Brazil and Paraguay to Resume Itaipu Dam Talks in December After Espionage Scandal Resolution

After nearly eight months of frozen diplomacy, Brazil and Paraguay are set to resume critical negotiations over the Itaipu Binacional Hydropower Plant in the first half of December 2025. The breakthrough came after a tense, behind-closed-doors meeting in Salvador, Brazil on November 18, 2025, between Foreign Minister Mauro Vieira and his Paraguayan counterpart, Rubén Ramírez Lezcano. The talks had been suspended since April 2025, when news broke that Brazil’s intelligence agency, ABIN, had conducted a covert operation targeting Paraguayan officials involved in pricing talks for the dam’s electricity.

How the Espionage Scandal Broke the Trust

The espionage operation, allegedly carried out between June 2022 and March 2023, aimed to steal classified data on Paraguay’s negotiating strategy for the Itaipu Binacional Hydropower Plant’s Annex C — the legal framework that dictates how much Brazil pays for the surplus power it buys from Paraguay. The revelation, first reported in April 2025, sent shockwaves through Asunción. Paraguayan officials felt betrayed. After all, the dam is co-owned, co-managed, and co-dependent — a symbol of binational cooperation since its completion in 1984. The fact that Brazil’s intelligence service had infiltrated their systems during sensitive negotiations wasn’t just a breach of protocol; it was a breach of faith.

Brazil’s official stance, reiterated in a March 31, 2025 statement, was that the operation occurred under former President Jair Bolsonaro’s administration. President Luiz Inácio Lula da Silva’s government, they claimed, acted swiftly once they learned of it — and nullified the operation. That’s what Minister Vieira confirmed in his confidential briefing to Ramírez Lezcano: the operation was shut down, internal investigations were launched, and accountability measures were initiated.

A Diplomatic Gesture That Mattered

What turned the tide wasn’t just the denial — it was the delivery of the report. Paraguay didn’t need the full details. They needed to know Brazil was taking responsibility. Ramírez Lezcano, after reviewing the document, declared the matter “closed.” That phrase carried weight. It meant Paraguay wasn’t just accepting an apology — it was choosing reconciliation over retaliation. The secrecy of the report was key. Public disclosure would have reignited outrage. Confidentiality allowed both sides to save face.

The Itaipu Binacional Hydropower Plant produces roughly 10% of Brazil’s electricity and nearly 90% of Paraguay’s. The 2024 agreement locked in a tariff of $19.28 per megawatt-hour until 2026 — a figure Paraguay considers far below fair market value. But without trust, no renegotiation is possible. Now, with the cloud lifted, both sides are returning to the table under the same 2024 terms as a baseline. The real fight — over whether that price should rise — begins in December.

Beyond the Dam: A Broader Reset

This wasn’t just about electricity. The November 18 meeting laid out a sweeping agenda for bilateral cooperation. The Integration Bridge — long delayed — is finally set for inauguration. Road networks linking the Bi-oceanic Corridor will be upgraded. The Paraguay-Paraná Waterway will get renewed investment. Airports on both sides will expand. Energy collaboration now includes biomass, ethanol, and grid interconnection — moves that could make Paraguay a clean energy exporter, not just a supplier.

Security cooperation is equally ambitious. Joint efforts against drug cartels, human trafficking, and arms smuggling will be formalized. Military training exchanges and defense equipment procurement are back on the table. Even education is getting a boost: Paraguayan students will get easier access to Brazilian universities, and teacher exchanges between diplomatic academies will begin next year.

“It’s not just about fixing a broken deal,” said one senior Paraguayan official who spoke anonymously. “It’s about rebuilding a relationship that’s been frayed by suspicion. We’re not going back to how things were. We’re building something better.”

What Comes Next

The December negotiations will be the real test. Will Brazil offer a meaningful price increase? Will Paraguay accept a longer-term contract in exchange? Analysts say the pressure is on Brazil. With global demand for clean energy rising and Paraguay sitting on one of the world’s largest untapped hydro resources, the country has leverage. Brazil, meanwhile, needs reliable power — and can’t afford another diplomatic rupture.

Presidential visits are expected in early 2026, possibly even before the end of the year. Lula and Paraguayan President Santiago Peña have both signaled openness to high-level engagement. The goal? To turn Itaipu from a point of contention into a model of regional cooperation.

Why This Matters Beyond the Border

This isn’t just a South American story. It’s a lesson in how trust, once broken in international relations, can be rebuilt — not through grand speeches, but through quiet diplomacy, accountability, and mutual interest. The Itaipu dam doesn’t just generate electricity. It generates stability. When it works, both countries thrive. When it fractures, the whole region feels the ripple.

For Paraguay, the resolution means its energy sovereignty isn’t being undermined by covert ops. For Brazil, it means avoiding isolation in a region increasingly wary of its dominance. And for the world watching, it’s proof that even the most damaged alliances can heal — if both sides are willing to listen.