Analysts say the Argentine decision, if implemented, could dash all hopes of a reconciliation over last year's suspension of Paraguay from the Mercosur trade bloc. Argentina and Paraguay are founding members of Mercosur but last year Argentina, Brazil and Uruguay spearheaded a diplomatic drive to push Asuncion out.
Their campaign followed the ouster in June 2012 of former Paraguayan President Fernando Lugo, a left-wing Roman Catholic priest. Lugo was impeached by Paraguay's Congress in a power grab blamed on a right-wing congressional wing.
Mercosur called Lugo's ouster a coup d'etat and suspended the country's membership. Recent moves by Argentina, Brazil and Uruguay to mend fences with Paraguay have gone nowhere.
Senior Paraguayan officials say the government requested Argentina consult with its neighbor on its nuclear plans but their request was ignored. There hasn't been an Argentine reaction to the assertion.
Argentina, already a major nuclear power producer, is reportedly planning a new installation in Formosa that aims to meet an expected increase in the nation's electricity consumption. Formosa lies on the banks of the Paraguay River in northwestern Argentina, about 750 miles from Buenos Aires.
Plans for a 27-megawatt reactor, with the potential to be upgraded to 100 megawatt or more, have existed since 2006 but have not moved beyond basic ground work.
Recent Paraguayan attempts to engage Argentina in a dialogue led to a sharp exchange in which Paraguayan politician Olga Ferreira de Lopez called Argentine President Cristina Fernandez de Kirchner a "perverse woman."
Argentine officials argue any negotiation with Paraguay, on the nuclear issue or any other topic, isn't possible because Paraguay is suspended from Mercosur and the government in Asuncion is not a legitimate one.
"The Argentine president has refused to answer the formal request through diplomatic channels about the nuclear plant our neighbors are planning to build in Formosa, just across our borders. Apparently she refuses to give any consideration to the request because Argentina does not recognize the government of President Federico Franco," Ferreira said.
Franco is the caretaker president who took over from Lugo last year and will hand over power to President-elect Horacio Cartes Aug. 15. While some Paraguayan officials hope the start of Cartes' presidency will disarm Mercosur critics who continue to question the legitimacy of Paraguay's government, other skeptics warn Argentina may continue to create obstacles.
Ferreira accused Fernandez of ignoring Paraguayans' genuine concerns about the nuclear power plant.
Paraguay has called for the United Nations to intervene in the dispute.
Argentina meets about 5 percent of its electricity needs with power generated at two nuclear power plants Buenos Aires. Critics of the Argentine nuclear program say governance issues in the country make it potentially unsafe.
The United States tried to have the nuclear program disbanded when Argentina was under military rule in the 1980s amid reports the junta was pursuing a weapons program. The weapons program was abandoned when Argentina returned to democratic rule in 1983 but nuclear power generation continued.