Paraguay: Winning Friends and Influencing Neighbors

Financial Advisor, Political Analyst and Jolly Globetrotter Alex Rosen on a Paraguayan Renaissance

Oh, I think they like me

There are only two land locked countries In the Western Hemisphere: Bolivia and Paraguay. And not by coincidence they border each other. Cross border wars in the Americas are very rare. Not including proxy wars, the last true inter-country war in the Western Hemisphere was the Chaco War between Paraguay and Bolivia which lasted for a solid three years.

Along the way, there have been other skirmishes, but nothing major. Prior to the Chaco War, the last major war in Latin America excluding US involvement was the war of the triple alliance in the 1880s. (If you ever want to read about truly pointless wars, read up on Paraguay’s involvement in both of these.)

The long help working hypothesis is that Latin American governments don’t send their troops to fight in other countries for fear that it would leave them vulnerable to coups at home. The point of this article though is not to give a history lesson on conflicts in the Americas, for that you can spend days, weeks and months reading Wikipedia.

The point is to review the progress Paraguay has made in normalizing relations with its neighbors.

Since the elections of this past spring, Paraguay has taken tremendous steps towards reestablishing diplomatic and economic ties with its neighbors and this is tremendous news. After the elections, many people were skeptical of the return to power of the Colorado political party—especailly given the party’s new figurehead: Horacio Cartes.

Cartes was such a political neophyte he had never even voted before.

It’s easy to overlook Paraguay, or even confuse it with Uruguay, and with good reason. After all, politically and economically it is essentially irrelevant. It does not have the natural resources of its fellow landlocked compadre Bolivia, it offers no strategic value to any other country, it has tremendous infrastructure problems and has the second lowest GDP per capita in the continent, beating only Bolivia.

But it is still a country and it still has rights.

In the past six months, the Paraguayan government has reached out to mend fences with Venezuela, Argentina, Bolivia, Uruguay, Brazil and Chile. After the change in government in 2012 (coup) Paraguay was dismissed from UNASUR and MERCOSUR.

Brazilian President Dilma Rousseff led the call for Paraguay’s ouster citing provisions in UNASUR calling for stable transfer of democracy. Prior to this Paraguay had been the lone state blocking the inclusion of Venezuela in UNASUR and MERCOSUR.

With Paraguay conveniently unable to block the vote, Venezuela was voted in as a full member. With a return to the democratic process, Paraguay has been welcomed back in to MERCOSUR.

Raise your hands if you're ready to hang out with Paraguay again...

Raise your hand if you’re ready to hang out with Paraguay again…

Since taking office in August, Paraguay’s pro-business president Horacio Cartes has reached out to his neighbors to try and build relations and that is something to be commended. He has met with Kristina Kirchner regarding the outstanding debt on the Yacyreta dam. (Perhaps Argentina can issue more bonds to fund that one); he has met with Dilma regarding the Itaipu dam and just last month, the two presidents broke ground on a vital transmission line that will dramatically increase the energy capacity of Asuncion.

Dam.

But that is not all. Venezuela has recently restored their Ambassador to Asuncion and the Maduro government has taken steps to expand trade with Paraguay. Chile has announced closer ties with Paraguay including access to Pacific ports and perhaps the most heartening news of all is that after the Paraguayan economy contracted by 1.2 percent in 2012, this year the central bank is predicting a growth rate of 13 percent. Record soy production, increased beef exports and higher energy prices have all led to this turn around.

Unfortunately though every sunny day has a cloud or two.

In August eight bus drivers crucified themselves in protest of a round of firings. The health care system is $100 million in debt and unions are threatening to strike if past wages are not paid and the government is facing an expanding national debt. The two biggest economic issues facing Paraguay, however, are renegotiating its agreements with both Brazil and Argentina regarding energy production from the two dams and the 800 pound elephant in the room, how does it join the rest of South American and tap into the Chinese interest in investing in the region?

These are difficult questions for President Cortes, but thus far he has proven to have his fair share of answers.