The stench of decay hanging over Paraguay’s old corrupt dictatorship

Press, 9 March 1987, Page 20

The stench of decay hanging over Paraguay’s old corrupt dictatorship

An ‘Economist’ correspondent reports from Asuncion

The stench of decay hangs over the world’s second-oldest dictatorship. General Alfredo Stroessner of Paraguay has served seven terms and 32 consecutive years as President; he is junior in service only to North Korea’s Kim II Sung. The atmosphere in the capital, Asuncion, eerily recalls that of another dictatorship: the one that ended in 1979 with the overthrow of President Somoza of Nicaragua, who fled to exile in Asuncion and was murdered there the next year. Paraguay, says one observer, is the “most corrupt country I have ever come across.”

Three-fifths of all transactions take place outside the legal economy. Customs duties are low (and non-existent in the purposebuilt President Stroessner City on the border with Argentina and Brazil). The country is a base for smuggling to its two big neighbours; refrigerators, cigarettes, drugs — and Scotch whisky, of which it is the region’s biggest importer. It is also a market for stoken goods, particularly cars from Brazil.

Army patrols, supposedly looking for smugglers, restrict the trafficking to generals and politicians, whose airstrips in the chaco scrublands receive flights from as far away as Panama. A recent flight carrying 43kg of cocaine was, untypically, intercepted and linked to a former Minister.

Last year a bank was found to have made $3O million by fiddling the complexities of the exchange-rate regime. It later became clear that the central bank, and some $2OO million, had been involved.

When the American Embassy’s cautious economic report included a veiled reference to exchange-rate policy, the Minister of the Interior, Mr Sabino Montanaro, suggested that the ambassador, Mr Clyde Taylor, might be declared persona non grata. This month Mr Taylor was tear-gassed by Paraguayan policemen at a banquet in his honour, and hurried out by his embassy’s Marines.

The American ambassador had given further offence by expressing concern over the closure of Radio Nanduti: the Government had been moderately criticised on - its phone-in programmes. Censorship is growing tighter.

The editor of ‘ABC Color,” Paraguay’s best newspaper until it was forced to close, is widely seen as a rallying-point for the opposition. He describes the country as “a personal ranch of 400,000 square kilometres, with a corrupt and bloody rancher in Stroessner.” The two television stations are under Government control. Some Church broadsheets are still published, preserving a semblance of free speech. Paraguay’s elections sometimes yield votes of more than 100 per cent for candidates of Mr Stroessner’s Colorado Party. The opposition does not control a single municipality. Two small parties, the Liberals and the Radicals, take their seats in Parliament, but the main Left-of-Centre Febrerista Party has refused to take the seats it is entitled to. The Authentic Radical Liberal party is banned; its leader, Mr Domingo Laino, Paraguay’s chief opposition figure, recently tried to return from exile, but was bundled back on to the aircraft he arrived in.

Other exiles have been allowed home. Once there, most have been harassed. Many longterm political prisoners have been released, but Paraguay has been under a state of siege since 1923, so there is no habeas corpus.

People are picked up and held for days or months. A year ago a prisoner, said to have hanged himself, was found to have been killed by a blow on the head.

Three challenges to the regime emerged last year. Landless peasants fought the police, and some 200 of them were arrested. University students rioted.

In December, doctors and medical workers went on strike for increases in salaries which were well below the .official

minimum wage. Mr Stroessner faces a restless middle class, now suffering badly from the country’s economic deterioration. Although about twothirds of Paraguay’s 3.8 million people are short of food, the urban middle class did well in the early 1980 s. Money flowed into Paraguay from two huge hydro-electric projects built on its borders with Brazil and Argentina: the Itaipu dam, which cost nearly $l3 billion, and the Yacyreta project, on which $l.B billion has so far been spent. In 1984 annual gross domestic product (G.D.P.) per person rose to about $BOO (at a realistic exchange rate). The mixed-race people and the Guarani Indians live in the centre of Asuncion. In the surrounding suburbs there are well-stocked shops, new housing estates, and Mercedes limousines.

But in 1986 a drought severely affected agriculture, and a sharp credit squeeze was imposed to rein back price rises. The squeeze halted new investment and hit the middle class hard.

The public sector, meanwhile, continued to surge by playing the exchange rates. In January 1986 there were three rates: publicsector capital transactions, at 160 guaranis to the dollar; publicsector imports, at 240 guaranis; and private transactions at 400 guaranis. The unofficial rate rose to around 700 to the dollar, so the Government invented three more rates.

The World Bank and the InterAmerican Development Bank threatened to cut off credit lines unless the public-sector rate was raised to 320 guaranis to the dollar (still too low). The Government did nothing, and now there are ten rates.

The exchange-rate circus disguises the fact that the public sector, officially in surplus, is $l6O million a year in the red — about 10 per cent of G.D.P. Last year’s official trade deficit was some $2OO million (though Paraguay probably exports, or reexports, a further $l5O millionworth on the quiet).

General Stroessner is heading

towards another phoney election and an eighth term next year. The opposition is much weaker than the one that brought down Somoza in Nicaragua, and there are few guerrillas.

Neither the farmlands nor the chaco areas that cover half the country offer shelter for rural guerrillas. Urban ones are deterred by the regime’s ruthlessness. The only credible opposition — not a violent one — is mounted by discontented businessmen.

The Paraguayans, a gentle people, have put up with some appalling rulers. Jose Gaspar

Rodrigues de Franco, “El Supremo,” closed the frontiers and allowed no schools or newspapers; Carlos Antonio Lopez, by the end of his rule, owned half the country; Francisco Solano declared war on Brazil, Argentina and Uruguay at the same time, and lost. General Stroessner, now aged 74, is in their tradition.

The splintered opposition seems half-resigned to waiting for his death. Even then his army, under the tough-minded General Andres Rodriguez, might bid for the succession.

Copyright — The Economist.