In the late 19th and early 20th centuries, Brazil and Paraguay engaged in several border disputes, which were resolved with the signing of the Treaty of Peace, Friendship, Commerce and Navigation in 1932.

In the mid-20th century, Brazil and Paraguay strengthened their economic ties with the construction of the Itaipu hydroelectric dam on the Paraná River, which forms the border between the two countries.

Brazil–Paraguay relations have improved greatly after Brazilian President Lula's decision in 2009 to triple its payments to Paraguay for energy from a massive hydro-electric dam on their border, ending a long-running dispute.

[5] As a result, Paraguay was suspended from the South American Trade Bloc, which included Argentina, Brazil, Uruguay, and the then-recent addition of Venezuela.

[8] In February 2019, Brazilian President Jair Bolsonaro praised the late military strongman of Paraguay, Alfredo Stroessner, calling him "a man of vision."