The World Bank has said that the water level at the Yacyretá dam on the Argentina/ Paraguay border should not be raised any further until studies are completed to assess the social and environmental effects of the change.

The financial institution was distancing itself from a key recommendation made by a Bank-appointed panel of experts on raising the reservoir level to its designed full supply. The Bank said no action should be contemplated without necessary measures and guarantees to protect the environment and affected communities — those already resettled, as well as others who would be displaced by raising the water level.

The Bank commissioned the independent multi-disciplinary panel, composed of six specialists from Canada, the UK, Brazil, Chile and Colombia, in September 1998 to analyse the implications of operating the Yacyretá dam at its current 76m asl or at the designed reservoir elevation of 83m.

The panel, after consultations with interested and affected groups including local and provincial governments as well as NGOs from Argentina and Paraguay, recommended raising the dam’s water level to the designed level. They stated, however, that such a course of action would only be feasible with a series of fundamental changes to the current management framework of the dam. Among the recommended changes are amending the original binational treaty that established the project, creating a new financial framework for the scheme and privatising the dam operation.

The panel said the recommended course of action was appropriate as it would end the uncertainty surrounding the project’s future, increase its earnings by expanding power generation and allow for more effective flood control. The risks, the panel concluded, are offset by the need to ensure the dam can be made financially and economically viable under the management of the private sector. The panel also said that keeping the water reservoir at its existing level would have negative consequences. It would result in significant economic losses and create frustration in nearby communities as the danger of flooding would remain.

Manuel Sevilla, the Bank’s manager for the Yacyretá project, will soon be meeting with local authorities, representatives of the affected populations, NGOs and other parties in the communities of Encarnación in Paraguay and Posadas in Argentina. He will present and discuss the panel’s report directly with them.

The US$8.5B hydro dam on the Parana river was built jointly by Argentina and Paraguay with financial help from the World Bank. Since construction began in 1979, Yacyretá dam has evoked controversy over its social and environmental impacts as well as its economic viability. (See IWP&DC October 1998, pp21-22).