Paraguay has a market economy characterized by a large informal sector. Agriculture dominates the economy, but unequal land distribution has resulted in a large class of peasant farm laborers. A large portion of the population is uninvolved in the formal economy, instead existing as subsistence farmers. In recent years, the economy has grown as a result of increased agricultural exports, especially soybeans. Reforms in fiscal and monetary policy also have improved Paraguay’s economy. Inflation has dropped, and the currency has appreciated gradually. Nevertheless, urban unemployment and underemployment have been problems throughout Paraguay’s history. Paraguay has the economic advantages of a young population and vast hydroelectric power but has few very bad mineral resources, and political instability has undercut some of the economic advantages present. The government welcomes foreign investment.^[4] Paraguay is a middle-income country that changed rapidly in the 1970s and 1980s as a result of hydroelectric development, agricultural colonization, construction, and cash crop exports. Nevertheless, the country's gross domestic product (GDP) in 1986 was approximately US$3.4 billion, or roughly US$1,000 per capita, ranking Paraguay only ahead of Bolivia among the Spanish-speaking countries of South America. Paraguay was the most agricultural economy of South America, and that sector influenced the performance of virtually every other sector of the economy.

Traditionally isolated and underpopulated, Paraguay was one of the last countries in Latin America to enjoy the region's rapid growth in the post-World War II period. Paraguay entered a phase of sustained economic growth in the late 1950s. Its economy grew at the fastest pace of all the Latin American countries during most of the 1970s as the Paraguayan-Brazilian project, the Itaipu Dam, the world's largest hydroelectric plant, was constructed. During that decade, cotton and soybeans came to dominate agriculture, mostly as a result of high export prices and agricultural colonization. Paraguay's economy also was characterized by a large underground sector, in which smuggling and contraband had become normal features by the 1970s.

The Paraguayan economic miracle of the 1970s came to a halt in 1982 because of the completion of construction at Itaipú, lower commodity prices for cotton and soybeans, and world recession. The economy recovered in 1984 and 1985, stagnated in 1986, and continued to expand in 1987 and 1988. Despite its rapid growth, the Paraguayan economy became increasingly dependent on soybeans and cotton for exports and overall economic dynamism. These two crops, however, remained subject to external price fluctuations and local weather conditions, both of which varied considerably.

Economic growth in the post-World War II period occurred in the context of political stability characterized by authoritarian rule and patronage politics. Government economic policies deviated little from 1954 to the late 1980s, consistently favoring a strong private-enterprise economy with a large role for foreign investment. Unlike most Latin American economies, in Paraguay import tariffs were generally low, fiscal deficits manageable, and exchange rates not overvalued. These trends faltered in the 1980s as the government took a more active part in industry, deficits rose, and the national currency was generally overvalued and devalued numerous times. Throughout the post-World War II era, Paraguay had no personal income tax, and government revenues as a percentage of GDP were among the lowest in the world.

Despite the sustained economic growth that marked the postwar period, the distribution of economic benefits was highly inequitable. Although GDP expanded rapidly in the 1970s, most economists estimated that income distribution worsened during the decade. Government spending on social services was particularly lacking. Paraguay's poverty was mostly a rural phenomenon, which increasingly involved competition for land in the eastern region near the Brazilian border, especially in the departments (administrative divisions) of Alto Paraná, Canendiyú, and Caaguazú. Nonetheless, land tenure was not generally the acute social problem it was in many developing countries.

Although Paraguay faced significant obstacles to future economic development, it displayed extraordinary potential. Paraguay contained little oil and no precious metals or sea coasts, but the country was self-sufficient in many areas and was endowed with fertile land, dense forests, and swift rivers. The process of opening up the eastern border region to economic activity and continued agricultural expansion was expected to effect rapid changes in once-isolated Paraguay. Likewise, the development of a series of hydroelectric plants along the Río Paraná linked Paraguay to its neighbors and provided it access to cherished energy resources and badly needed export revenues. Finally, road construction united different departments of Paraguay and provided the country its first access to the Atlantic Ocean via Brazil. These processes of infrastructure development, hydroelectric expansion, agricultural colonization, and a cash crop explosion allowed Paraguay by the late 1980s to begin to tap its potential

History of economic advancement[link]

Until the Spanish established Asunción in 1537, economic activity in Paraguay was limited to the subsistence agriculture of the Guaraní Indians. The Spanish, however, found little of economic interest in their colony, which had no precious metals and no sea coasts. The typical feudal Spanish economic system did not dominate colonial Paraguay, although the encomienda. System was established. Economic relations were distinguished by the reducciones (reductions or townships) that were established by Jesuit missionaries from the early seventeenth century until the 1760s. The incorporation of Indians into these Jesuit agricultural communes laid the foundation for an agriculture-based economy that survived in the late twentieth century.

Three years after Paraguay overthrew Spanish authority and gained its independence, the country's economy was controlled by the autarchic policies of José Gaspar Rodríguez de Francia (1814–40), who closed the young nation's borders to virtually all international trade. Landlocked, isolated, and underpopulated, Paraguay structured its economy around a centrally administered agricultural sector, extensive cattle grazing, and inefficient shipbuilding and textile industries. After the demise of Francia, government policies focused on expanding international trade and stimulating economic development. The government built several roads and authorized British construction of a railroad.

The War of the Triple Alliance (1865–70) fundamentally changed the Paraguayan economy. Economic resources were employed in and destroyed by the war effort. Paraguay was occupied by its enemies in 1870; the countryside was in virtual ruin, the labor force was decimated, peasants were pushed into the environs of Asunción from the east and south, and the modernization of the preceding three decades was undone. Sleepy, self-sufficient Paraguay, whose advances in agriculture and quality of life had been the envy of many in the Southern Cone, became the most backward nation in that subregion.

To pay its substantial war debt, Paraguay sold large tracts of land to foreigners, mostly Argentines. These large land sales established the base of the present-day land tenure system, which is characterized by a skewed distribution of land. Unlike most of its neighbors, however, Paraguay's economy was controlled not by a traditional, landed elite, but by foreign companies. Many Paraguayans grew crops and worked as wage laborers on latifundios (large landholdings) typically owned by foreigners.

The late 1800s and the early 1900s saw a slow rebuilding of ports, roads, the railroad, farms, cattle stock, and the labor force. The country was slowly being repopulated by former Brazilian soldiers who had fought in the War of the Triple Alliance, and Paraguay's government encouraged European immigration. Although few in number, British, German, Italian, and Spanish investors and farmers helped modernize the country. Argentine, Brazilian, and British companies in the late 1800s purchased some of Paraguay's best land and started the first large-scale production of agricultural goods for export. One Argentine company, whose owner had purchased 15 percent of the immense Chaco region, processed massive quantities of tannin, which were extracted from the bark of the Chaco's ubiquitous quebracho (break-axe) hardwood. Large quantities of the extract were used by the region's thriving hide industry. Another focus of large-scale agro- processing was the yerba maté bush, whose leaves produced the potent tea that is the national beverage. Tobacco farming also flourished. Beginning in 1904, foreign investment increased as a succession of Liberal Party (Partido Liberal) administrations in Paraguay maintained a staunch laissez-faire policy.

The period of steady economic recovery came to an abrupt halt in 1932 as the country entered another devastating war. This time Paraguay fought Bolivia over possession of the Chaco and rumors of oil deposits. The war ended in 1935 after extensive human losses on both sides, and war veterans led the push for general social reform. During the 1930s and 1940s, the state passed labor laws, implemented agrarian reform, and assumed a role in modernization, influenced in part by the leadership of Juan Domingo Perón in Argentina and Getúlio Dornelles Vargas in Brazil. The 1940 constitution, for example, rejected the laissez-faire approach of previous Liberal governments. Reformist policies, however, did not enjoy a consensus, and by 1947 the country had entered into a civil war, which in turn initiated a period of economic chaos that lasted until the mid-1950s. During this period, Paraguay experienced the worst inflation in all of Latin America, averaging over 100 percent annually in the 1950s.

After centuries of isolation, two devastating regional wars, and a civil war, in 1954 Paraguay entered a period of prolonged political and economic stability under the authoritarian rule of Alfredo Stroessner Mattiauda. Stroessner's economic policies took a middle course between social reform, desarrollismo, and laissez-faire, all in the context of patronage politics. Relative to previous governments, Stroessner took a fairly active role in the economy but reserved productive activities for the local and foreign private sectors. The new government's primary economic task was to arrest the country's rampant and spiraling price instability. In 1955 Stroessner fired the country's finance minister, who was unwilling to implement reforms, and in 1956 accepted an International Monetary Fund ( IMF) stabilization plan that abolished export duties, lowered import tariffs, restricted credit, devalued the currency, and implemented strict austerity measures. Although the sacrifice was high, the plan helped bring economic stability to Paraguay. Labor unions retaliated with a major strike in 1958, but the new government, now firmly established, quelled the uprising and forced many labor leaders into exile; most of them remained there in the late 1980s.

By the 1960s, the economy was on a path of modest but steady economic growth. Real GDP growth during the 1960s averaged 4.2 percent a year, under the Latin American average of 5.7 percent but well ahead of the chaotic economy of the two previous decades. As part of the United States-sponsored Alliance for Progress, the government was encouraged to expand its planning apparatus for economic development. With assistance from the Organization of American States (OAS), the Inter-American Development Bank (IDB), and the United Nations Economic Commission for Latin America (ECLA), in 1962 Paraguay established the Technical Planning Secretariat (Secretaría Técnica de Planificación—STP), the major economic planning arm of the government. By 1965 the country had its first National Economic Plan, a two-year plan for 1965-66. This was followed by another two-year plan (1967–68) and then a series of five-year plans. Five-year plans—only general policy statements—were not typically adhered to or achieved and played a minimal role in Paraguay's economic growth and development. Compared with most Latin American countries, Paraguay had a small public sector. Free enterprise dominated the economy, export promotion was favored over import substitution, agriculture continued to dominate industry, and the economy remained generally open to international trade and market mechanisms.

In an economic sense, the 1970s constituted Paraguay's miracle decade. Real GDP grew at over 8 percent a year and exceeded 10 percent from 1976 to 1981—a faster growth rate than in any other economy in Latin America. Four coinciding developments accounted for Paraguay's rapid growth in the 1970s. The first was the completion of the road from Asunción to Puerto Presidente Stroessner and to Brazilian seaports on the Atlantic, ending traditional dependence on access through Argentina and opening the east to many for the first time. The second was the signing of the Treaty of Itaipú with Brazil in 1973. Beyond the obvious economic benefits of such a massive project, Itaipú helped to create a new mood of optimism in Paraguay about what a small, isolated country could attain. The third event was land colonization, which resulted from the availability of land, the existence of economic opportunity, the increased price of crops, and the newly gained accessibility of the eastern border region. Finally, the skyrocketing price of soybeans and cotton led farmers to quadruple the number of hectares planted with these two crops. As the 1970s progressed, soybeans and cotton came to dominate the country's employment, production, and exports.

These developments shared responsibility for establishing thriving economic relations between Paraguay and the world's sixth largest economy, Brazil. Contraband trade became the dominant economic force on the border between the two countries, with Puerto Presidente Stroessner serving as the hub of such smuggling activities. Oblservers contended that contraband was accepted by many Paraguayan government officials, some of whom were reputed to have benefited handsomely. Many urban dwellers' shelves were stocked with contraband luxury items.

The Paraguayan government's emphasis on industrial activity increased noticeably in the 1970s. One of the most important components of the new industrial push was Law 550, also referred to as Law 550/75 or the Investment Promotion Law for Social and Economic Development. Law 550 opened Paraguay's doors even further to foreign investors by providing income-tax breaks, duty-free capital imports, and additional incentives for companies that invested in priority areas, especially the Chaco. Law 550 was successful. Investments by companies in the United States, Europe, and Japan comprised, according to some estimates, roughly a quarter of new investment. Industrial policies also encouraged the planning of more state-owned enterprises, including ones involved in producing ethanol, cement, and steel.

Much of Paraguay's rural population, however, missed out on the economic development. Back roads remained inadequate, preventing peasants from bringing produce to markets. Social services, such as schools and clinics, were severely lacking. Few people in the countryside had access to potable water, electricity, bank credit, or public transportation. As in other economies that underwent rapid growth, income distribution was believed to have worsened in Paraguay during the 1970s in both relative and absolute terms. By far the greatest problem that the rural population faced, however, was competition for land. Multinational agribusinesses, Brazilian settlers, and waves of Paraguayan colonists rapidly increased the competition for land in the eastern border region. Those peasants who lacked proper titles to the lands they occupied were pushed to more marginal areas; as a result, an increasing number of rural clashes occurred, including some with the government.

In the beginning of the 1980s, the completion of the most important parts of the Itaipú project and the drop in commodity prices ended Paraguay's rapid economic growth. Real GDP declined by 2 percent in 1982 and by 3 percent in 1983. Paraguay's economic performance was also set back by world recession, poor weather conditions, and growing political and economic instability in Brazil and Argentina. Inflation and unemployment increased. Weather conditions improved in 1984, and the economy enjoyed a modest recovery, growing by 3 percent in 1984 and by 4 percent in 1985. But in 1986 one of the century's worst droughts stagnated the economy, permitting no real growth. The economy recovered once again in 1987 and 1988, growing between 3 and 4 percent annually. Despite the economy's general expansion after 1983, however, inflation threatened its modest gains, as did serious fiscal and balance-of-payments deficits and the growing debt.

Industry[link]

Paraguay Table of Contents Industry, especially the manufacturing sector, historically was linked to agricultural processing until the 1970s, when the construction of hydroelectric plants and new industrial incentives began to broaden the industrial base. Industry was composed principally of manufacturing and construction. Paraguay had no real mining sector, but the manufacture of construction materials included limited mining activity. Manufacturing and construction in the economy in the late 1980s remained dependent on developments in other sectors, such as agriculture and energy, for their growth. Although industry was becoming more visible in Paraguay in the 1980s, industry's share of GDP actually declined in the 1970s and 1980s because of more rapid growth in agriculture.

Manufacturing[link]

Manufacturing accounted for 16.3 percent of GDP in 1986 and employed roughly 13 percent of the labor force, making Paraguay one of the least industrialized nations in Latin America. Manufactured exports, by most definitions, accounted for less than 5 percent of total exports; when semiprocessed agricultural products were included, however, that figure reached 77 percent. The growth of the country's manufacturing industries was hampered by numerous structural obstacles. These included a small internal market, limited physical infrastructure, costly access to seaports, a historical lack of energy production, and the openness of Paraguay's economy to the more industrialized economies of Brazil and Argentina. Another significant factor was the ubiquity and profitability of smuggling operations, which encouraged importing and reexporting rather than production.

Paraguay's earliest manufacturing industries processed hides and leather from its abundant cattle and tannin from quebracho trees. Small-scale manufacturing, especially textiles, flourished under the Francia dictatorship, when the nation's borders were closed. The War of the Triple Alliance, however, devastated what little industry and infrastructure the country had, causing Paraguay to enter the twentieth century as an almost completely agricultural society. Land sales to foreigners stimulated increased agricultural processing in the early twentieth century, including meat packing and the processing of flour, oilseeds, sugar, beer, and pectin extract. After the early 1900s, small-scale manufacturing in all subsectors grew at a slow, but steady pace, with some of the fastest growth occurring because of the shortages during World War II.

The government's role in promoting industry increased in the postwar era, and in 1955 the Stroessner government undertook the country's first industrial census. Over the next twenty years, the government enacted a number of industrial incentive measures, the most important of which was Law 550. Law 550 promoted exportoriented industries or those that would save foreign exchange. It also provided liberal fiscal incentives for companies to develop specific areas of the country, especially the departments of Alto Paraguay, Nueva Asunción, Chaco, and Boquerón. Incentives for business were related mostly to import-duty exemptions, but they included a variety of tax breaks and placed no restrictions on foreign ownership. Approximately one-fourth of all new manufacturing investment from 1975 to 1985 was registered under Law 550. Most foreign investments originated from Brazil, West Germany, the United States, Portugal, and Argentina in that order of importance. The dynamic processes of agricultural colonization and hydroelectric development, combined with such attractive industrial incentives, caused manufacturing to grow at an unprecedented rate in the late 1970s and early 1980s.

Unlike many other Latin American governments, which followed an import-substitution industrial policy, the Paraguayan government had played a minimalist role in the economy through most of the postwar era, curtailing import tariffs and maintaining a realistic exchange rate. In the 1980s, however, Paraguay's exchange rate became overvalued and several state-owned heavy industry plants became operational.

In the late 1980s, the major subsectors of manufacturing were food, beverages, and tobacco; textiles, clothing, leather, and shoes; wood and related products; and chemicals, petroleum, and plastics. Despite some increases in heavy industry in the economy during the 1970s and 1980s, Paraguayan industry was generally small-scale. Manufacturing production remained focused on consumer goods, and capital goods comprised under 5 percent of industrial output. In fact, in the 1980s Paraguay did not contain even one of Latin America's 1,000 largest companies, at least some of which were found in most other countries in the region. Virtually every subsector of Paraguay's manufacturing was characterized by numerous small- to medium-sized firms and a few large firms, which often were foreign owned. Most companies operated well below their capacity.

The food, beverages, and tobacco subsector has been the core manufacturing activity throughout Paraguay's history. In the late 1980s, this subsector continued to dominate, accounting for about 45 percent of industrial activity, depending on agricultural output in a given year. Agro-processing involved a large number of small, inefficient, and often family-run firms as well as a small number of large, efficient, and usually foreign-owned firms. The larger firms produced only the most lucrative items, such as oilseeds, meats, and various beverages, often for export. Some of the most common small-scale producers manufactured milled items, baked goods, sugar and molasses, dairy products, candy, manioc flour, vinegar, coffee, and tobacco. Along with raw agricultural produce, processed and semiprocessed food generated nearly all of the country's exports in the late 1980s. But, as with other manufacturing subsectors, the profitability of the food subsector often was impaired by contraband items from Brazil and Argentina, such as flour, meat, or dairy products. Paraguayan goods crossed borders unofficially, as well, thus lowering official exports.

The second most important manufacturing activity also relied on agricultural inputs for its base. Utilizing Paraguay's rich endowment of hardwood trees, the wood subsector represented about 15 percent of all industrial activity and contributed over 8 percent of exports in the 1980s. The most voluminous wood export was lumber, which was produced by hundreds of small sawmills throughout the central and eastern border regions. In addition to saw wood, mills also produced a variety of milled wood, plywood, chipboard, and parquet flooring. Although the country cut and processed only a fraction of its hundreds of species, Paraguayan wood was known for its quality. The country also contained several small paper companies and one large paper and cardboard factory located at Villeta.

Textiles, clothing, leather, and shoes comprised the third largest manufacturing subsector. These industries were traditional, grounded in the nation's abundance of inputs like cotton fibers, cattle hides, and tannin extract. The subsector accounted for about 10 percent of all manufacturing. The textile industry performed spinning, weaving, and dyeing operations and produced finished fabrics that amounted to over 100 million tons in 1986. Most fabrics were derived from cotton fibers, but a growing number of synthetic and wool fibers also were produced. Textile production provided inputs to approximately sixty clothing firms that operated under capacity and were generally inefficient. As with so many other manufacturers, clothing companies met stiff competition from widespread unregistered imports, which often originated in Asia and typically entered across the Brazilian border. The leather industry was characterized by 200 or so small tanneries dotting the Paraguayan countryside. In addition, many medium and two large tanneries fashioned leather goods. The leather industry operated at only about 40 percent of capacity, however. The shoe industry comprised a few hundred small workshops and a dozen or so mediumsized firms, which produced some 5 million pairs of leather and synthetic shoes a year.

The processing of petroleum, chemicals, and plastics repreated an increasing activity. In the late 1980s, this subsector represented less than 5 percent of industrial activity, but its share of manufacturing output was expanding because of the growth of heavy industry in Paraguay, especially industry related to the energy sector. The country also produced fertilizers, industrial gases, tanning chemicals, varnishes, and detergents. In 1987 a group of Japanese investors was considering the construction of a new fertilizer plant with a 70,000-ton capacity per year. Since the early 1980s, ethanol was being produced in large quantities, and the government was considering producing methanol. Also processed were paints, soaps, candles, perfumes, and pharmaceuticals. One of Paraguay's fastest growing industries was the new, relatively modern plastics subsector, which supplied a wide variety of goods to the local market.

Structure of the economy[link]

The most important component of the Paraguayan economy is the farming sector, which contributed 27% to GDP in 2006. The participation of commerce was 20.2%, and that of other services, including government, 38.4%. Industry’s part (including mining and construction) was about 20%.

After years of economic crisis, between 1999 and 1984, the Paraguayan economy grew at between 2.9 and 4.1% per year from 2003 to 2006. For 2007, the estimated growth is about 6.4%. Inflation in 2007 reached 6.0%.

Most enterprises are small, micro and individual ones, including subsistence jobs like street vendors. Only 4% of the Paraguayan labor force works in companies with more than 50 employees.

In June 2007 external foreign exchange reserves amounted to US$ 2153 million, and the foreign official debt US$ 2154 million, close to parity.

Fiscal surplus is provisionally reported as 0.5% of GDP in 2006 and 2007.

Paraguay’s economy (GDP) grew 5,8% in 2008, fastest growing sector being agriculture with 10,5% growth^[5]

cattle on cleared land in the Chaco

deforestation in the Paraguayan Chaco

Agriculture accounts for about 20 percent of Paraguay's annual gross domestic product (25 percent in 2004) and virtually all of the country's export earnings. It is Paraguay’s largest and most consistent source of employment, employing about 45 percent of the working population. In addition to those engaged in the formal agricultural sector, thousands of Paraguayan families survive through subsistence farming.^[4]

Paraguay produces enough basic food to be largely self-sufficient. Corn, cassava, and wheat are the main food crops for local consumption. The global surge in grain prices 2007/2008 was a major impulse for the agricultural sector. Wheat cultivation expanded, so did rice. Most significant was the increase of soy production. In 2004 Paraguay had about 1.6 million hectares dedicated to genetically modified (GM) crops.^[4] Export value of soy and its derivates increased from US$1,25 billion in 2007 to US$2,54billion in 2008

Paraguay’s eastern plains as well as the Chaco support the country’s dairy and ranching industry. Behind soybeans, beef exports make up a significant part of Paraguay’s agriculture sector. Additionally, Paraguay produces an adequate supply of beef, pork, and dairy products to meet domestic needs. The discovery of cases of foot-and-mouth disease in 2002 and 2003 led to a ban on Paraguayan beef in many countries. However, in 2004 Paraguay’s meat production and exports rebounded. As a result of rising international prices and the recovery of important markets like Chile or Russia, Paraguay’s meat exports rose to US$143 million in 2004. They reached US$353 million in 2007 and US$597 million in 2008. Presently, Paraguay has a national herd numbering between 9 and 10 million head of cattle.

Paraguay’s forests adequately meet domestic needs for lumber and fuelwood. However, logging for export, both legally and illegally, has thinned Paraguay’s once abundant forests, resulting in a ban on the export of logs since the 1970s. More than 90% of the native rainforest of Paraguay's eastern half have been lost between 1975 and 2008. In the western half, the Chaco, virgin forest is lost to cattle ranching at an annual rate of more than 200.000 hectare (2008).^[6] Sustainable wood cultivation is now on the increase.^[4]

The fishing industry in Paraguay exists almost solely to meet domestic demand.^[4]

Mining and minerals[link]

Unlike many South American countries, Paraguay has few mineral resources and very little history of mining success. Foreign companies have explored Paraguay in recent years, searching for overlooked mineral deposits. Small extraction projects exist, seeking lime, clay, and the raw materials necessary to make cement, but the country’s iron and steel manufacturers must import raw materials from neighboring countries.^[4]

In 2010 CIC Resources Inc., the same company that discovered the copper deposits in Chile, claims to have discovered 21 billion metric tons of titanium, which could be the biggest titanium deposit in the world, in Alto Parana near frontier with Brazil.

Industry and manufacturing[link]

The industrial sector produces about 25 percent of Paraguay’s gross domestic product (GDP) and employs about 31 percent of the labor force. Output grew by 2.9 percent in 2004, after five years of declining production. Traditionally an agricultural economy, Paraguay is showing some signs of long-term industrial growth. The pharmaceutical industry is quickly supplanting foreign suppliers in meeting the country’s drug needs. Paraguayan companies now meet 70 percent of domestic consumption and also have begun exporting drugs. Strong growth also is evident in the production of edible oils, garments, organic sugar, meat processing, and steel. Nevertheless, capital for further investment in the industrial sector of the economy is scarce. Following the revelation of widespread financial corruption in the 1990s, the government is still working to improve credit options for Paraguayan businesses.^[4]

In 2003 manufacturing made up 13.6 percent of the GDP, and the sector employed about 11 percent of the working population in 2000. Paraguay’s primary manufacturing focus is on food and beverages. Wood products, paper products, hides and furs, and non-metallic mineral products also contribute to manufacturing totals. Steady growth in the manufacturing GDP during the 1990s (1.2 percent annually) laid the foundation for 2002 and 2003, when the annual growth rate rose to 2.5 percent.^[4]

Energy[link]

Hydroelectric the Itaipú

Paraguay relies almost solely on hydroelectric power to meet its energy needs. The Itaipú Dam, completed in 1984, has the world’s second largest power-generating capacity: 13.3 gigawatts. The dam is located on the Paraguay River, and Paraguay and Brazil evenly share the ownership, operation, and electricity generated. Additionally, Paraguay co-owns another major hydropower plant, Yacyretá, with Argentina. Paraguay uses only a small portion of the energy it generates through Itaipú and Yacyretá. In 2002 Paraguay generated more than 48 billion kilowatt-hours of energy. It consumed only 2.5 billion kilowatt-hours while exporting 45.9 billion kilowatt-hours. Paraguay will have even more hydroelectricity to export when planned new turbines are installed at Itaipú and the Yacyretá dam is fully completed.^[4] In 2007 electricity production rose to 70 TWh, and exports reached 64 TWh which put Paraguay in second place worldwide as an exporter of electrical power (And in the first place as a net exporter since France, the Number one exporter in the World with 67 TWh, also imports 10 TWh, while Paraguay does not import any).

Paraguay has no oil reserves; it relies on imported oil to meet its limited need for oil-produced energy. The Paraguayan government owns Petróleos Paraguayos, which is responsible for all distribution of oil products. The state accepts bids from international oil companies, selecting a few companies annually to meet the country’s demand. Presently, Paraguay does not produce or consume natural gas, but consumes LPG imported mainly from the Argentine.^[4]

Services[link]

The services sector made up nearly 50 percent of Paraguay’s gross domestic product in 2004 and employed about 19 percent of Paraguay’s working population. The importation of goods, especially from Argentina and Brazil, for sale and illegal reexportation creates service industry jobs. The services sector had a moderate growth rate of 0.9 percent from 1990 to 2003. The sector decreased by 7.8 percent in 2002, before rebounding in 2003 with a 1.6 percent growth rate. Instability in the economy and a large black market have hampered development of the formal services sector in Paraguay.^[4]

Tourism[link]

Tourism

Paraguay has a small tourism industry. Total tourism receipts declined annually from 2000 through 2002. In 2003 Paraguay’s hotel occupancy rate was 38 percent. It increased by 15 percent in 2004. Small gains in tourism have come from business rather than leisure travelers. For many years, Paraguay served as a central market for trafficable, duty-free goods. However, crackdowns by the governments of Brazil and Argentina have stemmed the flow of shoppers traveling to Paraguay looking for trafficable items.^[4]

Banking and finance[link]

Paraguay’s banking and financial services industry is still recovering from the liquidity crisis of 1995, when news of widespread corruption resulted in the closure of several significant banks. Reform efforts spurred by the International Monetary Fund (IMF) and World Bank helped restore some credibility to Paraguay’s banking industry. Still, a paucity of credit options hinders the overall economy. Paraguay has a long history as a money-laundering center. The government has taken steps to curb the problem, but enforcement of anti-laundering legislation remains inconsistent.^[4]

Foreign companies either partially or wholly own most banks and financial institutions in Paraguay. Paraguayan banks hold less than 10 percent of deposits. Of the 16 banks operating in Paraguay in 2003, 50 percent were wholly foreign-owned and 25 percent were partially owned by foreign companies. Paraguay’s Central Bank exists to stabilize the financial sector, making sure that another run on banks, such as the one that occurred in 1995, does not recur. The Superintendencia de Bancos regulates the banking system, monitoring the percentage of non-performing loans in the banking system. Bank deposits rose significantly in 2004, along with the percentage of local currency in total deposits. Local currency deposits increased by 26 percent in 2004, a sign that Paraguayans are gaining confidence in the stability of Paraguayan currency. In another promising development, interest rates dropped dramatically in 2004, from 50 percent in 2003 to 27 percent in 2004.^[4]

Paraguay’s stock market, the Bolsa de Valores y Productos de Asunción, began trading in October 1993. The tradition of family-owned companies and economic instability kept investment low throughout the 1990s. The value of shares on the Asunción stock exchange rose by 390 percent in 2004, reaching US$17.5 million.^[4]

Labour[link]

Paraguay’s formal labour force was estimated to total about 2.7 million workers in 2004. About 45 percent worked in the agricultural sector, 31 percent in the industrial sector, and 19 percent in the services sector. Unemployment was estimated at about 15 percent. Paraguay’s constitution guarantees the right of workers to unionize and bargain collectively. About 15 percent of workers are members of one of Paraguay’s 1,600 unions. Strikes are legal and not uncommon.^[4]

The 2001 census found that 5 percent of Paraguay’s workforce was under the age of 14. Although Paraguay ratified the International Labour Organization’s Minimum Age Convention in 2004, child labour continues to be prevalent. Nearly 14 percent of children between the ages of 5 and 17 are employed, many in poor conditions and for negligible pay. The government has mandated a minimum wage of approximately US$158 per month for private-sector employees. Government employees have no minimum wage. The standard workweek is 48 hours. In 2004 Paraguay’s unemployment rate stood at 15 percent.^[4]

Currency, exchange rate, and inflation[link]

Paraguay’s currency is the guarani (PYG). In mid-October 2005, US$1 equaled about PYG6155.^[4]

Price inflation fell dramatically between 2003 and 2004, from 14.2 percent to a 30-year low of 4.3 percent. President’s Duarte’s economic reforms and austerity programs have produced results more rapidly than many expected. As of 2005, experts forecast that the inflation rate in Paraguay likely would rise in coming years but remain below 10 percent.^[4]

Foreign economic relations[link]

main export goods, 2007-2008, source : Paraguay Ministry of Industry and Commerce / Riedex

Paraguay is a member of the Common Market of the South (Mercado Común del Sur or Mercosur). Most of Paraguay’s trade takes place with neighbors Brazil and Argentina. In 2002 Paraguay conducted more than US$400 million in trade with Argentina and nearly US$800 million with Brazil. Paraguay is also a member of the Inter-American Development Bank, Latin American Integration Association, and Latin American Economic System and a signatory to the agreement creating the South American Community of Nations. In 2004 Paraguay signed an energy cooperation agreement with Venezuela to purchase oil and petroleum. Venezuela agreed to concessional financing that allowed Paraguay to pay over a 15-year period at a nominal interest rate.^[4]

Imports totaled US$3.3 billion in 2004. Principal import commodities included automobiles, chemical products, consumer goods, tobacco, petroleum, and machinery. Brazil was the leading source of imports to Paraguay (24.3 percent), followed by the United States (22.3 percent), Argentina (16.2 percent), China (9.9 percent), and Hong Kong (5 percent). Experts note that import statistics are difficult to confirm for Paraguay because as much as half of all imports are illegally re-exported to Argentina or Brazil. Imports from Mercosur countries continue to rise, up to 57 percent in 2003.^[4]

Paraguay’s export revenues totaled about US$2.9 billion in 2004. Agricultural commodities continue to drive Paraguay’s export totals. Soybeans are particularly vital, accounting for 35 percent of total export revenues in 2003. Other agricultural cash crops include cotton, sugarcane, cassava, sunflowers, wheat, and corn. Other significant exports include feed, meat, edible oils, electricity, wood, and leather. Even as Paraguayan export revenue has fluctuated, Brazil remained Paraguay’s principal export destination (27.8 percent in 2004), followed by Uruguay (15.9 percent), Italy (7.1 percent), Switzerland (5.6 percent), Argentina (4.3 percent), and the Netherlands (4.2 percent). In 2003 nearly 60 percent of Paraguayan exports went to Mercosur countries.^[4]

Paraguay had a negative trade balance of about US$400 million in 2004. Higher earnings from soybeans and cotton could not offset the surge in imported consumer goods and petroleum products.^[4]

After years of negative balances, Paraguay achieved a positive balance of payments totaling US$234 million in 2003. In 2004, however, the current account had an estimated deficit of US$35.1 million.^[4]

Paraguay has a sustainable debt level according to the International Monetary Fund (IMF). External debt totaled about US$3.4 billion in 2004, low compared to most Latin American countries. Continued reductions in Paraguay’s debt to gross domestic product ratio are expected in coming years. Paraguay paid US$412 million in debt service to the IMF in 2004.^[4]

Foreign investment in Paraguay nearly disappeared in 2002. After direct foreign investment of US$84 million in 2001, only US$9 million in investment came from abroad in 2002. This drop was largely the result of the financial crisis in Argentina and the banking collapse in Paraguay. Direct foreign investment rebounded in 2003, reaching US$90.8 million for the year.^[4]

Paraguay has depended on the International Monetary Fund (IMF) and World Bank for economic development assistance. The World Bank has promised Paraguay assistance totaling US$325 million between 2003 and 2007. Projects currently underway in Paraguay aim to improve education, transportation, and rural development.^[4]

Transport[link]

The Paraguayan road network includes almost 4,500 kilometers of paved roads and nearly 60,000 kilometers of secondary roads. The density of the road network is higher in the oriental region, and lower in the Chaco area. However, in 2007 a paved connection to the Bolivian border was completed across the Chaco region.

The Paraguay-Paraná waterway constitutes an essential route for the transport of exported and imported goods.

The railway which connects Asunción to Encarnación actually doesn’t operate, but there is still a connection between Encarnación and Posadas (Argentina) for the transport of agricultural goods.

Paraguay has two international airports, Silvio Pettirossi International Airport, in Asunción, and Guarani International Airport, in Ciudad del Este, and several secondary airports in other parts of the country.

Media and communications[link]

There are five national newspapers and a larger number of local publications. There are five Paraguayan TV stations. Additionally, essential international stations can be received by cable in the main urban areas.

The fixed line network is controlled by the state-owned COPACO Company. The cell phone network is open to private operators. There are four competing mobile phone operators in Paraguay. During the last few years mobile phone coverage of the population has been far more extensive than fixed line coverage.

Statistics[link]

GDP (purchasing power parity): $30.9 billion (2005 est.)

GDP (official exchange rate): $7.586 billion (2005 est.)

GDP - real growth rate: 3.3% (2005 est.)

GDP - per capita: purchasing power parity - $4,900 (2005 est.)

GDP - composition by sector:

• agriculture: 27.5%
• industry: 24%
• services: 48.5% (2005 est.)

Labor force: 2.68 million (2005 est.)

Labor force - by occupation: agriculture 45%

Unemployment rate: 16% (2005 est.)

Population below poverty line: 32% (2005 est.)

Household income or consumption by percentage share:

• lowest 10%: 0.5%
• highest 10%: 43.8% (1998)

Distribution of family income - Gini index: 56.8 (1999)

Inflation rate (consumer prices): 7.5% (2005 est.)

Investment (gross fixed): 20.1% of GDP (2005 est.)

Budget:

• revenues: $1.334 billion
• expenditures: $1.37 billion, including capital expenditures of $700 million (2005 est.)

Public debt: 36.1% of GDP (2005 est.)

Agriculture - products: cotton, sugarcane, soybeans, corn, wheat, tobacco, cassava (tapioca), fruits, vegetables; beef, pork, eggs, milk; timber

Industries: sugar, cement, textiles, beverages, wood products, steel, metallurgic, electric power

Industrial production growth rate: 0% (2000 est.)

Electricity:

• production: 51.29 billion kWh (2003)
• consumption: 3.528 billion kWh (2003)
• exports: 44.17 billion kWh (2003)
• imports: 0 kWh (2003)

Electricity - production by source:

• fossil fuel: 0%
• hydro: 99.9%
• nuclear: 0%
• other: 0.1% (2001)

Oil:

• production: 0 bbl/d (0 m³/d) (2003 est.)
• consumption: 25,000 bbl/d (4,000 m³/d) (2003 est.)
• exports: NA (2001)
• imports: NA (2001)

Current account balance: $-170 million (2005 est.)

Exports: $3.13 billion f.o.b. (2005 est.)

Exports - partners: Uruguay 27.8%, Brazil 19.2%, Argentina 6.3%, Switzerland 4.1% (2004)

Imports: $3.832 billion f.o.b. (2005 est.)

Imports - partners: Brazil 30.9%, Argentina 23.3%, China 16.6%, US 4% (2004)

Reserves of foreign exchange and gold: $1.293 billion (2005 est.)

Debt - external: $3.535 billion (2005 est.)

Economic aid - recipient: NA

Currency: 1 Guarani (G) = 100 centimos

Exchange rates: guarani (G) per US$ - 4,555.00 (2011), 6,158.47 (2005), 5,974.6 (2004), 6,424.34 (2003), 5,716.26 (2002), 4,105.92 (2001), 3,332.0 (January 2000), 3,119.1 (1999), 2,726.5 (1998), 2,177.9 (1997), 2,056.8 (1996), 1,963.0 (1995); note - since early 1998, the exchange rate has operated as a managed float; prior to that, the exchange rate was determined freely in the market

Fiscal year: calendar year

See also[link]

• South America Life Quality Rankings - Economy and Finance

References[link]

• Kleinpenning, Jan M.G. (2009). Rural Paraguay 1870-1963 : a geography of progress, plunder and poverty. Madrid; Frankfurt am Main: Iberoamericana; Vervuert. ISBN 978-3-86527-510-3. 

External links[link]

Wikimedia Commons has media related to: Economy of Paraguay

• CIA - The World Factbook -- Paraguay
• Central Bank of Paraguay
• Ministry of Finance
• Ministry of Industry and Commerce
• US Department of Agriculture - 2008 report on crop expansion in Paraguay

v t e Union of South American Nations Member states Argentina Bolivia Brazil Chile Colombia Ecuador Guyana Paraguay Peru Suriname Uruguay Venezuela Summits 2004 South American Summit 2008 South American Summit 2009 South American Summit 2010 South American Summit 2011 South American Summit Topics Cusco Declaration Constitutive Treaty President Pro Tempore Secretary General Bank of the South South American Parliament Initiative for Infrastructure Integration of South America Mercosur Andean Community

Republic of Paraguay República del Paraguay (Spanish) Tetã Paraguái (Guaraní)
Flag (obverse) Coat of arms
Motto: Paz y justicia  (Spanish) "Peace and justice"
Anthem: Paraguayos, República o Muerte  (Spanish) "Paraguayans, Republic or Death"
Capital (and largest city)		Asunción 25°16′S 57°40′W / 25.267°S 57.667°W / -25.267; -57.667
Official language(s)		Spanish Guaraní[1][2]
Ethnic groups (2000)		Mestizo (mixed European and Amerindian) 80% European 20% unmixed Amerindian 1-3% Asian 1-4% black 1% other 2.3%
Demonym		Paraguayan
Government		Unitary presidential Constitutional republic
-	President	Fernando Lugo
-	Vice President	Federico Franco
Legislature		Congress
-	Upper house	Chamber of Senators
-	Lower house	Chamber of Deputies
Independence		from Spain
-	Declared	14 May 1811
-	Recognized	15 May 1811
Area
-	Total	406,752 km2 (60th) 157,048 sq mi
-	Water (%)	2.3
Population
-	2009 estimate	6,454,548 [3] (103rd)
-	Density	14.2/km2 (204th) 39/sq mi
GDP (PPP)		2011 estimate
-	Total	$35.346 billion[4]
-	Per capita	$5,412[4]
GDP (nominal)		2011 estimate
-	Total	$21.236 billion[4]
-	Per capita	$3,252[4]
Gini (2008)		50.8[5] (high)
HDI (2010)		0.640[6] (medium) (96th)
Currency		Guaraní (PYG)
Time zone		(UTC-4)
-	Summer (DST)	(UTC-3)
Drives on the		right
ISO 3166 code		PY
Internet TLD		.py
Calling code		595

Paraguay (ⁱ/ˈpɛərəɡwaɪ/, PAIR-ə-gwy), officially the Republic of Paraguay (Spanish: República del Paraguay [reˈpuβlika ðel paɾaˈɣwai], Guaraní: Tetã Paraguái [teˈtã paɾaˈɣwaj]), is a landlocked country in South America. It is bordered by Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. Paraguay lies on both banks of the Paraguay River, which runs through the center of the country from north to south. Due to its central location in South America, it is sometimes referred to as Corazón de América, or the Heart of America.^[7]

The Guaraní have been living in Paraguay since before the arrival of Europeans in the 16th century, when Paraguay became part of the Spanish colonial empire. Following independence from Spain in 1811, Paraguay was ruled by a series of dictators who followed isolationist and protectionist policies. This development was truncated by the disastrous Paraguayan War (1864–1870) in which the country lost 60% to 70% of its population and large amounts of territory. During a large part of the 20th century, Paraguay was ruled by Alfredo Stroessner, who led one of South America's longest lived military dictatorships. In 1989 Stroessner was toppled and free elections were celebrated in 1993. In 1994 Paraguay joined Argentina, Brazil and Uruguay to found Mercosur.

As of 2009 the population was estimated at 6.3 million. The capital and largest city is Asunción. The official languages are Spanish and Guaraní, both being widely spoken in the country, with around 92% of the general population speaking Spanish and 98% speaking Guaraní.

Though it remains one of region's poorest and least-developed countries, in 2010, Paraguay's economy grew by 14.5%, the largest economic expansion in Latin America, and the third fastest in the world after Qatar and Singapore.^[8] By 2011, economic growth slowed but remained high, at 6.4%.^[9]

Etymology[link]

The name of the river, Paraguay, is thought to come from Guaraní para, "of many varieties", and gua, "riverine".

There is no conclusive explanation for the origin of the name Paraguay, however. The most common interpretations that have been suggested include:

1. "River which originates a sea"
2. The Spanish officer and scientist Félix de Azara suggests two versions: water from the Payaguas (Payaguá-and Payagua-i), referring to natural Payaguas living on the coasts of the river, and the other was due to the name of a great chief called "Paraguaio."
3. The French-Argentine historian and writer Paul Groussac argued that it meant "river that flows through the sea (Pantanal)."
4. The ex-president and Paraguayan politician, Juan Natalicio Gonzalez said it meant "river of the habitants of the sea."
5. fray Antonio Ruiz de Montoya said that it meant "river crowned."

Geography[link]

Paraguay is divided by the Río Paraguay into the eastern region, called Eastern Paraguay (Paraguay Oriental) and known as the Paraná region; and the western region, officially called Western Paraguay (Paraguay Occidental) and also known as the Chaco. The country lies between latitudes 19° and 28°S, and longitudes 54° and 63°W. The terrain consists of grassy plains and wooded hills in the east. To the west, there are mostly low, marshy plains.

Climate[link]

The overall climate ranges from subtropical to temperate, and like most lands in the region, Paraguay has only a wet and dry period. Winds play a major role in influencing Paraguay's weather: between October and March, warm winds blow from the Amazon Basin in the North, while the period between May and August brings cold winds from the Andes.

The lack of mountain ranges to provide a natural wind barrier allows winds to develop speeds as high as 100 miles per hour (161km/h). This also leads to significant changes in temperature within a short span of time; between April and September, temperatures will sometimes drop below freezing. January is the hottest summer month, with an average daily temperature of 84 degrees.

Rainfall varies dramatically across the country, with substantial rainfall in the eastern portions, and semi-arid conditions in the far west. The far eastern forest belt receives an average of 67 inches (170 cm) of rain annually, while the western Chaco region typically averages no more than 20 inches (50 cm) a year. Furthermore, the rains in the west tend to be irregular and evaporate more quickly, contributing to the aridity of the area.

History[link]

Francisco Solano López

Pre-Columbian society in the wooded, fertile region which is now Paraguay consisted of semi-nomadic tribes, who were recognized for their fierce warrior traditions. These indigenous tribes were members of five distinct language families, and 17 separate ethnolinguistic groups remain today.

Europeans first arrived in the area in the early sixteenth century, and the settlement of Asunción was founded on 15 August 1537, by the Spanish explorer Juan de Salazar de Espinosa. The city eventually became the center of a Spanish colonial province, as well as the primary site of the Jesuit missions and settlements in South America in the eighteenth century. Jesuit Reductions were founded, and flourished in Eastern Paraguay for about 150 years, until the expulsion of the Jesuits by the Spanish crown in 1767. Paraguay overthrew the local Spanish administration on 15 May 1811. Paraguay's first ruler was the dictator Jose Gaspar Rodriguez de Francia. He ruled Paraguay from 1814, until his death in 1840, with very little outside contact or influence, creating a utopian society based on Rousseau's Social Contract.^[10] After his death, Paraguay went through the very brief ownership of various military officers under a new junta, until the secretary Carlos Antonio Lopez, Francia's nephew, declared himself dictator. Lopez modernized Paraguay, and opened it up to foreign commerce. The relationship with Buenos Aires was limited to a non-aggression pact; Paraguayan independence from Argentina was declared in 1842. After Lopez's death, power was transferred to his eldest son, Francisco Solano López in 1862. Lopez's expansionist aims lead to the Paraguayan War in 1864. Paraguay fought against Brazil, Argentina and Uruguay, and was defeated in 1870 after five years of the bloodiest war in South America. William D. Rubinstein wrote: "The normal estimate is that of a Paraguayan population of somewhere between 450,000 and 900,000, only 220,000 survived the war, of whom only 28,000 were adult males."^[11] Paraguay also suffered extensive territorial losses to Brazil and Argentina.

Battle of Tuyutí, May 1866

The Chaco War was fought with Bolivia in the 1930s, and Bolivia was defeated. Paraguay re-established sovereignty over the region called the Chaco, but forfeited additional territorial gains as a price of peace.

The official narrative of Paraguay's history is fraught with disputes among historians, educators and politicians. The "authentic" version of historical events, wars in particular, varies depending on whether it was written in Paraguay, Argentina, Uruguay, Brazil, Bolivia, Europe, or North America.

Both the Colorado Party and Liberal Party maintain distinct official versions of Paraguayan history^{[citation needed]}. During the pillaging of Asuncion (Saqueo de Asunción) in 1869, the Brazilian Imperial Army ransacked and relocated the Paraguayan National Archives to Rio de Janeiro where they have been kept in secrecy,^[12] making Paraguayan history in the Colonial and early National periods difficult to study.

Between 1904 and 1954, Paraguay had thirty-one presidents, most of whom were removed from office by force.^[13]

From 1954 to 1989, the country was ruled by Alfredo Stroessner and the Colorado party. The dictator oversaw an era of economic expansion, but also had a poor human rights and environmental record (see "Political History"). Torture and death for political opponents was routine.^[14] After his overthrow, the Colorado continued to dominate national politics until 2008.

Leftist former bishop Fernando Lugo achieved a historic victory in Paraguay's presidential election of April 2008, defeating the ruling party candidate, and ending 61 years of conservative rule. Lugo won with nearly 41% of the vote, compared to almost 31% for Blanca Ovelar of the Colorado party.^[15] The Lugo administration has highlighted the reduction of corruption and economic inequality as two major priorities.^[9]

Government and politics[link]

Paraguay is a representative democratic republic, with a multi-party system and separation of powers in three branches. Executive power is exercised solely by the President, who is head of state and head of government. Legislative power is vested in the two chambers of the National Congress. The judiciary is vested on tribunals and Courts of Civil Law and a nine-member Supreme Court of Justice, all of them independent of the executive and the legislature.

Political history[link]

Pre-1980[link]

José Gaspar Rodríguez de Francia

Paraguay gained its independence from Spain in 1811, and its first president was Jose Gaspar Rodriguez de Francia, who was originally appointed with Fulgencio Yegros as alternative consul, but in 1814, de Francia was appointed president. He established new laws that more or less completely removed the powers of the church and the cabinet, forbade colonial citizens from marrying one other, being allowed to marry only blacks, mulattoes or natives, and cut off Paraguay from the rest of South America. Because of de Francia's abolition of freedom, and his drive for complete power, Yegros and several other ex-politicians attempted to host a coup-d'etat against him, which failed, and they were imprisoned for life.

After World War II, politics became particularly unstable, with several political parties fighting for power in the late 1940s, which most notably brought about the Paraguayan civil war of 1947.^[16] A series of unstable governments ensued until the establishment, in 1954, of the stable regime of dictator Alfredo Stroessner, who remained in office for more than three decades, until 1989. Paraguay was modernized to some extent under Stroessner's regime, although his rule was marked by extensive abuses.^[17]

Post-1979[link]

The splits in the Colorado Party in the 1980s, and the conditions that led to this — Stroessner's advanced age, the character of the regime, the economic downturn, and international isolation — provided an opportunity for demonstrations and statements by the opposition prior to the 1988 general elections.^{[citation needed]}

PLRA leader Domingo Laino served as the focal point of the opposition in the second half of the 1980s. The government's effort to isolate Laino by exiling him in 1982 had backfired. On his sixth attempt, in 1986, Laino returned with three television crews from the U.S., a former United States ambassador to Paraguay, and a group of Uruguayan and Argentine congressmen. Despite the international contingent, the police violently barred Laino's return.^{[citation needed]}

However, the Stroessner regime relented in April 1987, and permitted Laino to arrive in Asunción. Laino took the lead in organizing demonstrations and diminishing somewhat the normal opposition party infighting. The opposition was unable to reach agreement on a common strategy regarding the elections, with some parties advocating abstention, and others calling for blank voting. Nonetheless, the parties did cooperate in holding numerous 'lightning demonstrations' (mítines relámpagos), especially in rural areas. Such demonstrations were held and disbanded quickly before the arrival of the police.

In response to the upsurge in opposition activities, Stroessner condemned the Accord for advocating "sabotage of the general elections and disrespect of the law", and used the national police and civilian vigilantes of the Colorado Party to break up demonstrations. A number of opposition leaders were imprisoned or otherwise harassed. Hermes Rafael Saguier, another key leader of the PLRA, was imprisoned for four months in 1987 on charges of sedition. In early February 1988, police arrested 200 people attending a National Coordinating Committee meeting in Coronel Oviedo. Laino and several other opposition figures were arrested before dawn on the day of the election, 14 February, and held for twelve hours. The government declared Stroessner's re-election with 89% of the vote.^[18]

While contending that these results reflected the virtual Colorado monopoly on the mass media, opposition politicians also saw several encouraging developments. Some 53% of those polled indicated that there was an "uneasiness" in Paraguayan society. Furthermore, 74% believed that the political situation needed changes, including 45% who wanted a substantial or total change. Finally, 31% stated that they planned to abstain from voting in the February elections.^{[citation needed]}

1989 military coup and later developments[link]

On 3 February 1989, Stroessner was overthrown in a military coup headed by General Andrés Rodríguez. As president, Rodríguez 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.

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.^{[citation needed]}

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 former running mate, Raúl Cubas, became the Colorado Party's candidate, and was elected in May in elections deemed by international observers to be free and fair. One of Cubas' first acts after taking office in August was to commute Oviedo's sentence and release him from confinement. In December 1998, Paraguay's Supreme Court declared these actions unconstitutional. In this tense atmosphere, the murder of Vice President and long-time Oviedo rival Luis María Argaña on 23 March 1999, led the Chamber of Deputies to impeach Cubas the next day.^{[citation needed]} The 26 March murder of eight student antigovernment demonstrators, widely believed to have been carried out by Oviedo supporters, made it clear that the Senate would vote to remove Cubas on 29 March, and Cubas resigned on 28 March.^{[citation needed]} Senate President Luis González Macchi, a Cubas opponent, was peacefully sworn in as president the same day.

The President Fernando Lugo on Independence day, Asunción, Paraguay.

In 2003, Nicanor Duarte Frutos was elected and sworn in as president.

For the 2008 general elections, the Colorado Party was once again a favorite. This time, their candidate was not an internal opponent to the President and self-proclaimed reformer, as in the two previous elections, but Minister of Education Blanca Ovelar, the first woman to appear as a candidate for a major party in Paraguayan history. However after sixty years of Colorado rule, voters chose a non-politician, former Roman Catholic Bishop Fernando Lugo. Although he was a longtime follower of the controversial liberation theology he was backed by the center-right Liberal Party, the Colorado Party's traditional opponents.

Outgoing President Nicanor Duarte Frutos hailed the moment as the first time in the history of this nation that a government had handed power to opposition forces in an orderly and peaceful fashion.

Lugo was sworn in on 15 August 2008, but unlike other South American countries such as Venezuela, Ecuador and Bolivia, Lugo's leftist agenda remains largely unimplemented^{[citation needed]} as the Paraguayan Congress continues to be dominated by right-wing elected officials.^{[citation needed]}

Political instability in the past year, fueled by disputes within Fernando Lugo's cabinet, has led the right wing Colorado Party to regain popularity. Reports suggest that the businessman Horacio Cartes is the new political figure amid disputes. Despite the DEA's strong accusations against Cartes involving him in drug trafficking, he continues to amass followers in the political arena.

On 14 January 2011, the Colorado Party convention enabled Horacio Cartes to run as the presidential candidate for the party, even though, as reports suggest, the party's constitution didn't allow it.^{[clarification needed]}

Administrative subdivisions[link]

Paraguay consists of seventeen departments and one capital district (distrito capital). These are, with their capitals indicated:

Alto Paraguay

Boquerón

Presidente Hayes

Amambay

Concepción

San Pedro

Distrito Capital

Guairá

Caazapá

Alto
Paraná

Caaguazú

Canindeyú

Itapúa

Paraguarí

Misiones

Ñeembucú

Cordillera

Central

Brazil

Bolivia

Argentina

The departments are further divided into districts (distritos).

Demographics[link]

Paraguay population density (people per km²)

National Routes

There is no official data on the ethnic composition of the Paraguayan population, because the Department of Statistics, Surveys and Censuses^[19] of Paraguay does not include the concepts of race and ethnicity in census surveys,^[20] although it does inquire about the indigenous population. According to the census of 2002, the indigenous population was 1.7% of Paraguay's total population.^[21]

Traditionally, the majority of the Paraguayan population is considered mixed (mestizo in Spanish), because of the widespread offspring of Guaraní women and Spanish settlers during Spain's domination of the country.^[22] Other demographers contend the total "mostly white" percentage has grown in the last century as a result of European immigration and "whites" are now estimated at 20% or one-fifth of the country's population.^{[citation needed]}

According to the CIA World Factbook, Paraguay has a population of 6,669,086, 95% of which are mestizo (mixed European and Amerindian) and 5% are labelled as "other" ^[23] and are members of indigenous tribal groups. They are divided into 17 distinct ethnolinguistic groupings, many of which are poorly documented.

One remarkable trace of the indigenous Guaraní culture that has endured in Paraguay is the Guaraní language, generally understoood by about 90% of the population. However, nearly all Paraguayans speak Spanish, which alongside Guaraní is an official language.^[24] Small groups of ethnic Italians, Germans, Russians, Japanese, Koreans, Chinese, Arabs, Ukrainians, Brazilians, and Argentines had also settled in Paraguay, and they have to an extent retained their languages and culture, particularly the Brazilians, who represent the largest number at around 400,000.^[25] Many of the Brazilians are descendants of German, Italian and Polish immigrants.^[26] There are an estimated 63,000 Afro-Paraguayans, or 1% of the population.^[27] Some 25,000 German-speaking Mennonites live in the Paraguayan Chaco.^[28]

Paraguay has one of the more important German communities in South America. German settlers founded several towns as Hohenau, Filadelfia, Neuland, Obligado, Nueva Germania, etc. Some specialized German sites that promote German immigration to Paraguay refers to 5–7% of German-descent Paraguayan population and 150,000 German-Brazilian-descent population^{[29][30][31][32]}

Paraguay's population is distributed unevenly through the country. About 56% of Paraguayans live in urban areas. The vast majority of the people live in the eastern region near the capital and largest city, Asunción, accounting for 10% of the country's population. The Gran Chaco region, which includes the Alto Paraguay, Boquerón and Presidente Hayes Department, and accounts for about 60% of the territory, is home to less than 2% of the population.

Largest cities[link]

v t e Largest cities or towns of Paraguay (2002 DGEEC census)[33]
	Rank	City name	Department	Pop.	Rank	City name	Department	Pop.
Asunción Ciudad del Este	1	Asunción	Capital District	512,112	11	Alonso	Central	65,229
	2	Ciudad del Este	Alto Paraná	222,274	12	Pedro Juan Caballero	Amambay	64,592
	3	San Lorenzo	Central	204,356	13	Villa Elisa	Central	53,166
	4	Luque	Central	170,986	14	Caaguaz	Caaguazú	48,941
	5	Capiatá	Central	154,274	15	Coronel Oviedo	Caaguazú	48,773
	6	Lambaré	Central	119,795	16	Hernandarias	Alto Paraná	47,266
	7	Fernando de la Mora	Central	113,560	17	Presidente Franco	Alto Paraná	47,246
	8	Limpio	Central	73,158	18	Itauguá	Central	45,577
	9	Ñemby	Central	71,909	19	Concepción	Concepción	44,070
	10	Encarnación	Itapúa	67,173	20	Villarrica	Guairá	38,961

Asunción, the capital of Paraguay.

Religion[link]

According to the 2002 census, 89.9% of the population is Roman Catholic, 6.2% is evangelical Christian, 1.1% is other Christian, 0.6% practice indigenous religions.

A U.S. State Department report on Religious Freedom names Roman Catholicism, Evangelical Christianity, mainline Protestantism, Judaism (Orthodox, Conservative, and Reform), Mormonism, and the Baha'i Faith as prominent religious groups. It also mentions a large Muslim community in Alto Paraná (as a result of Middle-Eastern immigration, especially from Lebanon) and the Mennonite community in Boquerón.^[34]

Social issues[link]

Various poverty estimates suggest that 30–50% of the population is poor.^[35] In rural areas, 41.20% of the people lack a monthly income to cover basic necessities, whereas in urban centers this figure is 27.6%. The top 10% of the population holds 43.8% of the national income, while the lowest 10% has 0.5%. The economic recession has worsened income inequality, notably in the rural areas, where the Gini coefficient has risen from 0.56 in 1995 to 0.66 in 1999.

More recent data (2009)^[36] show that 35% of the Paraguayan population is poor, 19% of which live in extreme poverty. Moreover, 71% of the later live in rural areas of the country.

Similarly, land concentration in the Paraguayan countryside is one of the highest in the globe: 10% of the population controls 66% of the land, while 30% of the rural people are landless.^[37] This inequality has caused a great deal of tensions between the landless and land owners.^[38]

Economy[link]

Residential towers in Asunción

BBVA Paraguay

Landlocked Paraguay has a market economy distinguished by a large informal sector, featuring re-export of imported consumer goods to neighboring countries, as well as the activities of thousands of microenterprises and urban street vendors. Between 1970 and 2009 the country had the highest economic growth of South America, with an average rate of 7.2% per year and the prospect of 9% annual growth from 2010, being the highest in South America.

The country also boasts the third most important free commercial zone in the world: Ciudad del Este, trailing behind Miami and Hong Kong. A large percentage of the population, especially in rural areas, derives its living from agricultural activity, often on a subsistence basis. Because of the importance of the informal sector, accurate economic measures are difficult to obtain. On a per capita basis, real income has stagnated at 1980 levels. The economy grew rapidly between 2003 and 2008 as growing world demand for commodities combined with high prices and favorable weather to support Paraguay's commodity-based export expansion. Paraguay is the sixth largest soy producer in the world. Drought hit in 2008, reducing agricultural exports and slowing the economy even before the onset of the global recession.

In 2010, Paraguay experienced the greatest economic expansion of the zone and the highest of South America, with a GDP growth rate of 14.5% by the end of the year.^[39] The following year, Paraguay's growth rate remained a relatively high 6.4%;

Industry and Manufacturing[link]

The industrial sector produces about 25% of Paraguay's gross domestic product (GDP) and employs about 31% of the labor force. Output grew by 2.9% in 2004, after five years of declining production. Traditionally an agricultural economy, Paraguay is showing some signs of long-term industrial growth.

The pharmaceutical industry is quickly supplanting foreign suppliers in meeting the country's drug needs.^{[citation needed]} Paraguayan companies now meet 70% of domestic consumption and have begun to export drugs. Strong growth also is evident in the production of edible oils, garments, organic sugar, meat processing, and steel.^{[citation needed]}

Nevertheless, capital for further investment in the industrial sector of the economy is scarce. Following the revelation of widespread financial corruption in the 1990s, the government is still working to improve credit options for Paraguayan businesses.^{[citation needed]}

In 2003, manufacturing made up 13.6% of the GDP, and the sector employed about 11% of the working population in 2000. Paraguay's primary manufacturing focus is on food and beverages. Wood products, paper products, hides and furs, and non-metallic mineral products also contribute to manufacturing totals. Steady growth in the manufacturing GDP during the 1990s (1.2% annually) laid the foundation for 2002 and 2003, when the annual growth rate rose to 2.5%.^[40]

Education[link]

Literacy was about 93.6% and 87.7% of Paraguayans finish the 5th grade according to UNESCO's last Educational Development Index 2008. Literacy does not differ much by gender.^[41] A more recent study^[36] reveals that the assistance to primary school of children between 6 and 12 years old is about 98%. Primary education is free, mandatory and takes nine years. Secondary education takes three years.^[41] Paraguay's universities include:

• National University of Asunción (public and founded in 1889) Web Site
• Autonomous University of Asunción (private and founded in 1979) Web Site
• Catholic University (private and run by the church). Web Site
• American University (private).

The net primary enrollment rate was at 88% in 2005.^[41] Public expenditure on education was about 4.3 % of GDP in the early 2000s.^[41]

Health[link]

LIfe expectancy at birth was 75 years in 2006,^[42] and the 8th best position in America's ranking according to World Health Organization. It is the same level as Argentina. Public expenditure on health is 2.6 % of GDP and private expenditure on health 5.1 %.^[41] Infant mortality was 20 per 1,000 births in 2005.^[41] Maternal mortality was 150 per 100,000 live births in 2000.^[41] The World Bank has helped the Paraguayan government reduce Paraguay's maternal and infant mortality. The Mother and Child Basic Health Insurance Project aimed to contribute to reducing mortality by increasing the use of selected life-saving services included in the country's Mother and Child Basic Health Insurance Program (MCBI) by women of child-bearing age, and children under age six in selected areas. To this end, the project also targeted improving the quality and efficiency of the health service network within certain areas, in addition to increasing the Ministry of Public Health and Social Welfare's (MSPBS) management.^[43]

Sports[link]

Culture[link]

See also[link]

	Geography portal
	Latin America portal
	South America portal
	Paraguay portal

• Outline of Paraguay
• Bibliography of Paraguay
• Index of Paraguay-related articles

Bibliography[link]

Further reading[link]

See Bibliography of Paraguay

Paraguay in fiction (a brief chronological list)[link]

• Voltaire, Candide, ou l'optimisme (1759)
• Robert Southey, A Tale of Paraguay [poem] (1825)
• Joseph Conrad, Nostromo [not explicitly set in Paraguay, but the country was an important source for Conrad's composite Latin American country] (1904)
• Gabriel Casaccia (the pen name of Benigno Casaccia Bibolini), Hombres, mujeres y fantoches (1930)
• Graham Greene, Travels With My Aunt (1969)
• Graham Greene, The Honorary Consul (1973)
• Augusto Roa Bastos, Yo, el Supremo (I, the Supreme) [about José Gaspar Rodríguez de Francia, dictator of Paraguay, 1814–1840] (1974)
• Glenn Meade, Brandenburg: A Novel (1998)
• Anne Enright, The Pleasure of Eliza Lynch [about the Irish-born mistress of President Francisco Solano López] (2002)
• Lily Tuck, The News from Paraguay (2005)
• Tom Taylor, None Among the Gods, (2005)
• Ron Terpening, Tropic of Fear (2006)
• Warren D. Gillies, Guarani: A Novel, (2006)
• Lucia Puenzo, The Fish Child, (2010)
• A. B. Fowler, The Jesuit Papers, (2011)

External links[link]

Government

• Chief of State and Cabinet Members
• (Spanish) National Department of Tourism
• (Spanish) Ministry of Finance with economic and Government information, available also in English
• Paraguay Photos

General information

• Paraguay from the Encyclopaedia Britannica
• Paraguay entry at The World Factbook
• Paraguay at UCB Libraries GovPubs
• Paraguay at the Open Directory Project
• Wikimedia Atlas of Paraguay
• Geographic data related to Paraguay at OpenStreetMap
• Key Development Forecasts for Paraguay from International Futures

News media

• (Spanish) [http://www.larueda.com.py/ La Rueda – Weekly reviews]
• (Spanish) ABC Color
• (Spanish) Última Hora
• (Spanish) La Nación
• (Spanish) Paraguay.com
• (Spanish) Ñanduti

Travel

• Paraguay Convention & Visitor's Bureau
• Paraguay.com: Tradition, Culture, Maps, Tourism
• Paraguay travel guide from Wikitravel
• (Spanish)Tourism in Paraguay, information, pictures and more. Turismo.com.py

v t e Paraguay topics History Guarani people Governorate of New Andalusia Jesuit Reductions José Gaspar Rodríguez de Francia Paraguayan War Chaco War Paraguayan Civil War Alfredo Stroessner Politics Elections Political parties Constitution Human rights (LGBT rights) Foreign relations Military Congress (Chamber of Deputies Senate) Presidents International rankings Geography Environmental issues Fauna Flora National parks Subdivisions (Departments Cities Districts) World Heritage Sites Economy Agriculture Communications Companies Currency Energy Science and technology Stock exchange Transport Demographics Education Health Immigration Languages Religion Notable Paraguayans Indigenous peoples Women Culture Cuisine Cinema Heritage Holidays Internet domain Literature Media Music Sport Symbols National flag Coat of arms National anthem National symbols WikiProject

Republic of Paraguay   Politics v t e Heads of state of Paraguay Yegros Rodríguez de Francia Yegros Rodríguez de Francia Ortiz Medina Roque Alonzo C.A. López F.S. López Rivarola Machaín Rivarola Jovellanos Gill Uriarte Bareiro Saguier Caballero Escobar J.G. González M. Morínigo Egusquiza Aceval Carvallo Escurra Gaona Báez Ferreira González Navero Gondra Jara Rojas Peña González Navero Schaerer M. Franco Montero Gondra Eusebio Ayala Eligio Ayala Riart Eligio Ayala Guggiari Eusebio Ayala R. Franco Paiva Estigarribia H. Moríñigo Frutos J.N. González Rolón Molas Chávez Romero Stroessner Rodríguez Wasmosy Cubas González Macchi Duarte Lugo Italics indicate acting, interim or provisional role. v t e Divisions and cities of Paraguay Administrative subdivisions Departments (17) Alto Paraguay Alto Paraná Amambay Boquerón Caaguazú Caazapá Canindeyú Central Concepción Cordillera Guairá Itapúa Misiones Ñeembucú Paraguarí Presidente Hayes San Pedro Capital District (1) Asunción Largest cities Asunción Ciudad del Este San Lorenzo Luque Capiatá Lambaré Fernando de la Mora Limpio Ñemby Encarnación Mariano Roque Alonso Pedro Juan Caballero Villa Elisa Metropolitan areas Gran Asunción Gran Ciudad del Este v t e Elections and referendums in Paraguay Elections 1928 1943 1948 1950 1953 1954 1958 1960 1963 1967 1968 1973 1977 1978 1983 1988 1989 1991 1993 1998 2000 2003 2008 2013 Referendums 1940 2011 v t e List of wars involving Paraguay Wars Paraguayan War (1864–1870) Chaco War (1932–1935) Paraguayan Civil War (1947)   Geographic locale  Bolivia  Bolivia  Brazil  Argentina  Brazil    Paraguay    East  Argentina  Argentina  Argentina v t e Countries and dependencies of South America Sovereign states Argentina Bolivia Brazil Chile Colombia Ecuador France French Guiana Guyana Paraguay Peru Suriname Uruguay Venezuela Dependencies United Kingdom Falkland Islands South Georgia and the South Sandwich Islands   International membership v t e Latin Union Member nations Andorra Angola Bolivia Brazil Cape Verde Chile Colombia Costa Rica Côte d'Ivoire Cuba Dominican Republic East Timor Ecuador El Salvador France Guatemala Guinea-Bissau Haiti Honduras Italy Mexico Moldova Monaco Mozambique Nicaragua Panama Paraguay Peru Philippines Portugal Romania San Marino São Tomé and Príncipe Senegal Spain Uruguay Venezuela Permanent observers Argentina Holy See Sovereign Military Order of Malta Official languages Catalan French Italian Portuguese Romanian Spanish v t e Union of South American Nations Member states Argentina Bolivia Brazil Chile Colombia Ecuador Guyana Paraguay Peru Suriname Uruguay Venezuela Summits 2004 South American Summit 2008 South American Summit 2009 South American Summit 2010 South American Summit 2011 South American Summit Topics Cusco Declaration Constitutive Treaty President Pro Tempore Secretary General Bank of the South South American Parliament Initiative for Infrastructure Integration of South America Mercosur Andean Community v t e Mercosur · Mercosul  (Southern Common Market) Treaties Treaty of Asunción Protocol of Ouro Preto Currencies Argentine peso Brazilian real Paraguayan guaraní Uruguayan peso gaucho Members Argentina Brazil Paraguay Uruguay Venezuela Associates Bolivia Chile Colombia Ecuador Peru Observers Mexico New Zealand v t e Organization of American States (OAS) Antigua and Barbuda Argentina Barbados Brazil Belize Bahamas Bolivia Canada Chile Colombia Costa Rica Cuba Dominica Dominican Republic Ecuador El Salvador Grenada Guatemala Guyana Haiti Honduras Jamaica Mexico Nicaragua Panama Paraguay Peru St. Lucia St. Vincent and the Grenadines St. Kitts and Nevis Suriname Trinidad and Tobago United States Uruguay Venezuela

This article includes a list of references, related reading or external links, but its sources remain unclear because it lacks inline citations. Please improve this article by introducing more precise citations. (December 2011)

Fernando Lugo
President of Paraguay
Incumbent
Assumed office 15 August 2008
Vice President	Federico Franco
Preceded by	Nicanor Duarte
President pro tempore of the Union of South American Nations
Incumbent
Assumed office 29 October 2011
Preceded by	Bharrat Jagdeo
Personal details
Born	(1951-05-30) 30 May 1951 (age 61) San Solano, Paraguay
Nationality	Paraguayan
Political party	Patriotic Alliance for Change
Children	Guillermo Armindo Lugo Carrillo
Alma mater	Catholic University of Our Lady of Asuncion
Religion	Roman Catholic
Signature
Website	Official website

Fernando Armindo Lugo Méndez (Spanish pronunciation: [ferˈnando arˈmindo ˈluɣo ˈmendeθ]; born 30 May 1951) is the President of Paraguay, and a former Roman Catholic bishop of the Diocese of San Pedro.

Early life[link]

Lugo's family was not particularly religious; by his own account, he never saw his father set foot in a church.^{[citation needed]} However, the influences during his upbringing were distinctly political. His maternal uncle, Epifanio Méndes Fleitas, was a Colorado Party dissident and was persecuted and exiled by General Stroessner's regime. Lugo's father was imprisoned twenty times, and some of his elder siblings were sent into exile. He received his basic education at a religious school in Encarnación, all the while he worked selling snacks on the streets.^{[citation needed]}

Aged 17 or 18, against his father's wishes for him to become a lawyer, Lugo entered a normal school, and began teaching at a rural community. He was well accepted within this people, who were very religious, but they had no priest. He recalls that he was touched by that experience, discovering his vocation to the Roman Catholic priesthood, and he decided to enter a seminary operated by the Society of the Divine Word at age 19. Lugo was ordained a priest on 15 August 1977. That year he was sent to Ecuador, where he served as a missionary for five years. In Ecuador he had the opportunity to learn about the controversial liberation theology, a movement later criticized in large measure by the Vatican.

Lugo returned to Paraguay in 1982, and after a year, the regime's police asked Church authorities that he be expelled from the country. The Church complied and sent him to Rome for further academic studies. Lugo returned to Paraguay in 1987, two years before the Stroessner dictatorship's ultimate fall. Lugo was ordained a bishop on 17 April 1994, and received charge of the nation's poorest diocese, in the San Pedro department.^[1]

Lugo resigned as ordinary of the Diocese of San Pedro on 11 January 2005. He had requested laicization in order to run for office. However, the Holy See refused the request on the grounds that bishops could not undergo laicization, and also denied him the requested canonical permission to run for civil elected office.^[2] Following his election as President, the Church imposed laicization for his having been elected to political office without permission.^[3]

Personal life[link]

As Lugo is unmarried, he announced the designation of his elder sister, Mercedes Lugo, as First Lady of Paraguay.

2009 Paternity controversy[link]

On 13 April 2009, Lugo admitted he is the father of a child conceived with Viviana Carrillo, age 26, while he was still a Roman Catholic bishop. The revelation came five days after lawyers for Carrillo announced they were filing a paternity suit against the President. Ms. Carrillo's lawyers say the boy was born on 4 May 2007. Pope Benedict XVI did not relieve Lugo from his vows of chastity until 31 July 2008.^[4][5] A minor judicial investigation ensued as it was claimed that the woman was under 18 years old when the relationship started, and the allegations were not substantiated.

One week later, a second woman, Benigna Leguizamón, came forward in Paraguay alleging that Lugo fathered one of her children in 2002, while he was still serving as a Catholic bishop.^[6] However, Lugo did not acknowledge this child as in the first case. Leguizamón then filed a lawsuit against the President demanding a DNA test.^[7] Other Paraguayan bishops were reportedly informed of such allegations in 2004, but did not make them public at the time.^[8] A third woman, political activist Hortensia Morán, appeared a day after Leguizamón and also claimed President Lugo to be the father of her child, a 16-month-old boy named for Pope John Paul II.^[9] Initially she waited for Lugo's recognition of her child. As this did not happen, she decided after seven months to sue the President.^[10]

The BBC reported that DNA-testing has shown Moran's child is not Lugo's.^[11]

Health issues[link]

In August 2010, Lugo was diagnosed with non-Hodgkin lymphoma, a form of cancer. He continued his duties as president of Paraguay while undergoing treatment.^[12]

Presidential candidacy[link]

Lugo jumped to the national arena by backing peasants' claims for better land distribution. During 2006, wide-spectrum opinion polls published by Diario ABC Color newspaper showed him as a possible choice for the opposition's presidential candidacy. Known as "the bishop of the poor", Lugo was seen in the subsequent months as the most serious threat to the dominance of the Colorado Party on Paraguayan politics. Although he has said he finds the presidency of Hugo Chávez in Venezuela interesting, he has also made a point to distance himself from leftist leaders in Latin America, focusing more on social inequality in Paraguay. On 23 February 2007, a Prensa Latina article noted that the Paraguayan Interior Ministry offered Lugo protection because of the death threats he has received during the course of his political activities.^[14]

According to a poll released in February 2007, he was the leading contender in the April 2008 presidential election, with more than 37% of the voters' intention.^[15] On 29 October 2007, he registered himself into the tiny Christian Democratic Party of Paraguay in order to get his bureaucratic habilitation to run for office.^[16] That party integrated a coalition of more than a dozen opposition parties and social movements, named Patriotic Alliance for Change. Federico Franco, from the centrist Authentic Radical Liberal Party, Paraguay's largest opposition party, was his running mate.^{[citation needed]}

On 16 November 2007, although then-Chairman of the National Republican Party (ANR, Partido Colorado), President Nicanor Duarte Frutos, announced that the Colorado Party declined to initiate proceedings to block Lugo's candidacy,^[17] there is a debate going on about its legality, because Article 235 of the Constitution forbids ministers of any religious denomination to hold elective office and Pope Benedict XVI rejected Lugo's resignation from the priesthood.^[18] In July 2008, however, the pope laicized Lugo which allowed him to become president within the framework of canon law.^[19]

President[link]

On 20 April 2008, Lugo won the election by a margin of 10 percentage points, although far short of a majority. The Colorado Party candidate, Blanca Ovelar, acknowledged that Lugo had an unassailable lead and conceded the race that same night at about 9 pm local time. Two hours later, President Duarte acknowledged that the Colorados had lost an election for the first time in 61 years. Lugo became Paraguay's second leftist president (the first being Rafael Franco, who served from 1936 to 1937), and the first to be freely elected. His swearing in marked the first time in Paraguay's history (the country gained independence in 1811) that a ruling party peacefully surrendered power to an elected member from the opposition.^{[citation needed]}

Lugo was sworn in as President on 15 August 2008, saying he would not accept the presidential salary because it "belongs to more humble people" and encouraged other politicians to refuse their salaries as well.^[20]

He initially named Alejandro Hamed as his foreign minister. During the campaign, Lugo had suggested that he would switch diplomatic relations from the Republic of China (Taiwan) to the People's Republic of China,^[21] thereby depriving the ROC of its last diplomatic ally in South America. However after the inauguration, which had been attended by President Ma Ying-jeou from Taiwan, Lugo stated that he had no plans to switch recognition.^[22]

On 18 August 2008, Lugo named Margarita Mbywangi, a member of the Aché indigenous ethnic group, as minister of indigenous affairs, the first indigenous person to hold such a position in Paraguay.^[23]

Although to date little progress has been made in tackling corruption and encouraging land reform (two of the main promises of Lugo's presidential campaign), a number of initiatives have been introduced to improve the lives of Paraguay's poor, such as investments in low-income housing,^[24] the introduction of free treatment in public hospitals,^[25] and the introduction of cash transfers for Paraguay's most impoverished citizens.^[26]

Blog[link]

Lugo began writing a blog on the web site of newspaper ABC Color in March 2007.^[27]

References[link]