Argentina, Brazil may see change in Paraguay dam deal

By Kevin Gray

ASUNCION, April 8 (Reuters) - South American giants Argentina and Brazil are grappling with energy shortfalls as their economies roar, and could soon face calls to pay more for key power supplies from their poor neighbor Paraguay.

Both regional powerhouses jointly own hydroelectric plants with Paraguay and benefit from decades-old deals that provide them with electricity at cut-rate prices.

But some political leaders in Paraguay, including the front-runner in the country's April 20 presidential election, are clamoring for a new pricing deal.

The call comes as many Latin American countries are strengthening state control over their natural resources to reap economic benefits from record-high commodity prices.

For landlocked Paraguay -- which has few resources other than abundant fresh water -- that means launching a difficult challenge to its two bigger and more powerful neighbors, some analysts say.

"They also thought it was impossible for Panama to renegotiate the canal ahead of time," said Fernando Lugo, a left-leaning former bishop who is the favorite in Paraguay's presidential race. The United States handed over control of the Panama Canal in 1999.

"We're just asking for what's fair," he added.

Stretching over the Parana River that marks Paraguay's borders with Argentina and Brazil are the Yacyreta and Itaipu dams, which Paraguayan officials once hoped would bring prosperity to one of South America's poorest countries.