Paraguay - Tips

Paraguay - Tips

Bureau of Western Hemisphere Affairs
May 2007

Background Note: Paraguay

Paraguay flag is three equal, horizontal bands of red (top), white, and blue
with an emblem centered in the white band; unusual flag in that the emblem is
different on each side; the obverse (hoist side at the left) bears the
national coat of arms (a yellow five-pointed star within a green wreath
capped by the words REPUBLICA DEL PARAGUAY, all within two circles); the
reverse (hoist side at the right) bears the seal of the treasury (a yellow
lion below a red Cap of Liberty and the words Paz y Justicia (Peace and
Justice) capped by the words REPUBLICA DEL PARAGUAY, all within two circles.

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 (2006 est.): 6,506,464.
Annual population growth rate: 2.45% (2006 est.).
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--29/1,000. Life expectancy--69 years male; 73
years female. (Population Reference Bureau)
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 (2005 Central Bank and IMF data)
GDP: $8.06 billion.
Annual growth rate (2005): 2.9%.
Per capita GDP: $1,288.
Natural resources: Hydroelectric sites, forests.
Agriculture (25.5% of GDP): Products--soybeans, yucca, cotton, beef, cereals,
sugarcane.
Arable land: 9 million hectares, of which 30% is in production.
Manufacturing (14% of GDP): Types--sugar, cement, textiles, beverages, wood
products.
Trade (2005): Exports--$1.68 billion: soybeans, meat, cotton, soybean oil,
wood, animal hides, vegetable oil, tobacco, and sugar. Major markets--Uruguay
(28.23%), Brazil (19.10%); the United States is 8th place with 3%.
Imports--$3.25 billion: fuels and lubricants, machinery, electric materials,
transportation and accessories, industrial chemicals, fertilizers, plastics
and manufactures, paper and manufactures. Major suppliers--Brazil (27.6%),
Argentina (20%), China (19.7%), U.S. (5.5%).

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
established a mixed record on attacking corruption and improving the quality
of management. In his first year, Duarte worked constructively with an
opposition-controlled Congress, removing six Supreme Court justices suspected
of corruption from office and enacting major tax reforms. While Duarte
remains the most dominant political figure, he faced stiff opposition
mid-term from the opposition strongly opposed to his efforts to amend the
Constitution to allow him to run for reelection. 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--Rubén Ramirez Lezcano
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 International Monetary Fund (IMF) data, Paraguay's real GDP in
2005 of $8.06 billion (in 2000 dollars) represented an increase of 2.9% from
2004. The per capita GDP rose 1.02% to $1,288 in current U.S. dollar terms in
2005, but it is still below the peak of $1,793 in 1996. Given the importance
of the informal sector, accurate economic measures are difficult to obtain.
In 2005, Paraguay had a current account deficit of $190 million, with a large
deficit in the trade of goods, but with a surplus in services, reflecting
exports of electricity from Paraguay's two large hydroelectric dams shared
with Brazil and Argentina. In 2005, official foreign exchange reserves rose
to $1.29 billion, an increase of 10.8% over 2004, and an increase of more
than 100% from 2002 ($582.8 million). Foreign official debt rose slightly to
$2.73 billion. Inflation in 2005 rose to 9.9 %, up from 2.8% in 2004 which
was the lowest rate since 1970.

Agriculture and Commerce
Agricultural activities, most of which are for export, represent about 25.5%
of GDP and employ just under half of the workforce. More than 200,000
families depend on subsistence farming activities and maintain marginal ties
to the larger productive sector of the economy. In addition to commercial
sector with retail, banking and professional services, there is a significant
activity involving 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, largely in response to tighter
controls on imports and contraband on the part of Brazil. The underground
economy, which is not included in the national accounts, may equal the formal
economy in size, although the greater enforcement efforts by the tax
administration are having an impact on the informal sector.

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

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 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 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 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 four
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
$51.28 million in 2005, down from $58.58 million the previous year, U.S.
exports to Paraguay in 2005 were $895.53 million, up from $622.87 million in
2004, 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. 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 $10 million in fiscal year 2006.

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. The MOU was
extended in 2006 through the end of 2007.
*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.
*In 2006, the State Department's Bureau of International Narcotics and Law
Enforcement Affairs (INL) provided Paraguay with $494,000 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 (D0D) 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 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, 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&nbs

Paraguay - Tips