The Multinational Monitor

July/August - VOLUME 10 - NUMBERS 7 AND 8

T H E   U N I T E D   N A T I O N S

Paraguay in Transition

by William Stief

ASUNCION, PARAGUAY--For nearly 35 years, until February 3, 1989, General Alfredo Stroessner ruled as the dictator of Paraguay. He and his Colorado Party, founded as the National Republican Party September 11, 1887, in emulation of the U.S Republican Party, ran "a patrimonial system," according to Fernando Masi, an economist who worked for the World Bank in Washington, D.C., and who now heads the Paraguayan Institute for Latin American Integration.

That meant, Masi says, that Stroessner "distributed the wealth of the state to a small group of people, creating a new military-civilian elite which had big farms, numbered bank accounts in Switzerland [and] five or six houses apiece." Stroessner also abolished export taxes in the 1960s to benefit himself and his allies.

Typical of the new elite, Masi says, was the Colorado Party chairman, Juan E. Pereida. He had 40 storage containers on the border from which goods were smuggled into Brazil. He also had "four or five planes, 100 suits and his wife had 40 pairs of shoes"--not in Imelda Marcos' league, but enough to live comfortably in a country where the 1988 per capita income was about $1,200.

General Andres Rodriguez, was another member of Stroessner's elite circle. Rodriguez, in fact, has family ties to Stroessner- -his daughter is married to Stroessner's younger son. But it was Rodriguez who ousted the dictator in February and forced him to flee to Brazil.

In addition to commanding the Paraguayan Army's 1st Corps, Rodriguez owns a large cambio, a moneychanging institution. Rodriguez got rich through Stroessner, says Estevan Caballero, executive director of Paraguay's new Center for Democratic Studies. But the relationship between the two began to change late last year.

According to Caballero, as Stroessner grew older he became concerned that his army was not loyal to him so he made changes in the military command. Caballero says Stroessner "didn't favor Rodriguez's 'boys'--the general commanding the 2nd Corps, for instance, was demoted--and Rodriguez felt his political and economic power threatened."

In December 1988 Stroessner asked Rodriguez to retire. By the end of January, he ordered Rodriguez to step down and closed the Central Bank and all foreign exchange offices, the cambios in which Rodriguez had invested deeply. That triggered Rodriguez's revolt. He surrounded the quarters of Stroessner's elite guard with troops and began to fight. One to three hundred people were killed, but Stroessner was defeated.

After taking power, Rodriguez immediately made changes. He sent four of Stroessner's cabinet ministers to jail, while a fifth holed up in the Honduran Embassy with no guarantee of safe passage out of the country. Most Paraguayans agree that the new Rodriguez cabinet ministers are improvements over their predecessors.

Carlos Romero Pereira, whose father was Paraguay's president for four months before Stroessner's 1954 coup, says "people are making plans again, laughing. There's a completely different sense of life and optimism. They want to believe in something different."

Rodriguez consolidated the nations's three exchange rates, so that exporters were no longer at such a disadvantage on farm products. This measure was intended to limit smuggling, though it is not yet clear if it will accomplish that.

Rodriguez pledged to "privatize" the state-owned enterprises which represent about half of Paraguay's formal economy. Except for an oil refinery, all have been running at a loss.

Rodriguez promised to follow the constitution which called for a presidential election within 90 days of Stroessner's exile. That caused some grumbling from Liberal Party leader Domingo Laino and several fringe-party candidates who said that it was impossible to organize within 90 days. But Rodriguez stuck to the constitution and received 75 percent of the vote on May 1, keeping him in office for the remaining four years of Stroessner's term. Laino received 18 percent of the vote.

Because Rodriguez pledged to stay in office only for the remainder of Stroessner's latest five-year term, his victory is a sign that most Paraguayans favor some form of transitional rule.

"People here are conservative," says Masi. Stroessner is responsible for that. His 35 year reign dramatically shrunk the political spectrum. "There's no leftist influence here on the political scene," says Caballero. "We have no legal Communist Party, no clandestine Marxists."

According to Caballero, Stroessner "jailed and tortured" 8,000 people, making it difficult for an effective opposition to develop. Carmen de Lara Castro, a founder of the Paraguayan Commission for defense of human rights, corroborates that figure, though she adds that no one knows the precise number of political activists jailed and tortured. Her human rights group- -non-governmental and one of Latin America's oldest--was formed during one of Stroessner's many "waves of repression." She says, "most political prisoners were peasants" whose relatives, in fear for themselves, ignored the prisoners' plight. Middle class people, she says, were more likely to be freed, "depending on the mood of the dictator."

Lara Castro spent time in jail, as did her sons, her brother, and her brother-in-law, who was jailed for eight years. Her latest jail term--five days--began on December 9, 1988 when she arrived back in Asuncion from a human rights gathering in Spain. She was accused of "master-minding" a human rights march to be held in Asuncion the next day. "I was put in jail like a war criminal," this retired teacher in her 60s says. "There were no plates, forks or knives. I had to eat off a newspaper on the floor like a dog."

Romero Pereira is a leader of the Colorado Party's "ethical" faction, which broke with the party in 1985, "demanding that the government correct wrongs." He says that after the break, he was persecuted by Stroessner's junta. "I was put in jail twice in 1987, four days each time, with more than 20 people in a small cell. Some people in my party were in exile 30 years."

The Stroessner regime's extended brutality has induced a survivalist passivity in the people of Paraguay. Masi points to the 60 percent hike in electricity rates in 1988 to emphasize the extent of the inertia. "There were no protests. The state grew like a monster and nearly digested the whole country," he says.

Some have credited Stroessner with improving Paraguay's infrastructure, but the facts point in a different direction. There are only 88,000 telephones and 1,250 miles of paved roads in Paraguay and only Asuncion and a small city near the Brazilian border have running, potable water.

Paraguay's underdevelopment cannot be attributed to a lack of resources. Aldo Zucolillo, owner of the nation's biggest newspaper, ABC Color, claims that Paraguayans "have the richest country in the world." For example, the Itaipu Dam on the border with Brazil is owned jointly by the two nations and is one of the world's largest hydro power producers; a second dam, Yacyreta, is being built on the Paraguay-Argentina border and is also jointly owned; and a third hydro dam is in the works at Salto del Guaira. Zucolillo says that "by the 21st Century we'll have more than 20 million kilowatts of electricity being produced. Half belongs to us, worth five billion to eight billion yearly. We'll never use all our share, so we can sell it to 32 million consumers in Argentina and 145 million in Brazil."

But first Rodriguez's regime has to confront the immediate economic problems: a foreign debt of $2.2 billion, a 30 percent annual inflation rate and a Gross National Product (GNP) which has grown less than 6 percent from 1981 to 1988, going from $5 billion to 5.3 billion. Legal exports last year--mostly soya, cotton, timber and meat--amounted to about $500 million, while service on foreign debt amounted to 69.3 percent of the export total.

Under these circumstances, paying off the country's foreign debt is likely to be difficult. "If we could get the money Stroessner and his clique stole, we could pay off a third of our foreign debt," Masi says. But chances of that are slim.

Paraguay has a better chance of improving its economic indicators by bringing the "informal" economy under control and limiting the "non-registered" goods smuggled to Brazil and Argentina. Masi says half of Asuncion's economy is "informal;" this amounts to at least $1 billion to $1.5 billion yearly.

Rodriguez and subsequent governments face problems of a country that has been drained of its energy and its resources by 35 years of military rule. It bodes well that there is hope still left in the people, but Rodriguez may have to work miracles if he is not to disappoint them.

Paraguay at a Glace

Paraguay is the size of California, has a similar climate and, like California, stretches north and south.

But there the similarity ends. Asuncion is a city of almost a million people in a landlocked country of four million. More than 90 percent of Paraguayans live in the country's southeast. The northwest Chaco, over which Paraguay and neighboring Bolivia fought a war from 1932-1935, is a vast expanse, inhabited by very few people. Guarani Indians live there--Guarani and Spanish are Paraguay's official languages--along with descendants of Spanish settlers. More recently, Japanese and German farmers have established large soybean estates in the Chaco. Cattle graze there, too, and peasants grow cotton on 20- to 40-acre plots. But over all, only five percent of Paraguay's land is used for agriculture, according to economist Fernando Masi. The biggest business of the Chaco centers on the 300 air strips where light planes land carrying cocaine from Bolivia. The Chaco is a stop on the route narcotraficantes use to get their product to the world market.

The southeast part of the country is busier, with more farming, more towns and lots of smuggling of "non-registered" goods. Everything from refrigerators to soy beans to drugs move across the Parana River to Brazil and Argentina.

Paraguay's population is growing modestly, 2.7 percent a year, but the harshness of Stroessner's dictatorship gave a million Paraguayans the impetus to leave, mostly to Argentina. Those who left tended to be the best educated and most productive Paraguayans.

Paraguay's minimum wage is $140-a-month and Masi says only 40 percent of the labor force nationwide is paid that. He says "almost half" of the labor force is unemployed or under- employed.

U.S. Companies in Paraguay

AFIA/Firemen's Insurance Co: Insurance
American Bureau of Shipping: Ship surveys and classification
Avon Products Inc: Cosmetics
Bank of America: International banking
Braniff International Corp: Air transport
Brown & Root Inc: Construction and consulting
Chase Manhattan Bank: International banking
Citibank: International banking
Coopers & Lybrand International: Accountants and auditors
First National Bank of Boston: Commercial banking
INA Corp: Holding co.,insurance and financial services
Morrison-Knudsen Engineers Inc: Engineering and construction management
McCann-Ericson Inc.: Advertising
National Car Rental System Inc: Vehicle rental and leasing
Pan American World Airways Inc: Air transportaion
Peat Marwick Mitchell & Co: International accountants and consultants
Price Waterhouse & Co: Accountants and auditors
SGS Control Services Inc: Quality and quantity control checks
Ted Bates Worldwide Inc: Advertising
J. Walter Thompson Co: Advertising
World Courier Inc: International courier service

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