A plan by Donald Trump's administration to use energy from the Itaipu hydroelectric dam, shared by Brazil and Paraguay on their border, to power an artificial intelligence data center in Paraguay could shrink the share of Paraguayan electricity currently sold to Brazil in the coming years. That is the warning from energy experts interviewed by G1 after the announcement, on Wednesday (21), of a partnership between the American company Crusoe, which builds AI infrastructure, and Paraguayan energy developer Araico.
The deal was unveiled during a visit to Asunción by U.S. Deputy Secretary of State Christopher Landau and is part of a broader rapprochement between Washington and the government of Santiago Peña. According to InfoMoney, the agenda also included a US$ 12 million investment by Uranium Energy Corp in a uranium concession in Paraguay, an air interdiction assistance agreement against drug trafficking, and the start of negotiations for a civil nuclear cooperation agreement. For the United States, the project secures AI computing capacity powered by cheap renewable energy while deepening American influence in the hemisphere. For Paraguay, it represents what Landau called potentially the largest foreign private investment in the country's history.
The first phase is expected to come online in mid-2027. According to Crusoe, the facility, located next to the Itaipu substation, could reach 106 megawatts (MW) of IT capacity and eventually around 280 MW, serving cloud computing clients in the United States and Latin America. Reporting by the Paraguayan newspaper ABC Color with the state utility Administración Nacional de Electricidad (ANDE) found the agreed starting price is US$ 48 per megawatt, with an annual 2.5% adjustment tied to U.S. inflation and a tariff review roughly every two years.
What changes for Brazil
Under the Itaipu Treaty, Brazil and Paraguay are each entitled to half of the plant's output, and any share one country does not use can be purchased by the other. Historically, Paraguay consumed only a small fraction of its half and sent the surplus to Brazil. Today, the country already uses about 74% of its share, with the remaining 26% going to the Brazilian market. Victorio Oxilia, who holds a doctorate in Energy and teaches at the Universidad Nacional de Asunción, says the erosion of that surplus has been under way since 2021 and 2022, driven by large consumers such as cryptocurrency mining companies, and is likely to accelerate.
"What can be predicted is that perhaps the amount of energy available to Brazil will decrease quite a lot. It is very unlikely to disappear entirely, but it will decrease quite a lot," Oxilia said.
Tomaz Espósito, a professor of International Relations at the Federal University of Grande Dourados (UFGD), argues that the new ventures will complicate negotiations over Annex C of the Itaipu Treaty, the document that sets the financial and energy trading rules between the two countries, including the compensation paid for electricity one country does not use and makes available to the other. "With a new consumer, the Annex C negotiations will become more complex, because Paraguay may have other consumers, such as these companies. In the short term, that means a possible reduction in energy supply to the Brazilian market," he explained.
Despite the projection, the experts see no immediate risk of power shortages in Brazil. Oxilia notes that Brazil has a diversified electrical system and expects the impact to be minimal, while Espósito cautions that an important energy reserve for the country's Center-South region will shrink over time. There is no official estimate of how much the project could reduce the energy available to Brazil, nor any confirmation of an impact on consumers' electricity bills. Brazil took no part in the negotiations: Itaipu Binacional told G1 it was not present at the meeting between authorities and that the allocation of each country's energy share is a national decision, under the terms of the treaty.