The Washington Diplomat / May 2002
By Larry Luxner
In the hilarious 1980s comedy "Moon Over Parador," Richard Dreyfuss plays an actor forced at gunpoint to impersonate the dictator of a fictitious South American country.
That country, as any astute moviegoer could figure out, was really Paraguay -- with its oppressive bureaucracy, widespread corruption and slave-like devotion to Gen. Alfredo Stroessner, who seized power in 1954 and held onto the presidency for 35 years, longer than any caudillo in the country's sad and violent history.
Today's Paraguay, however, bears little resemblance to Hollywood's Parador. No longer shackled by repression, this California-sized nation of 5.5 million has evolved from South America's last military dictatorship into a struggling democracy eager to show the United States -- and the world -- that it's serious about human rights, foreign investment and respect for intellectual property.
That's a tall order for Leila Teresa Rachid de Cowles, a petite, lively woman from Asunción who in September 2000 was sworn in as Paraguay's ambassador in Washington. Prior to her current posting, Rachid was Paraguay's envoy to neighboring Argentina; before that, she served in the Foreign Ministry under former President Juan Carlos Wasmosy.
"I was the first female vice-minister of foreign affairs in Paraguayan history, and also the first female career diplomat who has achieved the rank of ambassador," says the 47-year-old Rachid, who speaks Spanish, English, French, Italian, Portuguese and Arabic as well as her country's indigenous language, Guaraní. She switched back and forth among several of these languages during our recent one-hour interview at the tiny Paraguayan Embassy on Massachusetts Avenue.
"A lot of people don't know anything about our country. That's why we've been doing so many conferences," said Rachid, one of 15 female ambassadors in Washington. "We are trying to introduce Paraguay to international businesses, and let everybody know where it is. Then we start talking about the Mercosur trading bloc, because this is a very important issue in our foreign policy."
Possibly the least-known of all South American republics, Paraguay is frequently confused with much more prosperous Uruguay to the south. The landlocked nation received only 9,000 American visitors in 2001, and "that was one of our best years for tourism," said Rachid. Barely 15,000 Paraguayans live in the United States -- 20% of them in the Washington, D.C., area -- and the Paraguayan Embassy is staffed by only 12 people.
But Rachid hopes that Mercosur, a Spanish acronym for Mercado Común del Sur, or Southern Common Market, will help lift the country out of economic stagnation.
Under the Treaty of Asunción, named after the steamy capital city where Mercosur was signed in 1991, four countries -- Argentina, Brazil, Paraguay and Uruguay -- agreed to eliminate all trade barriers and strive toward the free movement of people and goods across borders. Since then, Bolivia and Chile have signed on as associate members.
In theory, Mercosur sounds good, but in practice it has failed to achieve anything close to economic integration. Even so, it hasn't been a total failure.
"In 1996, when the democratically elected Wasmosy government was nearly overthrown, we were able to preserve our democracy thanks to Mercosur and friends like the United States," Rachid told The Washington Diplomat. "Economically speaking, Mercosur is in crisis, but politically it has been very successful for the Paraguayan people. We have gained a lot from it."
The man who tried to oust Wasmosy, Gen. Lino Oviedo, is also thought to have masterminded the assassination three years later of his bitter enemy, Vice President Luís María Argaña, as well as the killing of several Argaña supporters in downtown Asunción.
Like Stroessner, 88, Oviedo now lives in exile in Brazil; human-rights groups as well as the government of President Luís González Macchi -- which faces constant political turmoil -- are trying to have both men extradited back to Paraguay.
"President González is strong enough to finish his administration, and he's going to finish in 2003," vows the ambassador. "Remember that he became president during a tragic event in March 1999. We didn't have a vice-president, and [former president] Raúl Cubas had resigned a week after the assassination because he was facing impeachment. So under the constitution, González, who was president of the Congress, became president."
Asked if there's evidence Oviedo had Argaña killed, Rachid answers this way: "They were political enemies. I cannot say if he did it. What is true is that Oviedo gave the order to attack the people in the park in front of Congress after the assassination."
This kind of political intrigue is nothing new for Paraguay, which is one of South America's poorest and most corrupt countries.
"Paraguay became independent in 1811, and we didn't have a democracy until 1989," the ambassador explains. "In contrast to other countries, Paraguay had no possibilities of advancing its independence. The few governments that were democracies weren't strong enough, and they fell rapidly."
In fact, says Rachid, "throughout its entire history, Paraguay has been ruled by authoritarian regimes. Not only did those regimes violate human rights constantly, they also incorporated deceptive practices as a way of life. This is our history."
Paraguay is so corrupt, according to local media, that the president's official limo is actually a stolen BMW from Brazil. Rachid doesn't deny the accusation.
"When Argaña was assassinated in 1999, the only armored vehicle in Paraguay was this BMW," she said. "Of course, the new president took it. It was the only car in all of Paraguay that could protect the president. Nobody worried if all the documents were in order."
That kind of blatant disregard for the law is most evident in Ciudad del Este, a border town in eastern Paraguay known as Latin America's "contraband capital." During the Stroessner regime, the city's name was Puerto Presidente Stroessner, and corruption was as abundant as the hydroelectric energy that spewed forth from nearby Itaipú Dam.
To this day, Ciudad del Este's traders -- mainly of Lebanese origin -- brazenly sell false Rolex watches, adulterated Johnnie Walker whiskey and pirated CDs to Brazilians looking for bargains.
They may also be helping to finance Islamic terrorist groups.
"We have been working very closely with the State Department's office of counter-terrorism," says Rachid. "We have evidence that some of the 15,000 people of Arab descent who live in the border area are members of Hizbollah. In Lebanon, it's a recognized political party, but we consider them to be a terrorist group, like Hamas and Islamic Jihad. We've discovered that some of them are sending money to the Middle East."
Rachid said her government has already extradited six Lebanese nationals from the frontier area to Argentina, on suspicion of involvement inugh for the Bush administration, which since Sept. 11 has gathered evidence that Paraguay's terrorist network extends beyond Hizbollah. Recent reports indicate that the Egyptian branch of Islamic Jihad -- already said to be well-established in Ciudad del Este -- may be tied to Osama bin Laden's al-Qaeda network.
In fact, a recent position paper issued by the Council on Hemispheric Affairs argues that Paraguay "has the potential to become one of the prime bases for the export of terrorism" in the Americas.
Rachid staunchly defends Paraguay's record, claiming that the State Department recently praised her country as "lending more support to Washington's anti-terrorism efforts since Sept. 11 than any other country in Latin America."
Rachid herself is among the 5% of Paraguay's inhabitants of Arab descent. Her father was born in Homs, Syria; her mother is from Ba'albek, Lebanon. Even though her husband, Frank L. Cowles Jr., is an American industrialist whom she met in Paraguay, the names of the ambassador's three sons (by a previous marriage) reflect her family's dual heritage: Edgardo Karim, 19; Gabriel Gamal, 13, and Santiago Farid, 9.
Despite her Arab roots, says Rachid, "I was always very close to the Jewish community in Paraguay," noting that in July 1996, she took part in celebrations -- organized by the Israeli Embassy in Asunción -- marking the 3,000th anniversary of the founding of Jerusalem. "And in 1997, when I was vice-minister of foreign affairs, I went on an official visit to Israel to convince the government there not to close its embassy in Paraguay."
Yet the mood back home isn't very pro-Israel at the moment. A demonstration last month in Foz do Iguaçu, on the Brazilian side of the border, attracted t two bombings in Buenos Aires during the 1990s that killed and injured hundreds of Jews and other Argentines.
But that's not nearly enohousands of Arabs -- many of them waving pictures of Nasrallah, the Hizbollah leader.
"The first thing you have to realize is that there are three countries in this region," she said. "If we want to fight terrorism, we can't do it alone. That's why in 1995 we established an accord among the armed forces of Argentina, Brazil and Paraguay. We know that we have a big problem in this region, but it's not only Paraguay's problem."
Rachid, who was born and raised in Asunción, graduated with a degree in international diplomacy from Paraguay's Universidad Católica. She also has a doctorate in political science from Spain's Universidad Complutense de Madrid. She has represented her country at dozens of seminars ranging from a 1981 United Nations human rights gathering in Geneva to the 1998 Ibero-American Conference in San Juan, Puerto Rico.
Rachid's biggest challenge as ambassador, she says, is getting the United States to bolster democracy in Paraguay while encouraging U.S. multinationals to invest there and keep the country's battered economy afloat.
In 2002, Paraguay will receive only $450,000 in U.S. official aid -- mainly to fight drug trafficking -- while another $3 million is being donated to non-governmental organizations to support democracy and strengthen civil society.
"The Colorado Party has been running Paraguay since 1954," she said. "This is one of the reasons why Paraguay cannot consolidate its democratic process. The opposition sadly has no way to get into power."
Maybe that's also why investors perceive Paraguay as a basket case. Until recently, this 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 at 4,880 to the dollar, the local guaraní is virtually worthless.
As a consequence of the worldwide economic slowdown, Paraguay's GDP came to $7.2 billion last year, down from $7.7 billion in 2000. That translates into per-capita income of $1,278, down from $1,406 over the same period.
Complicating things is the chaotic situation in neighboring Argentina. Because of that country's recent devaluation, the Argentine peso -- which for a decade was on par with the U.S. dollar -- is now worth only 35 cents. As a result, prices are so much lower in Argentina that Paraguayans regularly travel from Asunción to Clorinda, on the other side of the Río Paraná, to do their shopping.
"One consequence of the devaluation is that Argentine products are much more competitive in quality and price," said Rachid. "This will dramatically affect our economy. We had been hoping to reach 2% growth this year. We now think the economy will grow by only 1.6%."
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 an external debt of $2.07 billion, the smallest in Latin America. It also boasts the cheapest electrical energy anywhere in South America -- 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.
"Our economy is not complex. It's based mainly on agribusiness," Rachid explained."For example, we sell more than 40,000 tons of beef per year to the international market. That gives us huge prestige. Paraguay is certified because we don't have hoof-and-mouth disease."
Paraguay is also the world's fourth-largest producer of soybeans (after the United States, Brazil and Argentina). It sells its entire production of soybeans to Brazil through Archer Daniels Midland (ADM), which also happens to be the top U.S. investor in Paraguay. Other U.S. multinationals there include Cargill, Citibank and Exxon-Mobil.
Paraguay could attract even more investment if the government would get serious about selling off a handful of state-owned entities that have been losing money for years. Rachid says her government will soon open bids for Antelco, Paraguay's bumbling, mismanaged telephone monopoly. Few doubt that under private ownership, Antelco would dramatically boost the number of lines in service in Paraguay, which currently has South America's lowest telephone density.
But fierce opposition by lawmakers and labor unions is stalling such privatizations; Argaña, the assassinated vice-president, was adamantly against privatization, and many Paraguayans feel likewise.
"This reform process has been talked about for years, but the principal delay is in Congress," said Rachid. "We have examples of other countries that privatized, and we are trying not to make the same mistakes."