The building of the dam, authorized by a 1973 bilateral agreement between the Paraguayan and Brazilian regimes of the time, marked a new era of cooperation between the countries, both of which had claimed ownership of Guaíra Falls.

Disaster struck on January 17, 1982, when a suspended footbridge affording access to a particularly spectacular view of the falls collapsed, killing dozens of tourists.

Brazilian poet Carlos Drummond de Andrade wrote a poem expressing his dismay at the destruction of Guaíra Falls.

Set in large type, the poem filled an entire page in the Jornal do Brasil newspaper:Here seven visions, seven liquid sculpturesvanished through the computerized calculationsof a country ceasing to be humanin order to become a chilly corporation, nothing more.A movement becomes a dam.—Carlos Drummond de Andrade, "Farewell to Seven Falls" (excerpt, translated from the Portuguese)Earlier, as the waters began to rise, a demonstration took place, as hundreds of people gathered to participate in a quarup, an indigenous ritual of remembrance for the dead, in memory of the falls.

By October 27, 1982, the reservoir was fully formed and the falls had vanished, with only part of the rock face visible during years of drought.