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Paraguay Evolving From Its Machismo, Authoritarian Past
The Washington Diplomat / April 2008

By Larry Luxner

Twenty years ago, when nearly all other Latin American countries were well along the road to democracy, Paraguay was still a classic dictatorship run by the iron-fisted Gen. Alfredo Stroessner.

A rabid anti-communist, Stroessner was best known for giving haven to escaped Nazi war criminals and fostering rampant corruption. The brutal caudillo, who seized power in 1954, was finally overthrown in 1989 and died in exile two years ago at the age of 93.

Yet these days, nobody's talking about Stroessner and his 35-year reign of terror.

The name on everyone's lips now is Blanca Margarita Ovelar de Duarte, a former minister of education who's running for president on the ruling Colorado Party ticket.

Either way, Ovelar's candidacy will make history.

If she defeats her three rivals in Paraguay's Apr. 20 presidential elections, the 50-year-old Ovelar will become her country's first female head of state — and the third woman to lead a South American nation, along with Argentina's Cristina Fernández de Kirchner and Chile's Michele Bachelet.

And if she loses, it would be the first defeat for the Colorado Party in over 60 years.

As of Feb. 18, according to one prominent pollster, Ovelar had the support of 24.3% of eligible voters. That put her right behind former army Gen. Lino Oviedo with 25.3% and front-runner Fernando Lugo, a bishop who was suspended by the Vatican for his involvement in politics, with 31.2%.

"People voting in these elections weren't even born during the dictatorship," says Paraguay's ambassador to the United States, James Spalding. "It's time to move on."

Indeed it is.

Landlocked Paraguay is one of the least-known countries south of the Rio Grande, and has a sad and violent history that few other nations would envy.

The War of the Triple Alliance, which lasted from 1864 to 1870 and was blamed in part on the expansionist ambitions of Paraguayan President Francisco Solano López,, pitted Paraguay against the combined forces of Argentina, Uruguay and Brazil. It ended in utter disaster; according to one estimate, Paraguay's prewar population of 525,000 was slashed to around 221,000 by 1971, of which only 28,000 were males.

Indeed, women have never played much of a political role in this machista society, and Spalding, for one, thinks the idea of a female leading his country is long overdue.

"Gender shouldn't be an issue. The president should be the best candidate possible," he told The Washington Diplomat during a lengthy interview at the Paraguayan Embassy along Massachusetts Avenue. "One important factor in Blanca Ovelar's favor is that she's considered a highly qualified professional who has many years of experience in the public sector. She has a very good chance of being our next president."

Spalding, who knows Ovelar fairly well, was Paraguay's minister of finance when Ovelar was minister of education.

"Blanca's a person who knows what needs to be done, and she has the character necessary to see that those things get done," he said. "Unfortunately, people still see Paraguay as it was 20 years ago, so that's one of our biggest objectives at the embassy. We have to get the word out that Paraguay has changed, and that democracy has taken root."

Given his very American-sounding name, European features and light skin, one could easily be forgiven for doubting the ambassador's Paraguayan-ness.

But Spalding, 41, says he's as paraguayo as they come. Born in the town of San Bernardino, the ambassador is a product of his German-Dutch mother and his British-Argentine father.

"It's a good way to break stereotypes, but my mother's side of the family has been in Paraguay for over 200 years," jokes Spalding, who's been Asunción's man in Washington since December 2003.

In the last four years under Spalding's boss, President Nicanor Duarte Frutos, per-capita income has jumped by 110.7%, from under $1,000 to nearly $2,000. Commodity prices for Paraguay's biggest export, soybeans, have skyrocketed, further helping the country's balance of payments.

"Our most important achievement has been the recovery of the economy. Paraguay was badly affected by the 2001-02 crisis in Argentina, so it wasn't an easy task to stabilize and regain confidence in the economy," he told the Diplomat.

"When President Duarte took office, Paraguay was in a selected default scenario, which means that our payments weren't being made on time. That's changed dramatically. Exports are up, the currency is stable, and we've had a fiscal surplus throughout his term. International reserves have climbed to their largest ever, about $2.4 billion. That's more than our external debt."

Under Duarte, who constitutionally cannot run for re-election but has endorsed Olevar to succeed him, Paraguay has applied for a "compact" with the Millennium Challenge Corp., but that to fully qualify, it has to do more to fight corruption — a problem that

"Our focus will be to continue to improve the indicators we need in order to qualify. The key one is controlling corruption — a problem for a country that for years has been nicknamed the "contraband capital of Latin America."

In, Ciudad del Este — a traffic-choked, dusty city of 240,000 that used to be named Puerto Presidente Stroessner — trucks, bicycles, pedestrians and two-wheeled "moto-taxis" clog the streets, along with children lugging huge boxes of merchandise and sidewalk kiosks selling everything from umbrellas and cheap cellphones to fake Chinese-made Rolex watches.

But the ultimate irony of Ciudad del Este is the Puente de la Amistad (Friendship Bridge) that links it to Foz do Iguaçu, its Brazilian sister city on the other side of the Río Paraná. Although customs and immigration inspectors are prominently stationed at both ends of the bridge, they typically stop only one or two of every 10 vehicles, meaning few tourists are ever asked for passports or visas.

And if you cross the bridge on the back of a moto-taxi — it only costs a dollar — chances are you won't be stopped at all.

This seedy reputation is one reason investors have long perceived Paraguay as a basket case that doesn't respect intellectual property rights. Until recently, it was one of the few countries in South America without a McDonald's or Burger King; aside from Havana, Asunción is still the only Latin American capital without a Hilton, Hyatt, Marriott, Sheraton or Inter-Continental hotel. And even though it's appreciated somewhat in recent years, at 4,570 to the dollar, the local guaraní is virtually worthless.

On the other hand, Paraguay boasts a number of advantages that might make it more attractive for investors. Among these are generous investment laws, extremely low wages and the lowest external debt in South America. It also boasts the region's cheapest electrical energy anywhere — thanks to three hydroelectric dams that generate a total of 53.4 gigawatts of energy — as well as a "maquila" law that permits the production and re-export of merchandise without taxes or tariffs of any kind.

"We've improved dramatically, but we're still below the median for countries such as ours," Spalding said. "One thing is corruption, another thing is perception. This administration has used funds to tackle the issue by changing the system of government procurement, for example. Now it's all done online, through the Internet. Before it was done in an office."

Paraguay is enthusiastically promoting ethanol based on sugarcane production as an alternative fuel. Spalding said a Texas-based energy conglomerate plans to build a $42 million ethanol factory in San Pedro, one of Paraguay's poorest departments.

"We started in 1999, and now we're mixing all of our gasolines with ethanol, just like Brazil," he said. "We also have imports of ethanol-fueled cars into Paraguay. This new technology has led to big investments in ethanol plants. Up until now, we've had a lack of supply. The demand is there, but the supply must increase in order to really be able to get the mixture constant throughout the year. This new investment will give us the opportunity to export ethanol for the first time."

At the same time, the Duarte administration has slashed Paraguay's corporate tax rate from 30% to 10%, increasing government revenue in the long run.

"By making it easier to pay taxes, people now have less incentive to find other ways of doing business," he said. "That, combined with more aggressive investigation of companies, has helped to increase tax revenue."

Even so, the disparity between wealth and poverty among Paraguay's six million people is alarming — a problem Paraguay's new leader will have to confront immediately, whoever he or she may be.

"We have big inequalities," Spalding admits. "One of our biggest objectives, for now and for the next president, is to make this scenario of prosperity reach down to all levels of the population. But this obviously takes time."

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