Paraguay (09/05)

For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Republic of Paraguay

Geography
Area: 406,752 sq. km. (157,047 sq. mi.); about the size of California.
Cities: Capital--Asuncion (pop. 539,000). Other cities--Ciudad del Este, Concepción, Encarnación, Pedro Juan Caballero, Coronel Oviedo.
Terrain: East of the Paraguay River--grassy plains, wooded hills, tropical forests; west of the Paraguay River (Chaco region)--low, flat, marshy plain.
Climate: Temperate east of the Paraguay River, semiarid to the west.

People
Nationality: Noun and adjective--Paraguayan(s).
Population (2004 est.): 6,191,368.
Annual population growth rate: 2.3% (projected 1999-2015, UNDP).
Ethnic groups: Mixed Spanish and Indian descent (mestizo) 95%.
Religions: Roman Catholic 90%; Mennonite and other Protestant denominations.
Languages: Spanish (language of business and government), Guarani (spoken and understood by 90% of the population).
Education: Years compulsory--9. Attendance--92%. Literacy--94%. (UNICEF)
Health: Infant mortality rate--27/1,000. Life expectancy--72 years male; 77 years female.
Work force (2002, 2.5 million): Agriculture--45%; industry and commerce--31%; services--19%; government--4%.

Government
Type: Constitutional Republic.
Independence: May 1811.
Constitution: June 1992.
Branches: Executive--President. Legislative--Senate and Chamber of Deputies. Judicial--Supreme Court of Justice.
Administrative subdivisions: 17 departments, 1 capital city.
Political parties: National Republican Association/Colorado Party (ANR), Authentic Radical Liberal Party (PLRA), Beloved Fatherland (PQ), National Union of Ethical Citizens (UNACE), National Encounter Party (PEN), The Country in Solidarity Party (PPS), and numerous small parties not represented in Congress.
Suffrage: 18 years of age; universal and compulsory by law up to age 75.

Economy (2004 Central Bank data)
GDP: $7.98 billion.
Annual growth rate (2004): 3.9%.
Per capita GDP: $1,173.
Natural resources: Hydroelectric sites, forests.
Agriculture (24.1% of GDP): Products--soybeans, cotton, beef, cereals, sugarcane.
Arable land: 9 million hectares, of which 30% is in production.
Manufacturing (14.5% of GDP): Types--sugar, cement, textiles, beverages, wood products.
Trade (2004): Exports--$1.62 billion: soybeans, soybean flour, cotton, meat, wood, animal hides, vegetable oil, tobacco, and sugar. Major markets--Uruguay (27.75%), Brazil (19.22%). Imports--$2.65 billion: fuels and lubricants, machinery, electric materials, transportation and accessories, industrial chemicals, fertilizers, plastics and manufactures, paper and manufactures. Major suppliers--Brazil (30.97%), Argentina (23.38%).

PEOPLE
Paraguay's population is distributed unevenly throughout the country. The vast majority of the people live in the eastern region, most within 160 kilometers (100 mi.) of Asuncion, the capital and largest city. The Chaco, which accounts for about 60% of the territory, is home to less than 2% of the population. Ethnically, culturally, and socially, Paraguay has one of the most homogeneous populations in South America. About 95% of the people are of mixed Spanish and Guarani Indian descent. Little trace is left of the original Guarani culture except the language, which is understood by 90% of the population. About 75% of all Paraguayans speak Spanish. Guarani and Spanish are official languages. Brazilians, Argentines, Germans, Arabs, Koreans, Chinese, and Japanese are among those who have settled in Paraguay with Brazilians representing the largest number.

HISTORY
Pre-Columbian civilization in the fertile, wooded region that is now Paraguay consisted of numerous seminomadic, Guarani-speaking tribes, who were recognized for their fierce warrior traditions. They practiced a mythical polytheistic religion, which later blended with Christianity. Spanish explorer Juan de Salazar founded Asuncion on the Feast Day of the Assumption, August 15, 1537. The city eventually became the center of a Spanish colonial province. Paraguay declared its independence by overthrowing the local Spanish authorities in May 1811.

The country's formative years saw three strong leaders who established the tradition of personal rule that lasted until 1989: Jose Gaspar Rodriguez de Francia, Carlos Antonio Lopez, and his son, Francisco Solano Lopez. The younger Lopez waged a war against Argentina, Uruguay, and Brazil (War of the Triple Alliance, 1864-70) in which Paraguay lost half its population; afterward, Brazilian troops occupied the country until 1874. A succession of presidents governed Paraguay under the banner of the Colorado Party from 1880 until 1904, when the Liberal party seized control, ruling with only a brief interruption until 1940.

In the 1930s and 1940s, Paraguayan politics were defined by the Chaco war against Bolivia, a civil war, dictatorships, and periods of extreme political instability. Gen. Alfredo Stroessner took power in May 1954. Elected to complete the unexpired term of his predecessor, he was re-elected president seven times, ruling almost continuously under the state-of-siege provision of the constitution with support from the military and the Colorado Party. During Stroessner's 35-year reign, political freedoms were severely limited, and opponents of the regime were systematically harassed and persecuted in the name of national security and anticommunism. Though a 1967 constitution gave dubious legitimacy to Stroessner's control, Paraguay became progressively isolated from the world community.

On February 3, 1989, Stroessner was overthrown in a military coup headed by Gen. Andres Rodriguez. Rodriguez, as the Colorado Party candidate, easily won the presidency in elections held that May, and the Colorado Party dominated the Congress. In 1991 municipal elections, however, opposition candidates won several major urban centers, including Asuncion. As president, Rodriguez instituted political, legal, and economic reforms and initiated a rapprochement with the international community.

The June 1992 constitution established a democratic system of government and dramatically improved protection of fundamental rights. In May 1993, Colorado Party candidate Juan Carlos Wasmosy was elected as Paraguay's first civilian president in almost 40 years in what international observers deemed fair and free elections. The newly elected majority-opposition Congress quickly demonstrated its independence from the executive by rescinding legislation passed by the previous Colorado-dominated Congress. With support from the United States, the Organization of American States, and other countries in the region, the Paraguayan people rejected an April 1996 attempt by then-Army Chief Gen. Lino Oviedo to oust President Wasmosy, taking an important step to strengthen democracy.

Oviedo became the Colorado candidate for president in the 1998 election, but when the Supreme Court upheld in April his conviction on charges related to the 1996 coup attempt, he was not allowed to run and remained in confinement. His running mate, Raul Cubas Grau, became the Colorado Party's candidate and was elected in May. The assassination of Vice-President Luis Maria Argana and the killing of eight student anti-government demonstrators, allegedly carried out by Oviedo supporters, led to Cubas’ resignation in March 1999. The President of the Senate, Luis Gonzalez Macchi, assumed the presidency and completed Cubas’ term. Gonzalez Macchi offered cabinet positions in his government to senior representatives of all three political parties in an attempt to create a coalition government that proved short-lived. Gonzalez Macchi’s government suffered many allegations of corruption, and Gonzalez himself was found not guilty in a Senate impeachment trial involving corruption and mismanagement charges in February 2003.

In April 2003, Colorado candidate Nicanor Duarte Frutos was elected president. He was inaugurated on August 15. Duarte’s administration has focused upon attacking corruption and improving the quality of management, in the wake of the Gonzalez administration, widely considered the most corrupt in the post-Stroessner era. Duarte has been successful at working constructively with an opposition-controlled Congress, and in his first year of office, six Supreme Court justices suspected of corruption were removed from office, and major tax reforms were enacted. Macroeconomic performance has improved significantly under the Duarte administration, with inflation falling significantly, and the government clearing its arrears with international creditors. Unemployment remains stubbornly high and the living standard of most households has not improved. The administration has placed a strong emphasis on participating in international institutions and has used diplomacy to promote the opening of international markets to Paraguayan products. In June 2004, Oviedo returned to Paraguay from exile in Brazil and was imprisoned for his 1996 coup-plotting conviction.

GOVERNMENT AND POLITICAL CONDITIONS
Paraguay's highly centralized government was fundamentally changed by the 1992 constitution, which provides for a division of powers. The president, popularly elected for a 5-year term, appoints a cabinet. The bicameral Congress consists of an 80-member Chamber of Deputies and a 45-member Senate, elected concurrently with the president through a proportional representation system. Deputies are elected by department and senators are elected nationwide. Paraguay's highest judicial body is the Supreme Court. A popularly elected governor heads each of Paraguay’s 17 departments.

Principal Government Officials
President--Nicanor Duarte Frutos
Vice-President--Luis Castiglioni Soria
Minister of Foreign Affairs--Leila Rachid de Cowles
Ambassador to the U.S.--James Spalding Hellmers
Ambassador to the OAS--Manuel Maria Caceres
Ambassador to the UN--Eladio Loizaga Caballero

Paraguay maintains an embassy in the United States at 2400 Massachusetts Avenue, NW, Washington, DC 20008 (tel. 202-483-6960). Consulates are in Miami, New York, and Los Angeles.

ECONOMY
Paraguay has a predominantly agricultural economy, with a struggling commercial sector. There is a large subsistence sector, including sizable urban unemployment and underemployment, and a large underground re-export sector. The country has vast hydroelectric resources, including the world's largest hydroelectric generation facility built and operated jointly with Brazil (Itaipú Dam), but it lacks significant mineral or petroleum resources. The government welcomes foreign investment in principle and accords national treatment to foreign investors, but widespread corruption is a deterrent. The economy is dependent on exports of soybeans, cotton, grains, cattle, timber, and sugar; electricity generation, and to a decreasing degree on re-exporting to Brazil and Argentina products made elsewhere. It is, therefore, vulnerable to the vagaries of weather and to the fortunes of the Argentine and Brazilian economies.

According to Paraguayan Central Bank (BCP) data, Paraguay's real GDP in 2004 of $7.98 billion (in 1994 dollars) represented an increase of 3.9% from 2003. Data with the new base year was released in 2005. IMF data using the prior base year of 1982 shows real GDP growth of 2.9% in 2004. The per capita GDP rose to $1,173 in current U.S. dollar terms in 2004, but has fallen by more than a third since the peak of $1,793 in 1996. Given the importance of the informal sector, accurate economic measures are difficult to obtain. Paraguay presently maintains a balance-of-payments surplus. It runs a deficit in the trade of goods, but a large surplus in services, reflecting large exports of electricity from Paraguay’s two large hydroelectric dams shared with Brazil and Argentina. In 2004, official foreign exchange reserves rose to $1.17 billion, an increase of $184.2 million over 2003, and an increase of almost 50% from 2002 ($582.8 million). Foreign official debt rose slightly to $2.35 billion. Inflation in 2004 dropped to 2.8%, down from 9.3% in 2003 and the lowest rate since 1970.

Agriculture and Commerce
Agricultural activities, most of which are for export, represent about 21.1% of GDP. More than 200,000 families depend on subsistence farming activities and maintain marginal ties to the larger productive sector of the economy. The commercial sector is primarily engaged in the import of goods from Asia and the United States for re-export to neighboring countries. The recorded activities of this sector have declined significantly in recent years, placing a strain on government finances, which depend heavily on taxes on this trade. In general, Paraguayans prefer imported goods, and local industry relies on imported capital goods. The underground economy, which is not included in the national accounts, may equal the formal economy in size. The bulk of underground activity centers on the unregistered sale of imported goods--including computers, sound equipment, cameras, liquor, and cigarettes--to Argentina and Brazil.

DEFENSE
The constitution designates the president as commander in chief of the armed forces. Military service is compulsory, and all 18-year-old males--and 17 year olds in the year of their 18th birthday--are eligible to serve for one year on active duty. However, the 1992 constitution allows for conscientious objection. Of the three services, the army has the majority of personnel, resources, and influence. With about 7,000 personnel, it is organized into three corps, with six infantry divisions and three cavalry divisions. The military has two primary functions: national defense (including internal order) and engaging in civic action programs as directed by the president. The navy consists of approximately 2,000 personnel and in addition to its fleet, has an aviation section, a prefecture (river police), and a contingent of marines (naval infantry). The air force, the newest and smallest of the services, has approximately 1,200 personnel.

FOREIGN RELATIONS
Paraguay is a member of the United Nations and several of its specialized agencies. It also belongs to the Organization of American States, the Latin American Integration Association (ALADI), the Rio Group, INTERPOL, and MERCOSUR (the Southern Cone Common Market). Paraguay is closely aligned with its MERCOSUR partners on many political, economic, and social issues.

U.S.-PARAGUAY RELATIONS

U.S. Interests in Paraguay
The United States and Paraguay have an extensive relationship at the government, business, and personal level. Paraguay is a partner in hemispheric initiatives to improve counternarcotics cooperation, combat money laundering, trafficking in persons, and other illicit cross-border activities, and adequately protect intellectual property rights. The United States looks to Paraguay, which has substantial rainforest and riverine resources, to engage in hemispheric efforts to ensure sustainable development. In early 2005, Paraguay was deemed eligible to participate in the Millennium Challenge Corporation’s (MCC) Threshold Country Program (TCP), which helps countries improve their governance, levels of investment in their citizens, and economic freedom, so they can qualify for the MCC’s principal program. Paraguay has submitted a formal TCP proposal. The United States and Paraguay also cooperate in a variety of international organizations.

Paraguay has taken significant steps to combat terrorism-financing activity in the tri-border area it shares with Argentina and Brazil. It participates in antiterrorism programs and fora, including the Three Plus One process, with its neighbors and the United States.

The United States strongly supports consolidation of Paraguay's democracy and continued economic reform, the cornerstones of cooperation among countries in the hemisphere. The United States has played important roles in defending Paraguay's democratic institutions, in helping resolve the April 1996 crisis, and in ensuring that the March 1999 change of government took place without further bloodshed.

Bilateral trade with the United States has increased over the last three years, after a steady decline over several years due to a long-term recession of the Paraguayan economy. Although U.S. imports from Paraguay were only $58.6 million in 2004, up from $53.3 million the previous year, U.S. exports to Paraguay in 2004 were $622.9 million, up from $483.6 million in 2003, according to U.S. Customs data. (Not all exports and imports are reflected in Paraguayan government data.) More than a dozen U.S. multinational firms have subsidiaries in Paraguay. These include firms in the computer, agro-industrial, telecom, banking, and other service industries. Some 75 U.S. businesses have agents or representatives in Paraguay, and more than 3,000 U.S. citizens reside in the country.

U.S. Assistance
The U.S. Government has assisted Paraguayan development since 1942. The U.S. Agency for International Development (USAID) currently supports a variety of programs to strengthen Paraguay's democratic institutions in the areas of civil society, local government and decentralization, national reform of the state, rule-of-law, and anti-corruption. Other important areas of intervention are economic growth, the environment and public health. The total amount of the program is approximately $8 million in fiscal year 2005.

The U.S. Department of State, the Drug Enforcement Administration, the Department of Justice and the Department of Treasury provide technical assistance, equipment, and training to strengthen counter narcotics enforcement, combat trafficking in persons, promote respect for intellectual property rights, and to assist in the development and implementation of money laundering legislation and counter terrorism legislation.

• On December 19, 2003, U.S. and Paraguayan officials signed a new Memorandum of Understanding to strengthen the legal protection and enforcement of intellectual property rights in Paraguay.
• Since 2003 the U.S. Government has a Resident Enforcement Advisor and Resident Justice Advisor in Paraguay working on money laundering and terrorist financing and other financial crimes, the fight against organized crime and corruption, and the administrative reorganization of the financial institutions related to money and products laundering.
• In 2005, the State Department’s Bureau of International Narcotics and Law Enforcement Affairs (INL) provided Paraguay with $600,000 in assistance to support its efforts to combat narcotics trafficking, money laundering, and violations of intellectual property rights.
• Starting in 2004, a Resident Public Debt Advisor, a Resident Budget Advisor, and a Resident Tax Advisor from the Department of Treasury have been working with Paraguayan counterparts to implement essential reforms.

The U.S. Department of Defense provides technical assistance and training to help modernize, professionalize, and democratize the military.

The Peace Corps has about 160 volunteers working throughout Paraguay on projects ranging from agriculture and natural resources to education, rural health, and urban youth development.

The Office of Public Diplomacy also is active in Paraguay, providing information on the United States to the press and public, as well as helping to arrange educational and citizen exchanges to promote democracy.

Principal U.S. Officials
Ambassador--John F. Keane
Deputy Chief of Mission--Kevin M. Johnson
Political Officer--James P. Merz
Economic/Commercial Officer--Patrick R. O'Reilly
Consul--Sharon Weber
Management Officer--Graham Webster
USAID Director--Wayne Nilsestuen
Public Affairs Officer--Bruce Kleiner
Defense Attache--LTC Dennis Fiemeyer
Office of Defense Cooperation--COL Arie Bogaard

The U.S. Embassy in Paraguay is located at 1776 Avenida Mariscal Lopez, Asuncion (tel. (595) (21) 213-715, fax (595) (21) 213-728). The embassy's home page address on the World Wide Web is: http://paraguay.usembassy.gov/

Other Contact Information
U.S. Department of Commerce
International Trade Administration
Office of Latin America and the Caribbean
14th and Constitution Ave., NW
Washington, DC 20230
Tel: (202) 482-0477, 800-USA-TRADE
Fax: (202) 482-0464
http://www.ita.doc.gov/

Paraguayan-American Chamber of Commerce
General Díaz 521, Piso 4, Oficina 1
Edificio El Faro Internacional
Asuncion, Paraguay
Tel: (595) 21-442-135
E-mail: pamchamb@conexion.com.py
http://pamcham.com.py
(Branch office in Ciudad del Este)