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The new president Horacio Cartes – a businessman who had never even bothered to vote before, let alone take part in politics – is said to be the richest man in Paraguay. But he has little to show for his first 100 days of government. Instead, he has been undoing some of the positive achievements of President Fernando Lugo – the controversial Catholic bishop who was ousted by what was effectively a parliamentary coup.
The public health service is being undermined and human rights officials have been sacked. Most government revenue goes on maintenance of the public machine. Income tax was only introduced last year. “Paraguay isn’t a poor country. It’s just badly run”, says economist Amilcar Ferreira.
On paper, Paraguay is enjoying an economic boom – 11% growth last year – thanks to agribusiness, which is mostly in the hands of Brazilian and US companies. It now exports more meat than Argentina and soya exports have boomed. Thanks to the huge Itaipu hydreletric dam on the border with Brazil and the new bilateral treaty negociated by Lugo, which greatly increased the benefits from the dam for Asunción, Paraguay is an energy-rich country.
This growth is attracting transnationals. For foreign companies, besides cheap energy, the investment climate is also favourable because of low taxes, low inflation, monetary stability, and the lack of social unrest (which is not the case in Brazil and Argentina, for example). Paraguay’s GDP trebled between 2002 and 2012.
But who benefits from this prosperity? Not the poor, because it is not creating jobs. Their share of the national income has stagnated, while the wealthiest minority has seen its slice of the national pie grow bigger. Commerce, too, is floundering, struggling to compete with large-scale, unchecked contraband.
Walking round Asunción, the contrast is stark. In the rich quarters avenues of Hollywood-style mansions with well-cropped lawns and hosts of sleek Mercedes and BMWs. But on the waterfront near the Cathedral (which is locked and barred), one sees miserable cardboard shacks with scruffy children rooting through rubbish skips.
All is not so calm in other parts of Paraguay. In Concepción, one of the poorest and most backward provinces, a rural guerrilla movement is defying police and army attempts to crush it. The Paraguayan People’s Army – EPP – has ambushed and killed policemen, kidnapped cattle ranchers for ransom and earned the sympathy of the local, extremely poor, population. It has received training from the Colombian FARC, but its aims are vague. It is also said to be in league with Brazil’s criminal organisation, the PCC, and to cultivate plantations of marijuana.
For President Cartes, who is accused of involvement in contraband and who has family members accused of drug trafficking, the EPP may be a useful distraction.
Back in Asunción, the UK government has just reopened the embassy, closed during an economy drive in 2005. This is probably due to the ongoing Malvinas/Falklands dispute, which means that Britain needs allies in the region.
Indeed, history keeps rearing its head in Paraguay. By an ironic twist, the new ambassador to the UK is Miguel Solano Lopez, the great-grandson of the man who, in the 1860s, led Paraguay to a disastrous defeat against the armies of the Triple Alliance (Brazil, Argentina and Uruguay), which was financed and aided by England.
At the Palacio de Justicia, two lawyers showed me the petition they plan to present to a court in Buenos Aires, asking that the treaty, which ended the war nearly 150 years ago, be revoked and Paraguay’s frontiers restored to what they were before the war. The changes would be far-reaching: Brazil, for example, would have to hand back the Iguaçu Falls. Somehow there does not seem much chance of this happening.