned with Argentina, and is also promising land reform in a country where three-quarters of the land is held by 2 per cent of the population. That pledge scares the rich farmers of Brazilian origin, known as brasiguayos, who dominate Paraguay’s booming soya industry.

Favero Tranquilo, Paraguay’s brasiguayo soya king, said in a recent newspaper interview that he expected Mr Lugo to win, but he was worried about “communists” in his coalition who did not respect private property.

Paraguay’s Colorado party has held power since 1947, the longest continuous rule of any party in the world, and it is synonymous with the state to many Paraguayans, and with using state resources for political ends.

Ms Ovelar’s narrow win over the country’s vice-president, Luis Castiglioni, in the disputed primary has raised fears of fraud.

“More than a fear, it’s almost a certainty,” said Mr Lugo. “I think they could steal the election.”

Such claims are flatly dismissed by Ms Ovelar, a former education minister who is vying to follow in the footsteps of Chile’s Michelle Bachelet and Argentina’s Cristina Fernández to become the first female president of her Latin American country.

She says her poll advantage will become increasingly apparent. “The party has a powerful electoral machinery and it has not yet fully deployed,” she said during a break in campaigning.

Mr Oviedo, a former commander-in-chief of Paraguay’s army who was released from jail last year and cleared of orchestrating a 1996 coup attempt, reckons Mr Castiglioni’s followers will back him.

Election monitors will be watching closely. The head of the Organisation of American States mission, María Emma Mejía, notes widespread scepticism about the possibility of change but says the vote is the “acid test” for Paraguay’s institutional credibility.

Whoever wins the first-past-the-post race can look forward to a fractured Congress, possibly with the outgoing president in an important position in the Senate.