This article examines the 2008-2011 renegotiation of Annex C of the Itaipu Treaty through process-tracing based on primary diplomatic records from Brazil’s CDO/MRE and contemporaneous press sources. It identifies two interacting mechanisms: a proactive one, driven by Paraguayan counter-hegemonic tactics that increased the reputational cost of inaction; and a reactive one, rooted in Brazil’s pursuit of cooperative hegemony, which translated reputational sensitivity into calibrated concessions within institutional limits. Their interaction reshaped bargaining leverage and enabled substantive adjustments to the Annex C.