COHA Backgrounder on U.S.-Paraguay Relations: Why Paraguay Matters

illustration by Margaret Scott

As a landlocked country in South America and a nation whose economy heavily depends on illicit smuggling activities, Paraguay demonstrates a history of political instability, corruption and painfully slow structural reforms. In recent years, it has attracted more attention from the U.S. military due to the fact that parts of Paraguay are covered by vast jungles that are almost impossible to readily monitor. This makes the country a drug, contraband, and possibly (according to some U.S. authorities), a terrorist haven. Most notably, in a post 9/11 era in which the U.S. is fighting its “War on Terror” throughout the region and the world, Paraguay is of increasingly strategic importance. Although the quality of the U.S-Paraguay bilateral relationship has been vacillating for many months—sometimes cool, at other times warm—the approaching April 2008 presidential elections in that country is of the utmost interest to Washington. At stake is the legacy of the Colorado Party (PC), which has ruled Paraguay for 60 years, much of it with violence and venality, while having done next to nothing to curb the country’s widespread corruption nor guard its loosely monitored borders. The year 2008 has the potential to be a monumental marker for Paraguay as well as for its future political and military links to the U.S.

Duarte’s Current Relationship with the U.S.
Despite an overall history of friendly ties with the U.S., Paraguayan President Nicanor Duarte has recently begun to distance himself from the Bush Administration, something that was hinted at in a meeting with COHA personnel in Washington, as well as during a visit the president made to the UN in New York a few days later, with both encounters taking place during a trip that the Paraguayan leader made to the U.S. in 2004. Several weeks ago, during a visit with COHA personnel in its Washington Office, the former U.S. Ambassador to Paraguay Timothy Towell—who currently heads the Foreign Policy Group in Washington—referenced Duarte’s traditional relationship with the U.S. by saying, “[Duarte] knows how to play the Yankees…he plays shoulder to shoulder with the U.S.” The ambassador added that the U.S. “loves” Duarte because of his unfaltering cooperation in helping to counter post-9/11 terrorism, most notably by facilitating the tracking of Islamic extremist groups such as allegedly Hezbollah agents at the confluence of the tri-border area of Paraguay, Argentina and Brazil. However, Duarte just might be beginning to show his teeth to Washington.

On June 21, Duarte dedicated a biodiesel manufacturing plant in Guarambare, Central Department, as part of an energy agreement with Venezuela and Brazil that was initiated on May 4. This deal with Venezuelan President Hugo Chávez and Brazilian President Luiz Inacio Lula da Silva is based on an energy plan that is in line with what Paraguayan officials see as part of the country’s development needs, and should represent notable savings to the economy. However, from the viewpoint of the Bush Administration, the pact will be seen as a disturbing act of Paraguayan solidarity with Chávez, an outspoken critic of U.S. foreign policy.

The Lure of the Left
Paraguay, consistently has ranked as the most corrupt country in Latin America by Transparency International. It has a gross national income per capita of only $1,110, and subscribes to a policy of accepting aid from any potential donor nation, including communist Cuba. In an interview with COHA, Dr. Christian Maisch of American University’s, School of International Service, observed that, “[t]he tragedy of Paraguay is that it never has had a stable democratic system or a sound economy.” This reality makes Paraguay’s institutions very vulnerable to disruptions and causes the country to be overly dependent on external aid. Duarte acknowledges that: “A lot of people do not like President Chávez, but we are Paraguayans and do what is most convenient for us and we are going to like those who help us. We cannot like those who do not help us.”

Much to the U.S.’s dismay, Venezuela and Cuba have become close political friends with Paraguay. Currently, Paraguay has 600 of its youths studying medicine in Cuba through scholarships granted by the Castro government and, if Chávez were to provide Paraguay with the equivalent opportunity, Duarte would likely accept such an offer with ease.

Of interest, the hemisphere’s most powerful and wealthy nation has not been so quick to be as generous. Duarte pointed out that the very powerful U.S. President George W. Bush, called to question Duarte’s decision to educate some Paraguayans in Cuba. Duarte responded: “Tell me Mr. President, could you give us scholarships to Michigan, Georgetown, or Chicago? Could you give me 600 scholarships for young Paraguayans today?” Paraguay is a nation that needs external assistance and if it does not come from Washington, it is perfectly willing, on the basis of pragmatism, to look elsewhere. Furthermore, Duarte accused the U.S. Congress of sabotage because it did not approve credits to Paraguay. At the same time, he condemned U.S. capitalism, stating: “It is the most savage capitalism that raves about profit without caring about social responsibility and often not even caring about fiscal responsibility.”

With the Paraguayan presidential elections less than a year away, Duarte may be trying to strengthen support for the Colorado’s social justice record by aligning his foreign policy more with his left-leaning Latin American neighbors than with the U.S., because that is where the most help can be found.

Deteriorating Relations
In recent months, President Duarte has made many more favorable comments towards President Chávez than he has toward President Bush. In a March interview with the German Channel 2 Program “The Keys of the Week,” Duarte defended the Chávez government, affirming the Paraguayan leader’s belief that Venezuela has an “overdose of democracy.” The Paraguayan president further added that he will believe in George W. Bush when the U.S. eliminates the trade barriers imposed on less developed countries. In addition, Duarte defended Bolivian President Evo Morales and even supported his announcement concerning arms purchases, which one would think would rattle Asunción because of the historical bad blood between the two countries. Duarte’s normally friendly relationship with the White House began to deteriorate over the past six months.

According to Duarte’s Chief of Staff, this slide was partly a result of a disappointing lack of technology transfer, trade barrier elimination and a lack of respect toward Paraguayans wanting to visit the U.S. For these reasons, the presidential candidacy of former bishop Fernando Lugo Mendez in the April 2008 election, who is closely associated with the ideals of liberation theology and his cordial feelings toward Chávez, would not be too drastic a shift from existing Paraguay foreign policy. However, the possibility that a populist candidate who leads a large bandwagon of indigenous followers can defeat the Colorados after 60 years of continuous rule is a scary thought to a number of political leaders in both Paraguay and the U.S. – mostly because so many unknowns are involved in Lugo’s candidacy.

The Lugo Candidacy Unfolds
Although President Duarte is backing former education minister Blanca Ovelar, representing the Colorado Party, in the upcoming elections, she is not the candidate receiving the greatest publicity. Stealing the spotlight is Lugo, known to his supporters as the “Bishop of the Poor.” Although he has not announced his precise presidential platform, Lugo has said that his recent travels have made public his people’s desire for agrarian reform, industrial action and higher employment. His upstart campaign continues to gain significant organizational support and on July 17, a majority faction of the opposition coalition, Concertación Nacional, nominated Lugo as its candidate for the April 2008 election. “We consider…it is the right moment to define the presidential ticket,” Senator Carlos Filizzola, of the Partido País Solidario (PPS) said, announcing Lugo’s nomination. The Concertación is made up of eight political parties that are united around the common goal of ending the rule by the tainted Colorados. However, two major Concertación members, Pedro Fadul’s Partido Patria Querida (PPQ) and ex-general Lino Oviedo’s Unión Nacional Éticos (Unance) – respectively the third and fourth largest electoral forces in the country–have declared Lugo’s nomination “illegitimate” and “hasty.”

General Oviedo, meanwhile, is serving a 10-year prison sentence for an attempted coup against former President Juan Carlos Wasmosy that was staged in 1996. Oveido has reason to hope that he will be released from jail in time to compete against Lugo for the Concertación’s leadership as there have been reports of an alleged scheme by President Duarte to attempt to drive a wedge between Concertación supporters. However, the Paraguayan press has suggested that Oveido’s early release would be nothing less than an act of political expedience for the Colorados. At the same time, even a conditional release of Oveido would be viewed as hardly an edifying political maneuver which could only undermine Paraguay’s history of tainted democratic institutions (though this would not be an unprecedented move in Paraguay’s history of corrupt politics). General Oviedo announced on July 20 that he would support Lugo in the presidential elections if he himself cannot stand as presidential candidate for the opposition bloc. According to Colonel Carlos Liseras, the president of Oviedo’s military tribunal, the court will announce whether the ex-general is due conditional freedom “in two months time.”

In the meantime, the pro-Lugo Concertación members agreed last month to accept a running mate from the Authentic Radical Liberals, the nation’s second largest party, which has spent decades challenging Colorado rule to no avail, but could still help finance and help mount a nationwide campaign. Lugo currently leads in the opinion polls with more than 60 percent approval ratings. Nonetheless, several smaller opposition parties still have not indicated whether they would unite behind Lugo, and his bid as well could be derailed in the courts as Paraguay’s constitution bans members of the clergy from seeking political office, even though Lugo formally resigned his position in 2005. Duarte has yet to file a legal challenge, which must be declared before a November 28 registration deadline, but it has been noted that the president has repeatedly criticized Lugo in the recent past. Additionally, both PPQ and Unance maintain they will remain part of the Concertación for the moment while they search for a consensus ticket with which to take on the Colorados.

The U.S.’ Preferred Candidate
In his recent June trip to Washington, Lugo assured the State Department that he is not like Venezuelan President Hugo Chávez, because he, unlike Chávez, is a religious man. Lugo said, “I am not of the left, nor of the right. I’m in the middle as a candidate sought by my people.” Paraguayan political analyst Alcibiades Gonzales Delvalle also characterizes Lugo as a moderate – more of pragmatist than an ideologue. Lugo resists ideological labels, saying, for example, that he embraces “socially responsible” capitalism. Since launching his campaign, he has visited Cuba, Argentina, the U.S. and Spain to raise his profile and also to meet with Paraguayan immigrants abroad and to seek campaign donations. According to Ambassador Towell, the election of Lugo as President of Paraguay “could be fun.” Although it is early in the race, Lugo’s seemingly middle-of-the-road stance should be a good opportunity for the U.S. to improve staggering political and military ties with Paraguay, if it is so-minded and sufficiently focused.

Paraguay’s Geo-strategic Importance
The U.S. has vested a long-time interest in Paraguay. This is largely because the country is in the tri-border region, along with Brazil and Argentina. This area is known to be a major transshipment point for drugs, contraband and a place where criminal organizations have flourished. There also have been many rumors that Islamic extremist groups and institutions are located there; however, it is unclear to what extent Hezbollah and other such organizations actually have operational headquarters there for strategizing and implementing their terrorist campaigns elsewhere, or if they are merely locations from which to obtain funds to remit to one’s family back home or to one’s favorite Middle East madrass. In addition, with Evo Morales’ somewhat anti-U.S. regime in power in Bolivia, it seems that Paraguay in the near future may again even more importance from Washington’s geo-strategic point of view, if it hopes to meaningfully counter-balance the leftward shift in the region.

A factor that Washington may try to utilize to promote close ties with Paraguay could be that the U.S. has been a friend of Asunción for a long time while the same could not be said of the Bolivians, who have had strained relations with its neighbor ever since the Chaco War in the 1930s. That conflict eventually saw Asunción emerge as the victor, which La Paz has neither forgiven nor forgotten. Bolivia, under Evo Morales, has attempted to emphasize its relationship with Venezuela rather than Paraguay, and the Bolivian leader has picked up on Chávez’ geopolitical strategy, culminating with last year’s decision to build a number of bases along the lengthy borders. Bolivian Army Commander General Freddy Bersatti has declared that these are not bases between the two countries, but rather “border modules.”

Building Bases
One of the proposed border bases affecting Paraguay, will be at Puerto Quijarro, located 200 kilometers away from Paraguay’s Bahia Negra. Added to the difficult terrain in that part of the country, there are a number of rivers flowing across the border. As a Peruvian intelligence officer interviewed by COHA observed, “In the jungle, the rivers are like roads,” meaning that Bolivian troops could be sent to the border with Paraguay, if necessary and without too much difficulty. An October 11, 2006 article in El Mundo by Ramy Wurgaft, observed that the new Bolivian base will also be close to Mariscal Estibarriaga, where, according to rumors, the U.S. wants to build a base of its own, perhaps to preside over the Guarani Aquafier, the biggest underground reserve of agua dulce in the world. The Paraguayan military is not particularly formidable, hence it probably makes some sense to consider allying itself with the U.S. in the area against a Venezuela-backed Bolivia, than to spend tens of millions of dollars on upgrading its military from almost zero. The outcome of the upcoming presidential elections will undoubtedly influence the development of all of these relationships.

Tri-Border Area
The tri-border region is rumored to be full of a variety of criminal cartels and ideological causes which could be taking advantage of the lack of even low-level of international integration among the region’s law enforcement agencies and security forces, as well as the traditional massive corruption in Paraguay that has facilitated the country’s national hobby: contraband. Washington is unclear at the present time if there are terrorist cells in the tri-border region, but it does suspect that Lebanese and other Arab residents in that region of the country are sending remittances back to groups and Madrassas linked to terrorist activities (namely Hezbollah) in the Middle East. For example, an August 25, 2006 article in The Washington Times explains that Assad Barakat, the owner of a shopping center in the Paraguayan border city of Ciudad del Este, had been jailed on charges of laundering $2.5 million that helped financed the 1994 bomb attack on the Argentine-Israeli Mutual Association. Even if the presence of Islamic extremist groups is not as widespread in the area as is commonly perceived, it is well known that there is an extensive amount of smuggling occurring in the region, a trademark of Paraguay’s long history of lawlessness. As Dr. Maisch explains, “Paraguay is a smuggling paradise,” and it seems clear that Asunción is unable, or unwilling, to confront the country’s historical cancer.

A final reason why the Paraguayan government may simply prefer to accept a U.S. military presence rather than attempt a protracted as well as expansive upgrading of its own military to protect the country’s borders is the historical fear of giving the armed forces too much power. Paraguay has an abundant history of military coups, most notably that of General Alfredo Stroessner’s in 1954, which founded his military regime that for decades has ruled by means of the Colorado party, and the failed coup by General Lino Oviedo in 1996, which ended in the assassination of then Vice President Luis Maria Argana. Viewed from this perspective, it would be more reasonable for any civilian government to resort to a major outside power for protection, as internal forces have often proven to be the most worrisome factors in the past. Should Oviedo be released from jail and elected president, civilian-military relations will probably remain cordial–even though there may be some tension between the military’s high command and Oviedo over ideological differences, as well as who supported as well as who opposed Oviedo in his attempted coup in 1996. Should Lugo be elected, it is unknown whether he will challenge the military’s power and longstanding control over parts of Paraguay, like some areas to be found in Chaco.

The U.S. Military Presence and Paraguay
There has been a good deal of speculation over the nature of the U.S. military presence currently in Paraguay. After the withdrawal of most American forces from the Panama Canal Zone in the late 1990s, Washington switched to a new strategy of creating small Forward Operation Location (FOL) bases throughout the region, as exemplified by the Palmerola facility in Honduras, Manta in Ecuador and another location in Aruba. Regarding Paraguay, in the summer of 2005, the American military began a series of joint military exercises with Paraguayan forces. These 13 military maneuvers lasted from July 2005 until December 2006. Washington repeatedly insisted that this did not mean a permanent base would be built in the county. An article on the State Department’s website explains that: “these short, time-limited exercises have been mischaracterized as a long-term stationing of U.S. troops in Paraguay. This is not true, nor are the military exercises stages in Paraguayan authority new. Paraguay and the United States have been routinely conducting such bilateral military exercises since 1943. For the 2005-2006 series of exercises, small numbers of U.S. personnel—generally 10- to 20-member units at a time—will train with their Paraguayan counterparts for periods of two to six weeks. No U.S. soldiers will be deployed for an extended period of time, and under no circumstances will there be more than a few dozen U.S. service members in Paraguay for longer than 45 days.”

After the series of exercises formally ended, Washington turned to another way of projecting a military presence in the country, namely constructing military infrastructure for the Paraguayan armed forces. The current facility in question is an airport being built at Mariscal Estigarribia. For several years, there has been discussion about who originally played the major role in erecting the airport in the late 1970s and early 1980s. Some claim it was the American military which built it, but the State Department claims it was the Paraguayans. Most recently, American troops have expanded the airport’s facilities, building new hangars and other structures, stoking the widely circulated idea that the U.S. will enter an ongoing military presence in the country. Nevertheless, the State Department has insisted that the airport is not an American base, and would be unsuitable for America’s military in any case, as the runway is too narrow for the largest American aircraft, such as B-52 bombers, making for a somewhat lame argument.

Other forms of military cooperation and joint-military training exercises also have taken place. Earlier this year, Paraguayan paratroopers, along with forces of several Central American and South American nations, trained with their American counterparts at the Soto Cano base in Honduras. This was part of the annual airborne exercise Iguana Voladora, which was held this year at Soto Cano from April 29 through May 4.

Analyzing Security Relations and Interests
Cooperation between Washington and Asunción may be tense, at least for the short term. The U.S. proposal to send military troops to Paraguay is meeting resistance from the Duarte administration and the nation’s Congress. In response, the U.S. has even suspended military and economic aid to Paraguay as a result of Asuncion’s refusal to grant permanent immunity to uniformed U.S. military personnel in accordance with the Rome Statute. Should Lugo be elected, relations may be strained as the former bishop could potentially decide to uphold the Rome Statute. This pact refers to the right of the International Criminal Court (ICC) to try individuals for the most serious offences of concern to the international community, such as genocide, war crimes and crimes against humanity. The ICC was originally agreed upon by 160 members of the United Nations on July 17, 1998. The U.S. repeatedly has opposed the Statute and the creation of the ICC. A major reason for not supporting its adoption stems from the refusal of the international community to grant the United Nations Security Council (of which the USA is a veto holding permanent member) control over which cases the Court considered, instead favoring an independent Prosecutor who—subject to all safeguards and fair trial guarantees—would make such decisions. Washington is currently approaching governments around the world and asking them to enter into what many consider illegal impunity agreements. These would provide that a government will not surrender or transfer US nationals accused of genocide, crimes against humanity or war crimes to the ICC, if requested by the Court.

Nevertheless, it seems likely that some kind of arrangement will have to be worked out in regards to an American military presence in Paraguay. After the 9/11 attacks, Washington sees any setting with a significant Arab population and with known connections to radical Islamic groups as a region of interest to its intelligence and security assets. The tri-border is a textbook case of this. Whether it is Lugo, Oviedo, Ovelar or another political figure, Washington will have to be prepared to work with the next Paraguayan president in order to have free access to monitoring the tri-border area, if it continues to be an area of concern.

Other Presidential Candidates
Even though the Paraguayan presidential elections are still several months away, there already exists a significant list of candidates other than Lugo. It is unclear whether any of them will be able to overtake Lugo in the polls as the election draws nearer and presidential campaign speeches begin to be heard.

The Status of the Presidential Elections
In regards to the present campaign season, there have been two significant developments. One issue is that former education minister Blanca Ovelar, the Colorados’ candidate to be Duarte’s successor, is now far back in the polls. This development can be seen from two different perspectives: one is that while there has been a proliferation of female candidates contesting presidential elections throughout Latin America in recent years, with mixed results: Michelle Bachelet won in Chile, Cristina Fernández de Kirchner is running a strong campaign in Argentina, while Nobel Prize winner Rigoberta Menchú badly falters in Guatemala, and Lourdes Flores lost in Peru in the 2006 presidential elections. Will the Colorado candidate be able to rally the support of Paraguayan women? Also, with Ovelar now falling behind in the polls, the continuation of Colorado rule after six decades in power seems to be in serious jeopardy. Colorado leaders must be aware that the last decade has seen the end of rule by traditional parties throughout the hemisphere, including the PRI in Mexico and Copei and AD in Venezuela. With a year to go, the question remains whether there will be a change of heart among the Colorado leadership to consider supporting another candidate, or whether Ovelar – unlikely enough – will be able to improve her standing as the months go by?

Finally, reports indicate that Lino Oviedo actually is beginning to register in the polls with some backing, even if he has not been released from jail and is unable to formally run for president. If his contingent statement that he could support Lugo holds true, the ex-bishop’s chances to become the country’s new president will greatly increase. In his interview with COHA, Ambassador Towell explained that Oviedo is the one candidate that could be an effective threat to Lugo. It remains to be seen what events will gestate in the coming months, if Oviedo gains his freedom, the whole electoral picture could change.

2008 Is Not Far Away
Even though the presidential elections will only take place in 2008, there is a growing sense of excitement within Paraguay over their possible outcome. The possibility that Colorado rule may finally be coming to an end either at the hands of Fernando Lugo or, even more bizarre, due to Lino Oviedo, is an issue whose importance throughout South America cannot be underestimated.

In addition, regional developments will also prove of importance. These could include like Morales’ rule in Bolivia and Correa’s in Ecuador and how this affect La Paz’s regional relations. Also germane will be the nature of future American military presence will end up being in Paraguay, which is tied to the extent of Islamic extremist movements that could be found in the tri-border area. All of these issues should keep Paraguay on the radar of Washington policymakers into the future. Paraguayans deserve to live in a corruption- and smuggling-free society; however, both activities have become ingrained throughout their modern history, severely crippling Paraguay’s economic and political development. The next Paraguayan president will not only have to possibly face recent issues like Islamic extremism in the tri- border area, but also the country’s endemic problems of corruption and economic destitution. The magnitude of these issues makes it clear that, for Paraguay’s sake, the next president will need God on his side.

This analysis was prepared by COHA Research Associate Jenna Schaeffer and Research Fellow Alex Sánchez