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The Yacyreta Hydroelectric Project should be completed as originally designed in order to improve the economic and social environments of Argentina and Paraguay even though it would cause additional damage to the ecology. The project was designed to have a reservoir 83 meters above sea level with the installed power of 3200 megawatts of electricity. It was conceived twenty-seven years ago to produce cheap electricity and to minimize the flood risk in the surrounding areas. However, mismanagement and poor decision making over the life of the project have caused irreparable harm to the community, the financial aspects of the project, and the ecology. By achieving its goal of 83 meters, the project can use the economic benefits to compensate for most of the social and economic damages. Unfortunately, raising the reservoir would cause substantial harm to the ecology. Although this is a steep price to pay, the health of the ecology does not outweigh the benefits of social and economic development in Yacyreta.

The history of the Yacyreta Project is necessary to fully understand the magnitude of the current damage. The project is located on the High Parana River on the international border between Argentina and Paraguay. In 1973, the two countries signed a treaty to share in the benefits of the project and created the Entidad Binacional Yacyreta (EBY) to manage the project and operate the facility. Construction started in 1979 with the help of a loan to Argentina from the Interamerican Development Bank (IDB) and the International Bank for Reconstruction and Development (IBRD), part of the World Bank. However, disbursements of the loan were suspended at the end of 1983 because of low work performance due to the South Atlantic War and the economic recession of Argentina at that time. In 1986, a new construction program was proposed and Argentina secured another loan. The loan allowed the completion of the International Bridge and the resettlement of 1702 families. At this time, studies of environmental impact were addressed for the first time. In 1992, with the help of the World Bank, the Action Plan for Resettlement and Rehabilitation and the Environmental Management Plan were submitted for consideration to the affected communities and the local authorities. The governments of Argentina and Paraguay then set out a schedule for the progressive filling of the reservoir. The schedule was as follows: September 1994: 76 meters of elevation, September 1995: 78 meters of elevation, and June 1998: 83 meters of elevation. Argentina, shortly thereafter, secured another loan that included an allocation for the resettlement and environmental plans. After relocating 641 families from 1992-1994, the reservoir was filled to an elevation of 76 meters in September 1994 even though all of the mitigation activities had not been completed. In 1995, Argentina, due to its financial condition, suspended payments on the loans, therefore abandoning the mitigation and compensation plans. In 1996, the Paraguayan NGO Sobrevivencia, on behalf of the local people affected by the dam, filed protests with the Independent Investigative Mechanism of the IDB and the Independent Inspection Panel of the World Bank. In 1997, the Base Program, financed by the IDB, the World Bank, and the EBY, was started to assess the permanence of 76 meters of elevation. Finally, in 1998, the World Bank assembled the International Advisory Panel to provide advice on options for the Yacyreta reservoir operating level.

The social environment of the surrounding communities of the Yacyreta project has been substantially damaged by the historical delays of the project. The people who live in the inundation area, from 76 meters of elevation to 83 meters of elevation, have been living in limbo for the last twenty-seven years. These people are covered by EBY’s Action Plan for Resettlement and Rehabilitation, and consequently are awaiting the completion of the plan so that they may be resettled. Moreover, in the last six years, these people have suffered a sharp decline in their quality of life. They have been exposed to health hazards caused by the polluted stagnant water of the reservoir due to untreated sewage and industrial and agricultural waste. Also, many people were dependent on the river for their livelihood. Ceramic workers were dependent on the riverbank clay deposits that have now been submerged. Fisherman have experienced a serious reduction in fish catches due to the blocked fish migrations and fouled water quality. And other affected occupations include laundresses and bread makers whose quality of product has suffered because of the poor water quality. Local governments do not consider these people part of their obligation and consequently do not include them in social programs or when preparing budgets. Even so, the residents have been reluctant to leave as they await the benefits provided by the Action Plan, which among other things includes new houses. In addition, more people have been moving into the affected area to try and reap some of the benefits promised by the plan. Thus, the community has become impoverished waiting for the project to be completed.

The economic gains of the project have not reached their potential due to the negligence of the responsible parties. The EBY has proven to be a corrupt organization with poor management. The cost of the project has risen from the originally estimated at 2.5 billion dollars to a cost of over 10.5 billion dollars. In Paraguay, there is a group of the economic elite referred to as the "Yacyreta millionaires" (Hynds) because they earned their fortunes doing business with the EBY. In addition, the IDB and World Bank did not supervise the project closely enough. For example, these banks broke their own loan agreement when they approved the decision to create the reservoir in 1994 even though the required resettlement and environmental mitigation activities were not complete. The banks decided to depend on Argentina’s counterpart funding to finance the completion of the activities by 1995, but that funding was cut off when Argentina went through an economic crisis that year. This decision is the reason the project has remained at the current level for six years. The additional costs accrued and the fact that the project is currently at the height of 76 meters are the reasons it does not operate at a profitable level. Consequently, the EBY remains under great financial strain and funds are not available to complete the resettlement and environmental mitigation activities. The mismanagement of the project has ensured that it will always be viewed as an economic failure.

Due to the incomplete ecological mitigation and compensation tasks, the ecological environment was irreparably damaged when the reservoir was raised to 76 meters above sea level. Terrestrial biodiversity of the area suffered and compensatory measures were inadequate. In one instance, the land title to a compensatory protected area of land was not acquired and some of the land was cleared for cattle ranching. Fish populations have suffered due to the lack of the ability to migrate and because gas oversaturation in the water resulted in massive fish kills. The water quality has suffered, as the water has become stagnant and polluted with untreated wastewater. The poor water quality has caused a sharp increase in health problems in the affected communities. Although compensation measures would lessen the damage, the ecology of the area has been changed forever.

Raising the reservoir would provide funds for the completion of the resettlement plans that would drastically enhance the quality of life of the people in the Yacyreta area. The promises made when the project was first conceived have influenced a whole generation of the community. The level of trust between the community and the government is extremely low because of the delays and dishonesty associated with the project. In fact, the former president of Argentina, Carlos Saul Menem, referred to the Yacyreta project as a "monument to corruption" (Treakle). The independent inspection panels set up by the World Bank and the IDB were invaluable as forums for the opinions and protests of the community to be heard. Without the inspection panels, the community’s only other alternative was to file protests with the governments which were either ignored or stifled. With the help of non-governmental organizations (NGOs), such as Sobrevivencia, and by way of the inspection panels, the people were empowered to protest in a way that now their governments are forced to account for. The community’s needs now have to be considered by the governments when making decisions. Since the affected community is a proponent of completing the resettlement plans, the governments must ensure that the plans are carried out. The alternative is to alienate the community and risk facing mass mobilization of the community in protest or even possibly facing a trial in front of an international court of human rights. Therefore, providing the benefits of the resettlement plans to the Yacyreta community has now become unavoidable.

Eventually, at its intended height, the project would even become profitable, providing economic benefits for the community. At the current level of 76 meters above sea level, the dam is only operating at 1800 megawatts, about 60% of capacity. At the height of 83 meters, the additional electricity produced could be sold to neighboring countries and provide a source of income for the project. And because so much money has already been spent on the project, the marginal cost of completing the project is relatively low. These additional funds could be used directly or as a guarantee to pay for projects to improve the quality of life of the Yacyreta residents and to minimize the ecological impact of the dam. The remaining income would be used to pay down the debt accrued by the EBY. The resulting profits from raising the dam would reverse some of the damage done by the gross mismanagement of the project over the last twenty years.

However, even with the additional funds available to invest in the ecological mitigation plans, the ecological impact of raising the reservoir would be substantial. Although the raise to 83 meters would eliminate the flood risk, it would have an adverse affect on all the other environmental factors. The land flooded by the reservoir would nearly double. A dike would have to be built to protect the Aguapey Valley, which would otherwise be flooded if the reservoir is raised. The valley is the most important place for the global conservation of birds threatened in the grasslands of Paraguay. Although the ecological impact of the dike has not been studied in depth, it is certain that it would create additional ecological damage. In addition, migratory fish species would be lost due to the more stagnant nature of the reservoir. The quality of water would deteriorate because the water in the reservoir would be more stagnant and would run the risk of seasonal thermal stratification. Thermal stratification causes unnatural temperatures, decreased oxygenation, and an increase in the concentration of mercury, iron, manganese and sulfur in the water downstream from the dam. The result would "spell doom for downstream areas" (Brick). Moreover, the poor water quality coupled with the inadequate sewage systems of the area would greatly raise the risk of diseases for the nearby communities. The damaging effects of raising the reservoir could be minimized with the appropriate compensation and mitigation plans, but substantial damage to the ecology can not be avoided.

Although environmental rights groups have gained influence in the last twenty-seven years, the decision that should be made today regarding the Yacyreta project is the same decision that was made in 1973. Environmental NGOs, like Sobrevivencia, support keeping the project’s operating level at 76 meters to ensure the completion of suspended environmental mitigation and social compensation plans and to minimize the damage to the ecology (Fundacion). They propose that the EBY, the World Bank, the IDB and the governments of Argentina and Paraguay assume the costs of completing the plans since they are responsible for the damages. This is a problem, however, as these responsible parties are unable or unwilling to assume the additional costs of completing the plans. The EBY is not in the financial condition to complete the plans. The governments of Argentina and Paraguay would like to privatize the project and therefore do not want to spend any more money on it. The World Bank and the IDB would be willing to loan the money to the governments of Argentina and Paraguay, but the banks do not feel they should be held directly responsible for what they believe to be the shortcomings of the EBY. Moreover, by minimizing the damage to the ecology, a great economic opportunity would be missed. The marginal cost of completing the project would only be a fraction of the marginal revenue over the life of the project. This additional profit is the key to reversing most of the damages caused by the project over the last twenty-seven years. An appropriate portion of the profits, ideally determined by considering the input of all vested parties, would be allocated to social and ecological works. Although the damage to the ecology can never be erased, such a sacrifice is acceptable because it would allow an improvement in the quality of life of the Yacyreta community. Under the care of an efficient management team, who would need to establish a two-way communication with the community, the Yacyreta Project could eventually be considered successful. As proven to be the case in this project, conservation of the ecology deserves ample consideration, but it should not always be the deciding factor.


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