Interest Based Negotiation with a Strategic Approach: Annex C ITAIPU Binational Case Study

In the advent of the single most important geopolitical negotiation between the owners of the largest hydroelectric power plant in the planet, Paraguay and Brazil, which involves new energy trade prices, this paper proposes a methodology to reach an agreement favorable for both parties, and reveals strategies to strengthen Paraguay’s position at the negotiation table. A bilateral negotiation analysis based on interests applying game theory in finite and infinite play schemes is conducted, considering the real costs of production, compensation royalties and current energy market prices. The resulting diagnose recognizes time as a fundamental criterion, as well as autonomy, to build up leverage. Finally, by comparing both mathematical models we demonstrate that initiating the negotiation as soon as possible will render the best possible outcome for Paraguay.