Brazil–Paraguay relations have improved greatly after Brazilian President Lula's decision in 2009 to triple its payments to Paraguay for energy from a massive hydro-electric dam on their border, ending a long-running dispute. Under the accord, Brazil will pay Paraguay $360m a year for energy from the jointly-operated Itaipu plant. Brazilian President Luiz Inácio Lula da Silva called it a "historic agreement" and the deal slated as a political victory for Paraguayan President Fernando Lugo. But deep-rooted problems remain in the relationship between the two countries, foremost of which are the unfavorable terms of the 1973 Itaipú Treaty under which Paraguay must sell hydro energy to Brazil as a derisory price and the presence of 300,000 Brazilian mainly soybean farmers in Paraguay, who pay minimal tax and have produced an exodus of small farmers from rural areas. [1]
Paraguay Coup of 2012
In June 2012 Paraguay's senate voted 39-44 to dismiss president Fernando Lugo from office. The events have been criticized by leaders of many Latin American nations including Argentina and Venezuela.
[1] As a result, Paraguay has been suspended from the South American Trade Bloc, which includes Argentina, Brazil, Uruguay, and the recent addition of Venezuela.
[2]
