A new report has claimed that Paraguay has become “Latin America’s new mecca” – but not everyone seems happy with the fact that more and more miners are choosing to set up shop in the country.
As previously reported, the Paraguayan Senate last month signed off on a bill that will regulate cryptocurrency mining and trading in the country. The bill, which has been in place since September 2021, seeks to legalize mining and ensure that miners pay taxes and declare their activities.
Many Paraguayan politicians have argued that the mining sector can be a major source of money for the government and power companies. The country is home to several large hydroelectric plants that periodically produce excess electricity.
Since this surplus electricity is often not used by Paraguayans, many advocates have called for encouraging international miners to set up shop near dams and power plants. While other industries use less infrequent electricity, this is not the case for miners, whose rigs can take advantage of electricity when it is available and idle when it is not. this case. Miners as far away as Canada and China have been courted, negotiations are still ongoing with several parties fleeing China’s crypto crackdown in September 2021.
El Pais reported that an abundance of “very cheap electricity” has turned the country into a “promising land for profitable Bitcoin mining” and commented that the former “forests” in Ciudad del Este, San Pedro and Paraguarí have become major mining centers. .
This is also the case for “rural towns” with high populations of Germanic descent, such as Villarrica.
The bill, which must now be approved or vetoed by President Mario Abdo Benítez, will seal the fate of the nation’s cryptocurrency mining sector.
But Luis Benítez, a university professor and longtime home cryptocurrency miner, has stated that only industrial miners will benefit – and “amateur and domestic” miners. get nothing from it. Benítez claimed that politicians “only met with big mining companies” before formulating the bill and created the law “very hastily, without taking into account issues related to energy policy and tax”.
In fact, power companies have also expressed their concerns. A national energy supplier previously asked the government to make it mandatory for miners to pay for their electricity – and pay their bills in USD.
Other political critics have stated that energy should instead be donated to poorer families.
But the reality of the situation is that at present, Paraguay uses little hydroelectric power. The media explained that the country “rarely has any industry or infrastructure” that can harness electric energy, so “their seven million people cannot benefit from” this resource. Instead, public transport, cars and agricultural vehicles typically use fossil fuels – meaning that only 20% of Paraguay’s hydroelectric power is actually used in the country where it is generated. out.
This means that some miners have been promised that they will pay as little as 18 USD per megawatt hour for electricity. This is a huge difference from the “average price paid in South America”, which, according to former energy minister Mercedes Canese, “is about US$100 per megawatt-hour”.
Canese considers this price too low and argues that energy importers are charged more than miners.
Canese argues that “in the context of climate change,” it doesn’t make sense to “devote too much energy to something that doesn’t create [anything] and doesn’t create jobs.”
She added that many miners would only agree to set up shop in Paraguay if they were allowed to use subsidized rates and complained that cryptocurrency mining does not “create wealth” for the country.
Miners, she said, are making huge profits from “raw materials” and “above all, enjoying subsidies.”
Still, there is evidence that mining may present some new opportunities for some Paraguayans. The media gave the example of Villarrica residents and native Christian Katz, who built a business helping miners connect to the internet.
But there are other wrinkles that are perhaps forcing Paraguay’s hand when it comes to fast-tracking crypto mining regulation. Under a bilateral agreement with Brazil, which shares many of the rivers that are damned by Paraguayan power stations, Paraguay must donate all the electricity that it does not make use of (or sell) to its neighbor.
And in 2019, illegal crypto miners were found stealing electricity from hydroelectric power plants – perhaps highlighting the need to legalize and tax the industry before it can go underground.