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Diplomacy in Action

Paraguay (08/09)


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


Republic of Paraguay

Area: 406,752 sq. km. (157,047 sq. mi.); about the size of California.
Cities: Capital--Asuncion (pop. 518,945). Other cities--Ciudad del Este, Concepcion, Encarnacion, Pedro Juan Caballero, Coronel Oviedo.
Terrain: East of the Paraguay River there are grassy plains, wooded hills, tropical forests; west of the Paraguay River (Chaco region) is low, flat, marshy plain.
Climate: Temperate east of the Paraguay River, semiarid to the west.

Nationality: Noun and adjective--Paraguayan(s).
Population (2008): 6,163,913.
Annual population growth rate (2008): 2.2%. (Paraguayan Directorate of Statistics, Surveys, and Censuses)
Ethnic groups: Mixed Spanish and Indian descent (mestizo) 95%.
Religions: Roman Catholic 89.6%; 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--89%. Literacy--94.7%. (Paraguayan Directorate of Statistics, Surveys, and Censuses)
Health: Infant mortality rate--32.00/1,000. Life expectancy--73 years male; 78.26 years female. (Paraguayan Directorate of Statistics, Surveys, and Censuses)
Work force (2008, 2.9 million): Agriculture--26.5%; manufacturing and construction--18.5%; services and commerce--54.9%; government--8.8%. (Paraguayan Directorate of Statistics, Surveys, and Censuses)

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 (PPQ), National Union of Ethical Citizens (UNACE), National Encounter Party (PEN), The Country in Solidarity Party (PPS), Progressive Democratic Party (PDP), Tekojoja Movement, and numerous small parties not represented in Congress.
Suffrage: 18 years of age; universal and compulsory by law up to age 75.

Economy (source: Central Bank of Paraguay and the IMF)
GDP (2008): $16.1 billion.
Annual growth rate (2008): 5.8%.
Per capita GDP (2008): $2,593.
Natural resources: Hydropower, timber, iron ore, manganese, limestone.
Agriculture (20% of GDP): Products--soybeans, cotton, beef, pork, cereals, sugarcane, cassava, fruits, vegetables. Arable land--9 million hectares, of which 35% is in production.
Manufacturing and construction (17% of GDP): Types--sugar, cement, textiles, beverages, wood products.
Trade (2008): Exports--$4.4 billion: soybeans and soy-related products, cereals, beef, wood, leather, cotton, sugar, apparel, tobacco. Major markets--Uruguay (17%), Argentina (16%), Brazil (14%), Chile (8%); the United States in 10th place with 2%. Imports--$8.4 billion: machinery and mechanical appliances; electrical machinery, equipment, and materials; mineral fuels and lubricants; motor vehicles, tractors, parts and accessories; plastics and articles thereof; fertilizers; beverages and tobacco; toys, games, and sporting equipment; chemical products; rubber and articles thereof; paper, paperboard and articles thereof. Major suppliers--China (28%), Brazil (27%), Argentina (14%), Japan (8.5%), and U.S. (6.3%).

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 95% of the population. About 90% 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.

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 established a mixed record on attacking corruption and improving the quality of management. Duarte worked constructively with an opposition-controlled Congress, removing six Supreme Court justices suspected of corruption from office and enacting major tax reforms. Macroeconomic performance improved significantly under the Duarte administration, with inflation falling significantly, and the government clearing its arrears with international creditors. In June 2004, Oviedo returned to Paraguay from exile in Brazil and was imprisoned for his 1996 coup-plotting conviction. In November 2007, Oviedo's criminal charges were overturned by the Supreme Court, and he was allowed to participate in the April 2008 presidential elections.

On April 20, 2008, former Roman Catholic bishop Fernando Lugo (representing a coalition of opposition parties) was elected President. According to the National Election Tribunal (TSJE), Lugo won 40.8% of the vote. Colorado candidate Blanca Ovelar came in second with 30.6% of the vote, and UNACE's Lino Oviedo came in third with 21.9% of the vote. President Lugo assumed office on August 15, 2008. Lugo has identified reduction of corruption and economic inequality as two of his priorities.

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--Fernando Armindo Lugo Mendez
Vice President--Luis Federico Franco Gomez
Minister of Foreign Affairs--Hector R Lacognata
Ambassador to the U.S.--James Spalding Hellmers
Ambassador to the OAS--Bernardino Hugo Saguier Caballero
Ambassador to the UN--José Antonio Dos Santos

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.

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 second-largest hydroelectric generation facility built and operated jointly with Brazil (Itaipu 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.

Paraguay's real GDP in 2008 of $16.1 billion (in 2000 dollars) represented an increase of 26% from $12.8 billion in 2007. The per capita GDP rose to $2,593 in current U.S. dollar terms in 2008, up from $1,928 in 2007 and $1,793 in 1996. Given the importance of the informal sector, accurate economic measures are difficult to obtain. In 2007, Paraguay had a current account deficit of $73 million, derived from a small deficit in the trade of goods, but accompanied by a significant increase in agriculture exports and services (electricity), reflecting favorable market prices for agricultural commodities and exports of electricity from the hydroelectric dams. In July 2009, official foreign exchange reserves rose to $3.2 billion, an increase of 33% over 2008, and over five times the figure for 2002 ($582.8 million). Foreign official debt rose slightly from $2.1 billion in 2007 to $2.2 billion in 2008. Inflation in 2008 was 7.5%, up from 6.0% in 2007, but down from 12.5% in 2006.

Agriculture and Commerce
Agricultural activities, most of which are for export, represent about 20% of GDP and employ about one quarter of the work force. More than 250,000 families depend on subsistence farming activities and maintain marginal ties to the larger productive sector of the economy. In addition to the commercial sector with retail, banking, and professional services, there is significant activity involving the import of goods from Asia and the United States for re-export to neighboring countries. The underground economy, which is not included in the national accounts, may be almost twice the size of the formal economy in size, although greater enforcement efforts by the tax administration and customs are having an impact on the informal sector.

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 smallest of the services, has approximately 1,200 personnel.

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. It is the only country in South America that recognizes Taiwan and not the People's Republic of China.


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 tropical forest and riverine resources, to engage in hemispheric efforts to ensure sustainable development. The United States and Paraguay also cooperate in a variety of international organizations.

Paraguay has taken significant steps to combat illegal activity in the tri-border area it shares with Argentina and Brazil. It participates in antiterrorism programs and fora, including the Three Plus One Security Dialogue, 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 7 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 $78.4 million in 2008, up from $68 million in 2007, U.S. exports to Paraguay in 2008 were $1.6 billion, up from $1.2 billion in 2007, 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. In 2006, Paraguay signed a $34.9 million Millennium Challenge Corporation's (MCC) Threshold Country Program (TCP) with the U.S. focused on supporting Paraguay's effort to combat impunity and informality. A second MCC Threshold program for $30 million was approved in July 2009. Also in 2006, Paraguay signed and ratified an agreement with the U.S. under the Tropical Forest Conservation Act that provides Paraguay with $7.4 million in relief and zeroing out its remaining bilateral debt in exchange for the Paraguayan Government's commitment to conserve and restore tropical forests in the southeastern region of the country. Separately, the U.S. Agency for International Development (USAID) 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 was approximately $17.8 million in fiscal year 2009.

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 counternarcotics enforcement, combat trafficking in persons, promote respect for intellectual property rights, and to assist in the development and implementation of money laundering legislation and counterterrorism legislation.

  • On December 19, 2003, U.S. and Paraguayan officials signed a new memorandum of understanding (MOU) to strengthen the legal protection and enforcement of intellectual property rights in Paraguay. The MOU was renewed in early 2008.
  • Since 2003 the U.S. Government has had a Resident Justice Advisor in Paraguay to support efforts to combat money laundering and terrorist financing and other financial crimes as well as organized crime and corruption.
  • 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 (DOD) provides technical assistance and training to help modernize and professionalize the military, including by promoting respect for human rights and obedience to democratically elected civilian authorities. DOD also provides assistance to impoverished communities through its Humanitarian Assistance Program.

The Peace Corps has about 200 volunteers working throughout Paraguay on projects ranging from agriculture and natural resources to education, rural health, and urban youth development. 2007 marked the 40th anniversary of the Peace Corps in Paraguay.

The Office of Public Diplomacy also is active in Paraguay, funding Fulbright and other scholarships to the U.S., U.S. scholars to Paraguay, other short- and long-term exchanges, English scholarship programs, donations of books and equipment, and a cultural preservation project to restore Paraguay's National Library.

Principal U.S. Officials
Ambassador--Liliana Ayalde
Deputy Chief of Mission--Perry L. Holloway
Political/Economic Chief--Joan Shaker
Consul--Ernest Abisellan
Management Officer--Mona Kuntz
USAID Director--Rosmary Rakas
Public Affairs Officer--James Russo
Defense Attache--LTC Patrick Mathes
Office of Defense Cooperation--Col. Timothy Hodge

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:

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

Paraguayan-American Chamber of Commerce
Asuncion, Paraguay
Telefax: (595) (21) 222-160
Branch Office in Ciudad del Este
Telefax: (061) 512-308/512-287
Ciudad del Este, Paraguay

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