Paraguay: Stuck on Stupid?

Financial Advisor, Political Analyst and Jolly Globetrotter Alex Rosen on recent elections in Paraguay

President Elect Horacio Cartes promises a new direction for Paraguay. This would imply that the country had a direction to begin with.

Last week, Paraguay held presidential elections. For one of South America’s least known and most dysfunctional countries, the outcome was more a question about the democratic process. For the record, Horacio Cartes a wealthy industrialist who admittedly has never voted, won, garnering 46 percent of the vote. His slogan was “A new direction for Paraguay”.

How can Paraguay have a new direction when it never had direction to begin with? For 60 years (1947-2008) the Colorado Party led the country without opposition. Through the bulk of this period, dictator Alfredo Stroessner, a Nazi sympathizer lorded over the nation, with allegiance to his Colorado party necessary to access public jobs or state health care. Elections were a farce (Stroessner polled particularly well among deceased voters), and he is perhaps best known for running Paraguay under a “State of Siege” which he renewed every 90 days for decades.

Democracy wasn’t even a pretext. All political parties besides his own Colorado party were suppressed and the opposition leaders, as well as the rank-and-file, were tortured while Paraguay became a haven for wanted criminals including drug dealers, ex-dictators and even Nazi war criminals. Stroessner only left office when his own party ousted him in a violent coup.

Scenes From the Coup that Ousted Stroessner

New Day, Same Pit

After Stroessner, the Colorado party maintained office for another 19 years. During this time, the country watched as its neighbors to the north and south boomed, busted and rebuilt while Paraguay stagnated at the starting block of development. During the late 1990s when contagion from the Asian Financial Crisis forced a Brazilian devaluation and subsequently an Argentine monetary disaster, Paraguay resolved its financial collapse by taking a bailout from Taiwan, of all countries, which only asked for political recognition in return for the $400 million loan.

While most of South America has taken advantage of rallying commodity prices, Paraguay must sell its largest resource soy beans at below market price to Brazil, because China the largest importer of soy will not do business with them.

GDP Per Capita of Paraguay and its neighbors since 1999

In 2008 Paraguay appeared to turn a corner with the election of a former Catholic Priest Fernando Lugo as president—the first non-Colorado candidate in 61 years. Unfortunately Lugo’s policies of economic inclusion and rights for the poor did not sit well with Paraguay’s entrenched elites accustomed to having their way. And their way has historically not included much for Paraguay’s poor. Apparently rocking the boat is unacceptable in this landlocked country, and Lugo was ousted in a political coup by his own Vice-President.

A New Direction in 2013?

This brings us to the 2013 elections. If there is any coherent direction—any path to this story—it has long been buried beneath the swampy Paraguayan Chaco. The 2013 elections turned into a debate of stability (the Colorado Party) against a more egalitarian opposition. The helicopter crash death of populist candidate Lino Oviedo, a man instrumental in the overthrow of Stroessner, proved to be a turning point in the election. His death sparked conspiracy theories that spread like wildfire—not uncommon in this desiccate land—but the Colorado party and its political neophyte Horatio Cartes managed to suppress all media outlets and reclaim the presidency as well as the senate.

Fernando Lugo: Not the transformative president many hoped he would be

Cartes has no political background. He only joined the Colorado party in 2009 and, again, he has never actually voted in an election. His claim to fame is that he has run a series of successful businesses including, tobacco farming, cattle ranching and a bank. Now, the man once apprehended by narcotics officers when a plane carrying cocaine and marijuana landed on his ranch, suggests that he can reform Paraguay. That this man, imprisoned in 1989 on fraud charges, can deliver on his promises to eliminate the clientelism and corruption that has long plagued the country is dubious at best.

Moreover, though Cartes campaigned on reform, who knows how he will act in office? He hasn’t given much indication. In one of the few interviews he has given, he spent a significant amount of time railing against homosexuality and gay marriage. Cartes compared homosexuals to monkeys and suggested that he might shoot his own testicles off if his own son came out as gay (fantastic response here). Apparently Paraguayan civil society mirrors its economy: Stuck in the 19^th century.

Pundits will argue that the election results will harm Paraguay’s development. How can you knock down something that is already passed out on the mat? Paraguay has so many internal problems that it is immune to poor economic planning. By sheer accident the country could show robust growth with just a slight uptick in the price of commodities or even a renegotiation of its energy contracts with Argentina and Brazil.

Cartes is calling for a new direction. Perhaps it would be wiser to first choose a direction to begin with.