Power Switch in Paraguay

After more than six decades under the rule of the Colorado Party, Paraguay readies itself for new President Fernando Lugo and his pledges of land reform, renegotiation of the Itaipú Dam contract, and job creation. Lugo, an ex-priest, won presidential elections in April as the candidate chosen by the Alianza Patriótica para el Cambio coalition and was endorsed by the Partido Liberal Radical Auténtico. In recent weeks, he gained political traction by appointing a heterogeneous cabinet, supporting his claim that he plans to serve as more of a centrist than a leftist. “I have always said I am a centrist, like the hole of a poncho, standing above political parties.” Lugo said to Newsweek during an interview.

After serving as a Catholic priest for 30 years, Lugo resigned from priesthood last December, when the Vatican issued a waiver releasing him from his religious vows. He served his last 10 years in the poor region of San Pedro, where his reputation as “the Bishop of the poor” gave him footing with the landless indigenous population. With a population over 6 million, 35 percent of Paraguayans live below the poverty line. During his electoral campaign, Lugo promised to fight indigence through better tax collections, as well as elimination of excessive bureaucracy and child labor.

Despite positive signs for his presidency, the leader faces a number of challenges, with land ownership serving as a pressing issue. According to the Economist, one percent of Paraguay’s population owns 77 percent of the land. The report notes that, even by Latin American standards, such inequality is high. The country is one of the top four soy exporters in the world, with production occurring mostly on land owned by Brazilians and providing crucial government revenue. Landless peasants, at a point of desperation, invade some properties to experience violent repercussions. Lugo declared their occupations illegal and called on peasant leaders to abide by the law. Before any agrarian reform might be implemented, he argues, a national land survey must be undertaken to determine who owns what. But for a country just shy of the size of California, such a daunting task will take at least two years, international loans, and patience from the landless peasants.

 

The negotiation of new prices with Brazil and Argentina over electricity generated by the Itaipú Dam stands as another test for Lugo and his newly appointed Foreign Relations Minister Alejandro Hamed. Under existing contracts, the three countries share the ownership of the dam but Paraguay finds itself forced to sell its share of electricity below market prices. On August 1, Lugo met with Brazil’s international affairs counselor and Paraguay’s future director for the Itaipú Dam; the new president presented a memorandum with detailed discussion points to renegotiate the terms of the contract currently set to expire in the year 2023.

But even with these challenges, Lugo comes to power at a time of economic growth in Paraguay. In addition to soy and electricity, remittances stand as a significant contributor to the country’s GDP. Paraguayans living abroad sent home $700 million in cash in 2007, according to the Inter-American Development Bank (IDB). IDB figures place Paraguay’s GDP growth at 6.4 percent last year with signs of strong export growth. Still, La Nación’s José Cantero argues that even now that the country’s financial system operates in the black, the new government must implement reforms to meet inflation goals, create more diligent institutional oversight, and improve efficiency.