Climate risk in Paraguay

Latin America's second largest river at its lowest levels since 1944, hitting trade and power generation.

Paraguay is suffering an unprecedented drought. Low rainfall over the past two years has resulted in the lowest levels of water in the Paraná and Paraguay rivers for over 77 years. Both rivers are commercial arteries and, together, manage 96% of Paraguay’s overseas trade.

“The situation is severe,” explained an international trade analyst in Asunción, “We are talking about the second largest river in Latin America at its lowest level since 1944. Barges are running at 50% capacity as they cannot navigate the river fully-loaded.”

“The situation is severe, we are talking about the second largest river in Latin America at its lowest level since 1944.”

International trade analyst, Paraguay

A local energy analyst was extremely concerned, “The Paraná is a crucial waterway for all South America, but bear in mind that for a small country locked in the heart of the continent like Paraguay, we are hugely commercially dependent on the river’s navigability. Around 80% of the country’s external trade goes through the Paraná waterway.”

If rainfall remains low for another two months, Paraguay will lose USD 100 million in cargo currently stuck in fluvial ports. The low level of water in the Paraná is also affecting Argentina which has registered losses of USD 620 million throughout 2021 in the export of flour and soya oil.

In Paraguay, the government has declared a state of emergency in the Paraná, Paraguay and Apa rivers, which has been in place since last July. The measure allows the government to approve extraordinary expenses to carry out emergency dredging activities to ensure the navigability of the river.

The Paraná’s low level is also having a severe impact on the Paraguayan energy sector. The Itaipú dam is only operating between 10 and 14 of its 20 turbines, and has produced 15% less energy than in 2020. The Yacyretá hydroelectric plant is only generating 40% of its capacity. Furthermore, all of Paraguay’s imports of oil and gas go through the Paraná River.

The energy analyst had been monitoring the situation closely, “The Itaipú dam should be producing 75 GW to secure the minimum energy reserves for Paraguay, it’s currently at 70GW. Itaipu’s production is crucial to the country’s energy needs: 85% of the energy consumed in the country comes from the dam.”

Environmental experts point to climate change being the main cause of changing weather conditions across the region. However, more studies are needed to understand how global heating and deforestation in the Amazon, which feeds the Paraná basin, is disrupting the river flow.

Unfortunately, the current situation could force the Paraguayan government to consider increasing energy generation from fossil fuels. “Politicians are already thinking about Paraguay’s energy matrix,” explained the energy analyst, “Look at Brazil, previously it was almost exclusively powered by hydro but today it is less than 50% of the energy matrix, it imports gas from Bolivia and has invested a lot in wind and offshore exploration.”

The United Nations Development Programme in Paraguay published a study calling for the increased use of biofuels, biomass, green hydrogen and solar plants. The energy analyst felt a shift to renewables was unlikely, “The current government is only interested in defending the interests of soya products and the agribusiness sector. Just look at COP26, the Paraguayan delegation was filled with agribusiness lobbyists.”

“It’s hard to blame the government for the weather but Paraguay should be taking a more proactive approach to climate risk.”

International trade analyst, Paraguay

According to the Inter-American Development Bank, Paraguay is the country most vulnerable to climate change in Latin America as it faces the region’s highest proportional deforestation rates. The trade analyst felt the government could do more, “It’s hard to blame the government for the weather but Paraguay should be taking a more proactive approach to climate risk instead of continuing with the current damage mitigation policies.” The energy analyst agreed, “We have overexploited the river by cutting down forests, building dams and plants, basically, we have damaged the river’s capacity to regulate itself.”

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