Historically, in Paraguay’s agricultural sector, logistics is of vital importance so as to ship the country’s produces to neighboring countries and overseas markets. However, outside experts maintain that Paraguay’s national economy is highly vulnerable because of counterfeit goods, contraband trade, and the failure to adequately crack down on corruption. In the war against terrorism, Paraguay has worked closely with the U. S. Government and drafted many laws that prevent the spread of money laundering in the country, especially in the tri-national frontier region in the city of Ciudad del Este.
Although former President Fernando Lugo’s administration was seen as a chance for Paraguay to bolster its democratic transition, this was squandered during his nearly four years in office since he traveled abroad more than 65 times as president. This was nearly as much as Soviet Premier Nikita Khrushchev’s travels during an 11-year term as General Secretary of the Communist Party of the Soviet Union. As president Lugo spent 265 days travelling during his approximately 3 ½ years in government.
In the war against corruption, however, there has been more progress made within the last 14 months than during Lugo’s entire term in office. Lugo, a popular former Catholic bishop, was befriended by progressive and leftist national leaders such as Venezuela’s Hugo Chavez and Ecuador's Rafael Correa while his relations with the U.S. declined. He was also hampered by allegations of sexual harassment of young women: he denied paternity of two children attributed to his liaisons with various young women. He also divided the nation with unacceptable and ineffective land reform that was intended to satisfy the needs of the poor, such as the impoverished farmers with whom he had worked for over 15 years as a Catholic priest and bishop.
Lugo burnished his leftist credentials while in office. For example, the International Movement of Young Communists held a major conference in one of the barracks of Paraguay’s armed forces. While in office, chaos reigned in communications between the legislative and executive branches. The Liberal Radical Authentic Party (PLRA) was marginalized even while it was part of the governing coalition. Lugo tried from time to time to divide the PLRA, while the capital city was wracked by demonstrations for and against his administration.
Tensions increased during his administration and were brought to a head as a result of the so-called Curuguaty Massacre. Landless demonstrators and squatters on private land who demanded land reform and re-distribution confronted police at a ranch in the Canindeyú province in southeastern Paraguay. In an exchange of fire, 11 landless peasants and six police officers were killed. Several of the policemen were killed by sniper fire. A congressional investigation ensued and impeachment proceedings led to his removal from office in August 2012. The Organization of American States determined that his impeachment and removal were legal and constitutional under Paraguayan law.
Nonetheless, Lugo retains some hard-core supporters. In February 2013, a general election saw him return to government as a national senator. Nonetheless, his former right-hand-man, Miguel Ángel López Perito has decided to “stay away” from the former president and laicized bishop. Lugo currently leads a faction in Congress that consists of five senators.
According to the International Monetary Fund, in 2010, Paraguay's economy experienced the fastest growing rate in Latin America, reaching the level of 10 percent, due to an increase in global demand for agricultural products, particularly soy, which is constantly increasing. Unfortunately, little can be said whether the revenues generated by the exports of agricultural products positively affect the lives of over 2.5 million impoverished Paraguayans in a total population of 7 million. Paraguay has had nearly constant economic growth for the last three years; unfortunately this performance was not reflected in improvement in the divide between the poor and the rich. In Paraguay, 36 percent of the population live below the poverty line, subsisting on less than one dollar a day.
The tax burden in Paraguay is the lowest in the Americas. At 12.4 percent, this means that some Paraguayans become wealthy while the government is broke. Agriculture contributes very little to tax revenue in Paraguay. Therefore, the three-year long economic growth is not reflected in the state's treasury.
The main reason for Paraguay’s growth since 2010 is the country’s mild Mediterrean climate. Over the last four years, exports of organic beef and soybeans have grown. In 2009-2010, the soybean harvest reached 7.5 million tons, and has increased every year since then. In 2010, the value of soy bean exports was pegged at $ 2.3 billion. Paraguay is the world's fourth soybean exporter, after Brazil, the United States, and Argentina.
In 2010, the IMF suggested to Asuncion that it must immediately abandon its position as the only country in Latin America that does not levy personal income tax. Today the Paraguay treasury is slowly applying an income tax code only to those who make more than $40,000 or $4,000 per month.
According to Sebastian Brizuela, the executive director of Revista Logistica, “Paraguay is a country of great opportunities and an ideal place to establish foreign investment projects and its open economy is friendly to international investors; not only from its innovative perception, but also from having a weather free of natural disasters, it has other attractive fiscal benefits that make a difference towards attracting international entrepreneurs. Foreign Investments are extremely important towards consolidating sustainable development in Paraguay, considered to be one of the world’s top nations that exports agricultural and organic food products of high quality.”
The evidence of such a dynamic evolution is reflected in the long list of agricultural products exported in the first three months of 2013, reaching over $3.1 Billion. In the first place are the soy bean sector, grain, oil and wheat, with $1.48 Billion; in the second place is Electrical Energy, with $729 Million; and the third most important commodity is organic beef exports, reaching a total of $446 Million. Other products are: Textiles, Clothes and shoes factories, Leather, Organic Sugar, stevia, have generated over $257 Million.”
Exports of cereals such as grain, rice and maize (corn), have generated over $226 Million, just in the period of January-April, 2013. This sector has experienced a significant growth if compared with the same time last year.”
Brizuela added, “Paraguayan beef is a successful export product–model, while the excellent performance of the agro-industrial sectors, renewable energy and industry, contribute to the consolidation and unprecedented economic growth of Paraguay in Latin America.”
The only pending question is how Paraguay’s president-elect Horacio Cartes will address the social disparities, the tremendous income gap and disparity between poor and the rich Paraguayans, as well as social strife in the northern tier of the country. When he takes office, will Cartes – one of Paraguay’s richest businessmen – address land distribution, which the rural poor have demanded for years?
Despite his evident lack of experience in politics, President-elect Cartes’s pragmatic and entrepreneurial approach r may be more effective than the wisdom of Paraguayan politicians such as the disgraced former president Fernando Lugo.
Spero columnist Peter M. Tase covers diplomatic and trade issues.