Paraguay: Government speeds up arrival of electro-intensive company

Source: Latin America Press

Despite unfavorable conditions for the business, multinational will produce aluminum, taking advantage of cheap hydroelectric energy.

Paraguay has no bauxite mines, nor the necessary supplies — pitch, calcined coke, tar or fuels — to produce aluminum, or the skilled labor and ports to make and ship the product, much less a market in which to sell it. However, the electro-intensive multinational firm Rio Tinto Alcan intends to set up shop in the country to take advantage of its hydroelectric power supply.

That’s how the members of the “No al Golpe de Rio Tinto Alcan,” or “No to the blow from Rio Tinto Alcan” campaign see it. The group intends to gather 100,000 signatures in opposition to the company’s arrival in Paraguay. The first part of the campaign began in July and ended Nov. 28 with a day-long mobilization in the capital of Asunción, where the group delivered 24,480 signatures to the Ministry of Industry and Commerce, with copies for the National Congress, demanding an end to negotiations with the company and stating that Paraguay’s citizens should be consulted on any investment, such as the one by Rio Tinto Alcan, that will have such a large impact on the people.

Rio Tinto Alcan is the second largest aluminum producer in the world, an activity considered electro-intensive because more than 30 percent of its production cost is from energy. The company, headquartered in Canada and funded also with British and Australian capital, estimates it will produce 670,000 metric tons of aluminum annually. That will require importing all of the raw materials to make the product, primarily from Brazil, and necessitate steady use of 1,100MW, adding up to 9,600 GWh annually. Meanwhile, national industries collectively use less than one-sixth of that (1,623 GWh/year), according to technical experts from the “No al Golpe de Rio Tinto Alcan” campaign.

“What Paraguay has is a lot of hydroelectric energy, which is indispensable to the production process, and unfortunately there are complacent officials willing to hand it over for almost half of its lowest value, for 30 years, [which is then] renewable for another 20 years. This deal will force everyone in Paraguay to pay the other half of its electricity consumption with either electricity rate increases, as happened in Brazil, or with higher taxes and reduced public spending. This amounts, over 20 years, to US$ 3.5 billion, or eight times Paraguay’s external debt, just so Rio Tinto Alcan has a ‘suitable climate’ to invest in Paraguay,” campaign member Sarah Zevaco told Latinamerica Press.

Moreover, Rio Tinto Alcan placed conditions in order to invest in Paraguay: the company is requiring that the government build a port and logistics terminal to import raw materials from Brazil and export the aluminum ingots it produces to manufacturing centers, where they will become auto parts, aircraft, cables, pans, cans and other processed products. It also demands a 500 kW line from the Itaipú and Yacyretá hydroelectric plants — which Paraguay shares with Brazil and Argentina, respectively — to the factory, as well as dredging the Paraná River to make it accessible to deep draft ships.

These public works will cost between $700 million and $1 billion according to estimates from the Ministry of Public Works and Communications. When it comes to paying for the projects, the Ministry of Industry and Commerce suggested managing a private sector loan and partnering with Rio Tinto Alcan for their implementation. It is estimated that Rio Tinto Alcan plant will consume 60 percent of the national annual consumption of electricity, or 47 percent of the electricity produced by the country, paying less than what it’s worth for 30 years. The company will import 100 percent of supplies and export the entirety of its production.

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