(Recasts to reflect agreement to release water)
By Cassandra Garrison and Luciano Costa
BUENOS AIRES/SAO PAULO, April 16 (Reuters) - Brazil has agreed to release water at the giant Itaipu hydroelectric dam to raise low water levels in the Parana River, a key thoroughfare for grains shipments, Argentina's Foreign Ministry said on Friday.
Decade-low water levels on the Parana are forcing Argentine exporters to load less soy and other grains on ships bound largely for China, adding a new problem to a sector already beset by bottlenecks due to the coronavirus pandemic.
The agreement with Brazil will allow for an additional 1,400 cubic meters of water flow to be added to the river, the ministry said in a statement. The two sides also agreed to a weekly dialogue mechanism to discuss the region's chronic drought, the Argentinian ministry said.
The move will help to ramp up Argentine soy exports, which compete with Brazilian farmers' output on global markets.
Brazil's Foreign Ministry did not immediately respond to request for comment.
Brazil's power industry had balked at the request from Argentina due to the scarce reserves of water supplying the mega-dam, people familiar with the matter told Reuters, requesting anonymity due to diplomatic sensitivities.
Dry weather has drained all but 17% of the reservoirs in southern Brazil feeding the dam's hydroelectric power plant, which is running far below capacity due to the dampening effect of the coronavirus outbreak on electricity demand.
"With lower-than-average reserves we're going to spill water ... pouring money down the spillway?" said one of the Brazilian sources.
On Thursday, a representative for Argentina's foreign ministry said the country was not offering anything in return for Brazil to raise the level of the Parana River.
The negotiations were conducted between the two country's foreign ministries, Brazil's National Electric System Operator and Paraguay, which runs Itaipu as a joint venture with Brazil, according to the sources.
An Itaipu representative said dam operator itself did not participate in the discussions. (Reporting by Cassandra Garrison in Buenos Aires, Luciano Costa in Sao Paulo and Rodrigo Viga Gaier in Rio de Janeiro Additional reporting by Hugh Bronstein in Buenos Aires Writing by Jake Spring Editing by Brad Haynes, Marguerita Choy and Sonya Hepinstall)
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