Background Notes: Paraguay, March 1998

Released by the Bureau of Inter-American Affairs.

Official Name: Republic of Paraguay

PROFILE

People

Nationality: Noun and adjective--Paraguayan(s).
Population: 4.8 million.
Annual growth rate: 2.7%.
Ethnic groups: Mixed Spanish and Indian descent (mestizo) 95%.
Religions: Roman Catholic 90%; Mennonite and other Protestant denominations.
Languages: Spanish, Guarani.
Education: Years compulsory--6. Attendance--86.6%. Literacy--90.7%.
Health: Infant mortality rate--38/1,000. Life expectancy--68 yrs. male; 75 yrs. female.
Work force (1995, 1.7 million): Agriculture--45%. Industry and commerce--31%. Services--19%. Government--4%.

Geography

Area: 406,752 sq. km. (157,047 sq. mi.); about the size of California.
Cities: Capital--Asuncion (pop. 502,000). Other cities--Caaguazu, Coronel Oviedo, Pedro Juan Caballero, Encarnacion, and Ciudad del Este.
Terrain: East of Paraguay River--grassy plains, wooded hills, tropical forests; west of Paraguay River (Chaco region)--low, flat, marshy plain.
Climate: Temperate east of the Paraguay river, semiarid to the west.

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.
Political parties: Colorado (National Republican Association), Authentic Radical Liberal, National Encounter, Christian Democratic, Febrerista Revolutionary, Popular Democratic, and numerous smaller parties not represented in Congress.
Suffrage: 18 years of age; universal and compulsory up to age 75.

Economy (1997 est.)

GDP: $10 billion.
Annual growth rate: 2.0%.
Per capita GDP: $2,100.
Natural resources: Hydroelectric sites, forests.
Agriculture (26% of GDP): Products--cotton, sugarcane, soybeans. Arable land--9 million hectares, of which 30% is cultivated.
Manufacturing (15% of GDP): Types--sugar, cement, textiles, beverage, and wood products.
Trade (1996): Exports--$1 billion: meat and meat products, lumber, vegetable oil, yerba mate, cotton, soybeans. Major markets--Brazil, Argentina, EU, U.S. (6%). Imports--$2.2 billion: machinery, fuels and lubricants, electronics, consumer goods. Major suppliers--Brazil, EU, U.S. (18% *), Japan, Argentina.
Official exchange rate (March 1998): 2,500 guaranies=U.S.$1.

(* Source: Government of Paraguay)

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. Germans, Japanese, Koreans, ethnic Chinese, Arabs, Brazilians, and Argentines are among those who have settled in Paraguay.

HISTORY

Pre-Columbian civilization in the fertile, wooded region that is now Paraguay consisted of numerous semi-nomadic, Guarani-speaking tribes of Indians, 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; Brazilian troops subsequently 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. General 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 Colorado Party.

During Stroessner's 34-year reign, political freedoms were severely limited and opponents of the regime were systematically harassed and persecuted in the name of national security and anti-communism. 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 General Andres Rodriguez. Presidential and congressional elections were held on May 1, 1989. Rodriguez, as the Colorado Party candidate, easily won the presidency, 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.

On May 9, 1993, Colorado Party presidential 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. A majority-opposition Congress also was elected, which quickly demonstrated its independence from the executive by rescinding legislation passed by the previous Colorado-dominated Congress. Wasmosy has worked to consolidate Paraguay's democratic transition, reform the economy and the state, and improve respect for human rights. His major accomplishments to date have been exerting civilian control over the armed forces and undertaking fundamental reform of the judicial and electoral systems. 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 General Lino Oviedo to oust President Wasmosy, taking an important step to strengthen democracy.

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 five-year term, appoints a cabinet. The next presidential elections are scheduled for May 10, 1998. The bicameral Congress consists of a 45-member Senate and an 80-member Chamber of Deputies, elected concurrently with the president through a proportional representation system. Deputies are elected by department and Senators nationwide. Paraguay's highest court is the Supreme Court. The Senate and the president select its members on the basis of recommendations from a constitutionally created Magistrates Council. Each of Paraguay's 17 departments is headed by a popularly elected governor.

Principal Government Officials

President--Juan Carlos WASMOSY Monti
Minister of Foreign Affairs--Ruben Dario MELGAREJO Lanzoni
Ambassador to the U.S.--Jorge PRIETO Conti
Ambassador to the OAS--Carlos Victor MONTANARO
Ambassador to the UN--Hugo SAGUIER

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, New Orleans, Chicago, Detroit, and Los Angeles.

ECONOMY

Paraguay has a predominantly agricultural economy, with a thriving commercial sector. There is a large subsistence sector (including sizable urban underemployment) and a larger underground re-export sector. The country has vast hydroelectric potential (including the world's largest hydroelectric generation facility at the Itaipu Dam), but lacks significant mineral or petroleum resources. The government welcomes and provides national treatment to foreign investors and businesses.

The economy is dependent on exports of soybeans, cotton, cattle, and timber; on electricity generation; and on the lucrative business of re-exporting products made elsewhere. It is therefore vulnerable to the vagaries of weather and to the fortunes of the Argentine and Brazilian economies.

According to Paraguayan Government statistics, Paraguay's GDP of $10 billion in 1997 represented real growth of 2.0% over 1996. However, given the importance of the informal sector, accurate economic measures are difficult to ascertain.

Paraguay generally maintains a small balance-of-payments surplus. Official foreign exchange reserves decreased to $900 million and foreign official debt remained about $1.3 billion. On a per capita basis, GDP declined by 1.0% at the end of 1997. Inflation continued to drop, standing at 6.2%.

Agriculture and Commerce

Agricultural activities represents about 20% of GDP, most of which is for export. More than 200,000 families depend on subsistence farming activities and maintain marginal ties to the larger, productive sector of the economy.

The commercial sector is primarily engaged in the import of goods from Asia and the United States for re-export to neighboring countries. In general, Paraguayans prefer imported goods, and local industry relies on imported capital goods. The underground economy, which is not included in the national accounts, is estimated to generate transactions amounting to $3 billion to $7 billion per year. The bulk of underground activity centers on the unregistered sale of imported goods--including computers, sound equipment, cameras, liquor, and cigarettes--to Argentina and Brazil.

Post-Stroessner Reforms

Since 1989, the government has deregulated the economy, previously tightly controlled by President Stroessner's authoritarian regime. The Rodriguez and Wasmosy Administrations eliminated foreign exchange controls and implemented a free-floating exchange rate system; reformed the tax structure and established tax incentives to attract investment; reduced tariff levels; launched a stock exchange market; and began a process of financial reform.

The Wasmosy Government has pledged to strengthen market-based economic reforms initiated since 1989. To do this, the government pledged to: keep government expenditures in line with revenues; combat inflation; eliminate restrictions on capital flows; reform and deregulate the financial sector; keep customs duties low and uniform; encourage production and exports; privatize state-owned enterprises; and fight official corruption.

In order to rationalize resources, President Wasmosy has vowed to privatize state enterprises which produce goods and services, but privatization has stalled due to opposition from many parts of the society long accustomed to a large public sector. The total public sector budget represents close to one-third of GDP. Of the $3.75 billion 1997 government budget, 40% was assigned to the central government, with the remaining 60% targeted for the decentralized agencies and state-owned enterprises.

DEFENSE

The constitution designates the president as commander in chief of the armed forces. Military service is compulsory, and all 17-year-old males are liable for one year of active duty. Although the 1992 constitution allows for conscientious objection, no enabling legislation has yet been approved. Of the three services, the army has the majority of personnel, resources, and influence. With about 12,000 personnel, it is organized into three corps, with six infantry divisions and three cavalry divisions. The army has two primary functions: to maintain the national defense (including internal order) and to manage some civic action projects in the countryside. The navy consists of about 2,000 personnel divided into three service branches. The air force, newest and smallest of the services, has about 1,500 personnel.

FOREIGN RELATIONS

Paraguay is a member of the United Nations and several of its specialized agencies, the Organization of American States, the Latin American Integration Association (ALADI), the Rio Group, INTELSAT, INTERPOL, and most recently, MERCOSUR (Southern Cone Common Market). Its foreign policy has followed closely the Rio Group's lead on many issues of wide-ranging political importance.

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 and other illicit cross-border activities, and adequately protect intellectual property rights. With substantial rain forest and riverine resources, the U.S. looks to Paraguay to engage in hemispheric efforts to ensure sustainable development. As a member of the Southern Cone Common Market (MERCOSUR in Spanish), Paraguay supports the move toward a Free Trade Area of the Americas early in the next century. The U.S. and Paraguay also cooperate in a variety of international organizations.

The U.S. strongly supports consolidation of Paraguay's democracy and continued economic reform, cornerstones of cooperation among countries in the hemisphere. The U.S. played an important role in helping resolve the April 1996 crisis that threatened Paraguay's seven-year-old democracy.

U.S. exports to Paraguay approach $1 billion per year, according to U.S. Customs data. More than a dozen U.S. multinational firms have subsidiaries in Paraguay. These include firms in the computer, manufacturing, agro-industrial, and banking and other service industries. Some 75 U.S. businesses have agents or representatives in Paraguay, and over 3,000 U.S. citizens reside there.

U.S. Assistance

The U.S. Government has assisted Paraguayan development since 1937. The U.S. Agency for International Development (USAID) currently supports a variety of programs to strengthen Paraguay's democratic institutions, particularly in the legislative and judicial branches, local government, and elections, as well as to protect the environment and stabilize population growth. USAID anticipates an assistance program of over $5 million per year for FY 1997-1999.

The U.S. Department of State and the Drug Enforcement Administration are providing technical assistance, equipment, and training to strengthen counternarcotics enforcement and to assist in the development and implementation of money laundering legislation. The U.S. Department of Defense is providing technical assistance and training to help modernize, professionalize, and democratize the military. The Peace Corps has about 170 volunteers working throughout Paraguay on projects ranging from agriculture and natural resources to education, rural health, and urban youth development. The U.S. Information Service (USIS) is also active in Paraguay, providing information on the United States to the press and public, as well as helping to arrange educational and citizen exchanges to promote democracy.

Principal U.S. Officials

Ambassador--Maura A. Harty
Deputy Chief of Mission--Stephen McFarland
Political Officer--Alexander H. Margulies
Economic/Commercial Officer--Francisco J. Fernandez
Consul--Charles S. Smith
Administrative Officer--Amy Pitts
USAID Representative--Barbara Kennedy
Public Affairs Officer--James Dickmeyer
Defense Attache--Ltc. Charles A. Rowcliffe
Office of Defense Cooperation--Col. David Wilderman

The U.S. Embassy in Paraguay is located at 1776 Avenida Mariscal Lopez, Asuncion (tel. (595) (21) 213-715, fax (595) (21) 213-728). The embassy's Home Page address on the World Wide Web is: http://www.usia.gov/posts/asuncion.html.

OTHER CONTACT INFORMATION:

U.S. Department of Commerce
International Trade Administration
Office of Latin America and the Caribbean
14th & Constitution Ave., NW
Washington, DC 20230
Tel: (202) 482-0477, 800-USA-TRADE
Fax: (202) 482-0464

Paraguayan-American Chamber of Commerce
Edif. El Faro Internacional, Piso 4
Asuncion, Paraguay
Tel: (595) 21-442-136, Fax: (595) 21-442-135
E-mail: pamcham@infonet.com.py
(Branch office in Ciudad del Este)

TRAVEL AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program provides Travel Warnings and Consular Information Sheets. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country. Consular Information Sheets exist for all countries and include information on immigration practices, currency regulations, health conditions, areas of instability, crime and security, political disturbances, and the addresses of the U.S. posts in the country.