BRAZIL HELPING GUYANA WITH ENERGY IN VENEZUELA BORDER

1. (C) SUMMARY: Brazil is in talks with Guyana to build a
hydroelectric plant on the border region of the two countries, in the
territory disputed between Venezuela and Guyana. International
Advisor to Brazil's Minister for Mines and Energy Edison Lobao,
Ambassador Rubem Barbosa told Econoff on October 5 that in addition
to augmenting the energy capacity for both countries, and bringing
Guyana closer politically to its South American neighbors, the
project would have the effect of allowing Guyana to establish
government infrastructure in the disputed territory. END SUMMARY.



2. (C) The idea to build a binational hydro plant in Guyana's border
region, near the Brazilian state of Roraima, stems from a meeting
between Brazil's President Lula and Guyanese President Jagdeo on
September 14 when the two inaugurated a new bridge that will be part
of the highway linking Brazil to the sea through Guyana. At that
time, Jagdeo, apparently aware of similar Brazilian projects,
including the Itaipu Dam with Paraguay and plans for five new dams
being constructed with Peru, asked Lula for assistance in meeting
Guyana's energy needs. Two weeks later, Lula sent a delegation to
meet with Jagdeo, led by Energy Minister Lobao who was accompanied by
Barbosa. The group included representatives of Brazilian National
Development Bank and likely project financier BNDES, and the
Brazilian state-owned electricity company, Eletrobras, which has been
charged by Lula to pursue foreign operations with a goal of
increasing energy integration throughout the continent. Barbosa
cautioned that talks are still in the initial stages, with
Electrobras undertaking an assessment of the area to determine the
potential for such a project.



3. (C) As currently envisioned, the hydro powerplant would generate
800 megawatts (MWs) of electricity, with 200MWs going to Guyana and
the rest returned to Brazil. Brazil would build additional
transmission lines to channel the excess electricity to the Amazonian
region of Manaus. Despite some press reports that the project could
be completed by 2015, Barbosa felt that not only were such
projections likely inaccurate, but also premature given the very
early stage of discussions. He felt a ten year timeframe was more
realistic.



4. (C) While helping to meet the pressing energy needs of Guyana and
the undersupplied areas of Brazil would be the primary reason for
undertaking such a project, Barbosa confided that the political
reasons for doing so were also compelling. Given that the proposed
hydroplant would be built in the section of Guyanese territory that
is disputed with Venezuela, Jagdeo, according to Barbosa, sees this
as an important effort to consolidate Guyana's claim to the area.
Asked if this wasn't a problematic element of the plan from the
Brazilian perspective, Barbosa responded that Jagdeo had observed
that Venezuelan President Chavez had not involved himself in the
question of the disputed land. This fact, combined with the ruling
by a third party arbiteur that the area in question was Guyanese
land, in Barbosa's estimation provided sufficient comfort for Lula to
proceed.



5. (C) According to Barbosa, Jadgeo said he is also interested in
the project as a means of integrating Guyana more into the South
American community, noting that Guyana's future lies with the region,
rather than with European allies that Guyana has traditionally relied
on. Barbosa said that Lula shares this interest and would like to see
Guyana and Surinam involved in the South American organization
UNASUL.



6. (C) COMMENT: This type of binational energy project is of growing
interest to the GOB, despite recent troubles with the Paraguayan
insistence on receiving higher rates from Brazil for energy from the
Itaipu dam, to which Brazil ultimately agreed. (Note: According to
Barbosa, the Itaipu matter is nearing its conclusion but the
resolution is currently awaiting approval from the Finance Ministry
which Barbosa said could take a while. Once obtained, the agreement
will require Congressional approval, which Barbosa judged to be a
foregone conclusion. End note.) Not only is Brazil looking to
expand its energy generation capacity, the political efforts are also
in keeping with Lula's philosophy of building bonds with neighboring
countries through interdependence for energy security and building a
South American political bloc, through which Brazil can conduct
harmonious regional relations while building a base of support for
its larger international ambitions. END COMMENT.

KUBISKE