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Paraguay Rebuffs Mercosur's Rapprochement
Diplomatic Pouch / August 2013

By Larry Luxner

In June 2012, the South American Common Market (Mercosur) suspended Paraguay after that country’s legislature impeached President Fernando Lugo, in what many countries described as nothing more than a congressional coup d’etat.

Now that Paraguay is scheduled to swear in wealthy businessman Horacio Cartes as its new president later this month, the four other Mercosur states have agreed to re-admit Paraguay as a full member in good standing.

But Paraguay isn’t sure it wants back in.

Fernando Pfannl Caballero, Asunción’s ambassador in Washington, said Cartes would like to rejoin Mercosur, “as long as it doesn’t violate the dignity of our country, which was trampled on” following the impeachment of former President Fernando Lugo.

Speaking July 23 at Washington’s Center for Strategic & International Studies, Pfannl said fellow Mercosur members Argentina, Brazil and Uruguay kicked Paraguay out of the trade bloc unfairly.

“Paraguay did not have a say in that decision,” he said. “We therefore do not recognize that de facto suspension. On the other hand, during that suspension, Mercosur admitted Venezuela as a full member without the approval of the Paraguayan government. At no point did our congress ratify the agreement by which Venezuela entered Mercosur.”

Adding insult to injury, Venezuela — under the leadership of leftist President Nicolás Maduro, an ally of Lugo — now occupies the rotating presidency of Mercosur for six months. “This was supposed to be Paraguay’s turn,” Pfannl complained.

On Aug. 15, Cartes will be inaugurated president, marking the return to power of the Colorado Party, which had ruled Paraguay for 61 years until its defeat by Lugo’s Liberal Party in 2008. In July, Mercosur members meeting in Montevideo, Uruguay, agreed to lift Paraguay’s suspension once Cartes was sworn in.

But that appears unlikely to happen now, said Pfannel.

“Paraguay does not think it can do so at this point without there being a violation of the whole process. The legality of the whole thing has been broken, and it’s very hard to see how it can be re-established,” he said. “It is very probable that Paraguay will not go back to Mercosur after Aug. 15.”

Pfannl added: “We have evidence that Venezuela trained terrorists through the FARC, so we see that as a grave meddling in our internal affairs. There’s no way we can sit down with President Maduro, who was declared by both chambers [of Paraguay’s legislature] persona non grata after that intervention.”

Political intrigue is nothing new for Paraguay — a landlocked, California-sized nation of 6.5 million which has a long history of brutal dictatorships and wars with neighboring countries.

In February 1989, when a military coup overthrew the 35-year-old military regime of Gen. Alfredo Stroessner, Pfannl became a spokesman for the democratic opposition. From 1993 to 1998, he was a senator representing the Liberal Party.

Following Lugo’s impeachment, Federico Franco became president; Franco named Pfannl interim head of the ministry of information. He was later named minister of planning and economy, a post Pfannl held until his current assignment to Washington.

Pfannl justified his government’s ouster of Lugo, a process he said “involved absolutely no violence” or intervention by the country’s military forces.

“When President Lugo took office, he declared that eventually, if things got really bad, it would be justifiable for impoverished peasants to take over private land,” Pfannl recalled. “The Liberal Party had to come out and say ‘No, we will make things better, but people will not be allowed to occupy private property.’”

The ambassador added that Lugo’s impeachment resulted in “no political prisoners, no restrictions on the liberty, or the press. Nor was he detained or restricted in any way.”

Pfannl was surprisingly harsh in his comments regarding the Mercosur trade bloc, which was established in 1991 and is headquartered in Montevideo. Brazil alone accounts for 195 million of the five member states’ combined population of 275 million.

Yet he said that in Argentina, “the business environment is more hostile and riskier” since President Cristina Fernández de Kirchner came to power in December 2007, and that “the bureaucracy in Brazil makes Paraguay an easier place to do business” by comparison.

“Mercosur is a little like Humpty Dumpty. It’s very hard, if not impossible, to put back together, at least from the Paraguayan perspective. The fact they violate your own norms and regulations make it very hard for us to consider re-entering Mercosur without the necessary guarantees that these things won’t happen again.”

Furthermore, it’s not entirely clear that Paraguay needs Mercosur.

Its commodity-based economy is predicted to grow by 11 percent this year, fueled by beef, soybean and vegetable exports to China (GDP expanded by an astounding 14 percent in 2010). In the first quarter of 2013 alone, Paraguay registered a 40 percent jump in exports compared to the year-ago period.

Paraguay now sells more beef than Argentina, and is ranked as the eighth-largest beef exporter in the world — as well as the world’s fourth-largest exporter of soybeans.

“The suspension has allowed us to look at other markets. We’re now observers in the Pacific Alliance, and we’re negotiating a free-trade agreement with Mexico,” he said. “The fact we are great food producers makes it possible for us to seek agreements with the Far East and with Europe.”

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