ASUNCION/BRASILIA – A recent announcement by the United States offering a reward of up to $10 million for information related to Hezbollah in the Triple Frontier region, where the borders of Paraguay, Argentina, and Brazil meet, has sparked controversy. Brazilian experts interpret this move as a veiled attempt by the U.S. to secure Paraguay's surplus electricity from the Itaipu Dam. This speculation, coupled with the immense energy demands of artificial intelligence (AI) development, has brought the complex interplay of South American energy security and U.S.-Latin American relations to the forefront.
The Hezbollah Bounty's Hidden Agenda: Securing Energy for AI Development?
On May 19, the U.S. Embassy in Argentina announced a reward of up to $10 million for information disrupting Hezbollah's financing mechanisms in the Triple Frontier region. While ostensibly a counter-terrorism measure, Gilberto Maringoni, a professor of international relations at Brazil's Federal ABC University, warned in an interview with the Russian digital media outlet Sputnik Brazil that this bounty could be a pressure tactic by the U.S. to gain access to Paraguay's surplus electricity. He suggested it might be a preliminary step to exert economic pressure, similar to U.S. strategies seen during the Donald Trump administration regarding drug trafficking and immigration issues.
Professor Maringoni's analysis gained further traction due to subsequent statements that are difficult to dismiss as mere conspiracy theories. Two days after the Hezbollah bounty announcement, on May 21, during a U.S. Senate Appropriations Subcommittee hearing, Marco Rubio, listed as the U.S. Secretary of State in the original article (Editor's note: Marco Rubio is currently a U.S. Senator from Florida and Vice Chairman of the Senate Intelligence Committee. The reporter may have confused his title, or intended to emphasize his significant influence on foreign policy), advocated for investment in Paraguay, stating:
"They [energy-providing nations like Paraguay] are going to have a big opportunity to be a leader in the AI space. But on the flip side, it will also put pressure on other countries because it will drain their energy resources."
Rubio further emphasized, "We not only need to discuss our role in the energy sector, but we also need to sit at the table to discuss how we can help or partner with countries that have energy supplies, such as Paraguay, which currently possesses hydropower plants." He specifically highlighted that Paraguay's agreement to sell 50% of its generated power to Brazil had expired and that this surplus power "cannot be put into tanks and sent across the ocean." He added, "Someone smart is going to go to Paraguay and open an artificial intelligence (AI) facility."
These remarks suggest deep U.S. interest in Paraguay's vast hydropower potential, particularly the surplus electricity from the Itaipu Dam, one of the world's largest hydroelectric power plants. This can be interpreted as a strategic U.S. move to secure cheap and stable energy sources to meet the surging power demands of AI data centers.
The Itaipu Treaty and Brazil's Dilemma
Marco Rubio's remarks have been met with sensitivity in Brazil. According to the Brazilian newspaper Valor Econômico, Brazil's Ministry of Foreign Affairs (Itamaraty) decided not to issue an official statement regarding Rubio's comments. This decision likely reflects a desire to avoid being perceived as opposing investment in data centers that consume Itaipu's power. However, Professor Maringoni criticized Itamaraty's passive stance, even referencing allegations of Brazilian espionage against Paraguay during Itaipu Annex C negotiations (Editor's note: In 2019, during a dispute over the Itaipu electricity purchase agreement between Paraguay and Brazil, allegations emerged that Brazil attempted to extract negotiation information from Paraguay), stating that "Brazilian foreign policy is unfortunately going through a difficult period."
The Itaipu Dam is a hydroelectric power plant jointly owned and operated by Paraguay and Brazil, making Annex C of the Itaipu Treaty, which governs power distribution between the two countries, highly significant. This Annex C, originally a 50-year agreement, expired on August 14, 2023, and both countries are currently negotiating a new agreement. Under the previous treaty, Paraguay was obligated to sell 50% of its generated power to Brazil and could use the remaining 50% domestically or sell it additionally to Brazil. Due to its lower domestic electricity demand, Paraguay has historically sold a significant portion of its surplus power to Brazil.
However, with the expiration of Annex C, Paraguay now has a legal basis to sell its surplus power to countries other than Brazil, a development that holds significant potential for economic benefit for Paraguay. Senator Rubio's statements brazenly reveal the U.S.'s intention to secure this surplus power, not for Brazil, but for itself through the establishment of data centers for AI development. For Brazil, this raises concerns about its stable energy supply and the potential loss of its existing energy dominance over Paraguay.
A New Chapter in South American Energy Geopolitics
The recent U.S. announcement of the Hezbollah bounty, followed by Senator Rubio's remarks, signals a new phase in the energy geopolitics of the South American region. Paraguay, in addition to Itaipu, possesses abundant hydroelectric potential, including the Yacyretá Dam (jointly owned with Argentina), earning it the moniker "South America's battery" for its vast clean energy potential. The AI and data center industries consume enormous amounts of power, making electricity costs a significant portion of operating expenses. Therefore, cheap and stable power supply is a highly attractive factor for global corporations.
The U.S. move to utilize Paraguay's surplus electricity for AI development is a strategic approach that goes beyond mere economic gain. As global competition for AI technology leadership intensifies, securing stable energy sources has emerged as a critical factor. Especially with China expanding its influence in Latin America, the U.S. is expected to intensify its efforts to secure its economic and strategic advantages in the region.
The Paraguayan government is striving to secure favorable terms in the Annex C negotiations and remains open to exploring other alternatives if negotiations with Brazil prove difficult. In this context, the direct "love call" from the U.S. offers Paraguay new options while simultaneously triggering a subtle war of nerves between Brazil and the United States.
In conclusion, the Hezbollah bounty in the Triple Frontier region may not be merely a counter-terrorism operation but rather a signal of the beginning of an energy security competition between the U.S. and Brazil over Paraguay's surplus electricity. With the advent of the AI era and the rapidly increasing strategic value of electricity, international interest and competition over South America's energy resources are expected to intensify. All eyes are on Paraguay to see how it will exercise its energy sovereignty and what choices it will make in this complex geopolitical puzzle.
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