A while back, we discussed Brazil's decision to grant Paraguay a greater share in the rents from their joint hydroelectric project. There were a number of excellent hard-headed reasons for the Brazilian government to do this, but we've just discovered another: persuading the Peruvian government that it is worth getting into bed with Brasilia.
Brazil is contemplating five hydroelectric projects in Peru that would cost about $15 billion and generate 6 gigawatts of power, 80 percent of which would go to Brazil. That represents about 4½ percent of the country's current installed capacity. The expansion will involve Electrobras purchasing Peruvian energy companies, something the Peruvian government won't accept lightly unless it trusts that it can negotiate with Brasilia. After all, as things stand now, Brazil approaches its neighbors much as Teddy Roosevelt did: it speaks softly, but it carries a big stick. That makes people nervous.
By showing grace towards Paraguay, the Brazilian government showed Peruvians that it would be a reliable partner and take their interests into account, rather than using its power to take up all of the surplus. We'll see if that attitude lasts (power corrupts and all that) but for now Brazil is managing the sudden and surprising emergence of its informal empire in South America with grace, aplomb, and plausible deniability.
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