ASUNCION, Nov 29 （Reuters） - Rio Tinto Alcan plans to spend $3.5 billion to build an aluminum plant in Paraguay that will produce an estimated 670,000 tonnes a year, the project manager said on Monday, raising the company's initial projections.
The unit of global mining giant Rio Tinto （RIO.L: Quote）（RIO.AX: Quote） initially announced a $2.5 billion investment in December 2009 that would have produced some 480,000 tonnes of aluminum a year.
"This project is now based on output of 670,000 tonnes of aluminum a year with a $3.5 billion investment," project manager Juan Pazos Romero told reporters. That would be the biggest investment in the poor South American country since the building of two massive hydroelectric power plants in conjunction with its two big neighbors, Brazil and Argentina, more than 20 years ago.
The construction of the aluminum plant is set to start in 2014 and Pazos Romero said it would be completed within two-and-a-half years. Itaipu dam on the Brazil-Paraguay border is one of the biggest hydroelectric generators in the world, supplying much of Brazil and Paraguay with cheap energy. But Paraguay has failed to attract big industry to use its excess output due to a lack of power transmission lines and decades of corruption scandals. Industry analysts say the successful construction of the aluminum plant would give Paraguay a chance to shake its reputation as one of Latin America's most corrupt countries. Government officials say it could also help attract more major investors with cheap hydroelectric power.
For an analysis see: "If the plan goes through and this becomes an industrial hub, it will mean other companies will arrive as well," Economy Minister Dionisio Borda said. Paraguay is the world's No. 4 soy exporter, but analysts say the plant, which projections say could provide 14,000 direct and indirect jobs, could help the impoverished country diversify its exports.
Company representatives met President Fernando Lugo on Monday to update him on the project, which is also expected to raise its energy demand for the plant's operation to 1,000
megawatts from 800 megawatts previously. The company signed a letter of intent with Paraguay's state-run National Electrical Administration last year to begin negotiations on an energy-purchasing agreement.
Power cuts are frequent in Paraguay despite Itaipu, the source of about 20 percent of Brazil's power supply. Paraguay's economy is expected to grow by 9 percent this year, one of the fastest rates of expansion in the region.
（Writing by Luis Andres Henao; Editing by Dale Hudson）
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