A senator realizes Bitcoin mining is a godsend for Paraguay

Bitcoin mining could make electricity from the large Itaipu dam more expensive – for Brazil, which has so far been buying the surplus from Paraguay at ridiculous prices. A fair price would be a big win for Paraguay.

Hot today, hot tomorrow. Recently, senators in Paraguay presented a bill that would ban mining in the South American country because it affects the electricity supply. Now another senator is presenting a statement calling for mining to be supported because it improves electricity supply.

TODAY WE APPROVE THE DRAFT DECLARATION BY WHICH THE SENATE OF THE #Paraguay SUPPORT FOREIGN INVESTMENTS IN INFRASTRUCTURE AND URGES @MIC_PY TO STUDY THE ECONOMIC ADVANTAGES OF SELLING OUR ENERGY SURPLUS TO THE INDUSTRY OF THE #CryptoMining #BITCOIN pic.twitter.com/XPF94zWKK2

— Salyn Buzarquis (@SalynBuzarquis) April 10, 2024

So what now? In my opinion, Senator Salyn Buzarquis has much better arguments in the refreshingly contradictory discussion. In an approved statement, he argues that the Department of Commerce “is studying the economic benefits that selling our energy surplus to the crypto mining industry can have.”

The main issue is the surplus electricity generated by the Itaipu Dam, which Paraguay and its neighbor Brazil operate jointly. Buzarquis believes “that crypto mining companies can be a short- or medium-term solution to sell our energy surplus at market prices.”

The senator apparently coordinated the statement with ANDE, the country’s national energy administration, which distributes electricity from the dam. ANDE demonstrates that the economic benefits are significant. Miners already bring in more than $100 million a year. In addition, they award “significant contracts to local companies producing transformers, cables, electronic systems and refrigeration.” These secondary effects also generate tax revenue and create jobs.

There are currently 45 legal Bitcoin mining farms operating in different regions in Paraguay. ANDE President Felix Sosa recently announced plans to test sell excess energy from the Itaipu Dam to miners through bilateral contracts. He assumes tariffs between $40 and $51 per megawatt hour. According to the senator, this is very relevant, “because for the first time in the history of Paraguay, excess energy from the dam will be sold at market prices, and with purchase guarantees that were previously unimaginable.”

The alternative is much less attractive: its neighbor Brazil – with which Paraguay shares the dam – only pays $10 per megawatt hour for the excess energy. “We will be able to finally achieve the fair price that we have longed for in Paraguay. In negotiations with Brazil, we can also reject prices below $40 per megawatt hour.”

The Bitcoin miners are actually making electricity more expensive, as they are often accused of – but in Brazil, not in Paraguay. They set a land price because Paraguay’s electricity suppliers know that there is always a buyer who will pay it.

For 2025, the senator expects that the installed mining farms will purchase electricity for around $125 million. This represents a profit of $73 million for ANDE and approximately $177 million in sales tax for the tax office. “This revenue is what ANDE needs to avoid going bankrupt and to be able to invest more in infrastructure without increasing electricity prices for people in Paraguay.” Mining does make electricity more expensive in Brazil – but Even cheaper in Paraguay.

Senator Buzarquis obviously gets it. Bitcoin mining could be a godsend for the electricity market in Paraguay.