Lula’s government insisted that it had halted the surveillance against Paraguay immediately after becoming aware of it, without elaborating on the nature of the operation or whom it targeted.
Brazilian news site UOL reported that the country’s intelligence agents had infiltrated Paraguayan computer systems to obtain intel on sensitive tariff negotiations related to the Itaipu dam on their shared border.
Paraguay on Monday said it would stop talks that had been underway for months with Brazil over the costs of hydropower generation from the Itaipu dam until Brazil can clarify “the intelligence action ordered against our country.”
Paraguay's Foreign Ministry said it had launched an investigation into what exactly occurred between June 2022 and March 2023, when the espionage operation reportedly took place under then-President Bolsonaro. Paraguayan authorities said they had not been aware of any such infiltration.
“It is a violation of international law, the interference in the internal affairs of one country in another,” Paraguayan Foreign Minister Rubén Lezcano told journalists. “We are under constant attack, and the ministry is taking all necessary steps to defend our confidential information.”
Lezcano said the ministry was recalling Paraguay's ambassador to Brazil and had also summoned the Brazilian ambassador to Paraguay to deliver a formal explanation about the cyber-spying campaign.
The move does not represent a permanent rupture in diplomatic relations, as Brazil’s Embassy in Paraguay will remain open.
But the discord does reflect a revival of historical tensions between the neighbors dating back to Brazil's invasion of the country in the 1860s, which started a brutal war in which Paraguay lost a quarter of its territory and most of its male population.
The Itaipu dam, with a capacity to generate some 14,000 megawatts of electricity, has long been a sore subject in Paraguay. Many Paraguayans consider the original treaty — in mandating Paraguay to cede to Brazil whatever share of the energy it does not use domestically rather than sell to other countries — as an affront to the nation's sovereignty.