Public Enterprise and Economic Development: The Case of Ande in Paraguay (Hydroelectric Power, Inter-American Development Bank, Itaipu Dam)
Birch, Melissa H.
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https://hdl.handle.net/2142/70757
Description
Title
Public Enterprise and Economic Development: The Case of Ande in Paraguay (Hydroelectric Power, Inter-American Development Bank, Itaipu Dam)
Author(s)
Birch, Melissa H.
Issue Date
1985
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, General
Abstract
The presence of large state-owned enterprises in non-socialist developing economies is not uncommon. This research focuses on one public enterprise, ANDE, which generates and distributes electricity in Paraguay. Created from a nationalized Italo-Argentine firm in 1948, it has moved from thermal to hydro generation and expanded the transmission system to serve small population centers around the country. With the Brazilian state-owned power company Eletrobras, ANDE is currently constructing the world's largest hydroelectric facility, Itaipu. Investment in this project alone will exceed $15 billion.
After introductory material describing the Paraguayan setting, Chapter III examines ANDE's history and traces Paraguayan-Brazilian economic cooperation which culminated in the Itaipu project. Chapters IV to VI examine ANDE's investment and pricing decisions and their impact on Paraguayan economic development between 1950 and 1982, focusing specifically on the mobilization of foreign and domestic financial resources and human capital formation.
The study finds few backward linkages from the first hydroelectric project, but a significant forward linkage. Abundant power made extending service outside the capital possible. Itaipu was found to have few backward linkages because of the underdeveloped state of Paraguayan industry and the absence of adequate infrastructure in Paraguay. Important forward linkages in Paraguay appear unlikely since utilization of Itaipu energy will be left to the private sector which is unable to make the parallel investments required to make use of the power (estimated at $3 billion per turbine).
ANDE's pricing policy is established in its charter; it prices to earn a rate of return sufficient to fund the local contribution required to secure international financing for expansion. The price of electric power in Paraguay is high compared to that of neighboring countries but has been declining in real terms as a result of the shift to hydro power and the concessional financing obtained.
The data were collected during a one-and-a-half-year stay in Paraguay supported by a Fulbright research fellowship. In addition to the statistics collected from the firm's files, extensive use was made of interviews with past and present decision-makers.
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