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Paraguay After 60 Years Of One Party Rule


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This presentation was given by Paraguayan Economist Fernando Masi at the Annual meeting of the Kansas Paraguay Partners, at the Dole Institute for Politics (University of Kansas). For more info about KPP please visit our website:

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Paraguay After 60 Years Of One Party Rule

  1. 1. PARAGUAY AFTER 60 YEARS OF ONE PARTY RULE Fernando Masi April 2009
  2. 2. CONTENT <ul><li>Economic and Social Conditions </li></ul><ul><li>The State in Paraguay </li></ul><ul><li>Political Situation </li></ul><ul><li>Government first steps </li></ul><ul><li>Limitations and Setbacks </li></ul><ul><li>Future Scenarios </li></ul>
  3. 3. Economic and Social Conditions <ul><li>Macroeconomic Equilibrium </li></ul><ul><li>Sustainable Economic Growth over the last 4 years </li></ul><ul><li>Low levels of inflation </li></ul><ul><li>Healthy public finances: fiscal surplus </li></ul><ul><li>Low level of public external debt </li></ul><ul><li>Rising international reserves </li></ul>
  4. 4. ECONOMIC AND SOCIAL CONDITIONS <ul><li>The Economic Model </li></ul><ul><li>Agriculture Commodity export country </li></ul><ul><li>Reexporting business or intermediation </li></ul><ul><li>Exporting hydroelectric energy </li></ul>
  5. 5. ECONOMIC AND SOCIAL CONDITIONS <ul><li>Economic growth without equity </li></ul><ul><li>Dynamic agribusiness sector vs. less efficient familiar agriculture </li></ul><ul><li>Dynamic commodity export sector vs. low productivity, non qualified labor and low level of industrialization </li></ul><ul><li>High levels of poverty and informal employment </li></ul><ul><li>Unequal distribution of income and resources </li></ul><ul><li>Problems with public health coverage and with quality of education </li></ul>
  6. 6. Source: DGEEC and BCP. Paraguay’s Main Economic and Social Indicators 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 GDP Growth (%) 3.0 -3.3 2.1 0.0 3.8 4.1 2.9 4.3 6.8 5.8 Inflation rate 14.6 8.6 8.4 14.6 9.3 2.8 9.9 12.5 6.0 7.5 Fiscal Surplus (Deficit) (as % of GDP) - (4.6) (1.2) (3.8) (0.6) 1.6 1.6 - 1.0 0.5 Debt (as % of GDP) - 46.1 47.7 65.5 60.7 47.8 40.7 33.0 25.9 21.4 Reserves (in millions of US$) 874.8 771.9 723.1 641.3 983.4 1168.0 1293.0 1703.1 2461.8 2864.1 Poverty (as % of population) 32.1 33.9 33.9 - - - 38.2 - 35.6 - Extreme poverty (as % of population) - - - 21.7 20.1 17.1 15.5 - 19.4 - Unemployment – formal sector (% of labor force) 14.3 15.9 15.3 16.4 13.0 10.9 9.4 11.4 5.6 - Underemployment – informal sector (% of labor force) 19.1 17.6 22.1 22.4 24.1 24.2 25.1 24.0 26.5 -
  7. 7. ECONOMIC AND SOCIAL CONDITIONS <ul><li>Weakness in Competitiveness </li></ul><ul><li>Inefficient allocation of resources through public expenditures </li></ul><ul><li>Poor public services and institutional development </li></ul><ul><li>Inadequate supply of physical infrastructure </li></ul><ul><li>Difficult access to medium and long term credits for the productive sector </li></ul><ul><li>Low levels of technology and innovation </li></ul>
  8. 8. THE STATE IN PARAGUAY <ul><li>A small State in comparison to others in Latin America: no import substitution process </li></ul><ul><li>No civil service but clientelism and informality </li></ul><ul><li>Corruption within public institutions: the price of political stability </li></ul><ul><li>Political and economic privileges: “rent seeking” </li></ul><ul><li>…… ..a “Predatory State” instead of a State that promotes development </li></ul>
  9. 9. POLITICAL SITUATION <ul><li>“ Paraguay: the unraveling of one party rule (D. Abente 2009) </li></ul><ul><li>An Hegemonic Party lost its grip on power, but modernization was not the relevant factor in the demise of the Colorado Party. </li></ul><ul><li>Three factors that explain the ousting of the “Colorados”: </li></ul><ul><ul><li>The fragmentation of the ruling party </li></ul></ul><ul><ul><li>The opposition overcoming its coordination dilemma </li></ul></ul><ul><ul><li>The capacity of the Liberal Party to build its own political apparatus </li></ul></ul>
  10. 10. POLITICAL SITUATION <ul><li>Paraguay´s Political Landscape: </li></ul><ul><li>The main traditional parties: Colorado and Liberal </li></ul><ul><li>The third Space I: Encuentro Nacional and Patria Querida </li></ul><ul><li>The Third Space II: UNACE, splinter of the Colorados </li></ul><ul><li>Small parties: Center-left and more leftist </li></ul>
  11. 11. Paraguay’s Presidential Elections, 2003–2008 CANDIDATE VOTES PERCENTAGE 2003 2008 2003 2008 2003 2008 Duarte Frutos Ovelar de Duarte 547,232 573,562 37.1 30.6 Sánchez Oviedo 208,391 410,637 13.5 21.9 Total for ANR & UNACE 755,623 984,199 50.6 52.5 Julio Franco Lugo 370,349 766,502 24.0 40.9 Fadul Fadul 328,916 44,060 21.3 2.4 Total for Opposition 699,265 810,562 45.3 43.3 + ANR is the Colorado Party; UNACE is the National Union of Ethical Citizens; PLRA is the Liberal Party; and PPQ is the Beloved Homeland Party. ‡ The PLRA ran alone in 2003 and as part of the APC coalition in 2008.
  12. 12. POLITICAL SITUATION <ul><li>The dilemmas for the new government </li></ul><ul><li>The President does not have a party of his own </li></ul><ul><li>A loose government coalition that does not have majority in the Congress </li></ul><ul><li>The Liberal Party and its internal divisions </li></ul><ul><li>A discredit political class because of influence trafficking and corruption </li></ul>
  13. 13. POLITICAL SITUATION <ul><li>Challenges for the new government </li></ul><ul><li>Fighting corruption within the State and reforming the public sector </li></ul><ul><li>Cleaning the judiciary </li></ul><ul><li>Governance in the Congress </li></ul><ul><li>Social demands and the political pressures of peasant, labor and others </li></ul><ul><li>How to implement progressist policies in a very conservative society. </li></ul><ul><li>The renegotiation of the Itaipu Treaty </li></ul><ul><li>Keep balance between liberal democracies and populism in Latin America </li></ul>
  14. 14. Government First Steps <ul><li>Economic and Social Plan: Objectives </li></ul><ul><li>Maintaining economic growth, but generating more employment opportunities and better income distribution with sustainable use of natural resources. </li></ul><ul><li>Maintaining macroeconomic equilibrium </li></ul><ul><li>Strengthening state institutions to promote effective policies oriented to provide better public services to the citizenship </li></ul>
  15. 15. Government First Steps <ul><li>Economic and Social Plan: Objectives </li></ul><ul><li>Strengthening State institutions to ensure legal guarantees to investment </li></ul><ul><li>Improve public social investment and concentrate public expenditures on reducing extreme poverty. </li></ul><ul><li>Build economic development jointly with the private sector and the civil society. </li></ul>
  16. 16. Government First Steps <ul><li>Economic and Social Plan: seven pillars </li></ul><ul><li>Macroeconomic policies that promotes growth </li></ul><ul><li>A financial system that reaches the medium and small producers </li></ul><ul><li>Efficient public companies to promote competitive public services </li></ul><ul><li>Modernization of the public administration to reduce corruption, clientelism and create a civil service </li></ul><ul><li>Promote productivity and competitiveness to expand markets and to gain new ones. </li></ul><ul><li>Agrarian reform and re-activation of the small agriculture </li></ul><ul><li>Policies to reduce poverty and generate employment. </li></ul>
  17. 17. Government Limitations and Setbacks <ul><li>High expectations have been met by </li></ul><ul><li>The appointment of a lackluster and disparate Cabinet with no experience in running the State, except a few members </li></ul><ul><li>Lack of understanding of the State and the economy by President Lugo´s inner circle. </li></ul><ul><li>No clear path in the process of decision making </li></ul><ul><li>Strained relationship with the Liberal Party </li></ul><ul><li>No clear understanding of Lugo´s political and ideologi cal position to solve urgent social problems </li></ul><ul><li>Lack of strategies for foreign and trade policies. </li></ul>
  18. 18. Government Limitations and Setbacks <ul><li>Resulting in: </li></ul><ul><li>Procrastination in implementing the economic and social plan </li></ul><ul><li>Lack of coordination within the Cabinet for the process of decision making </li></ul><ul><li>Bad management of relationships with the Congress and the Judiciary </li></ul><ul><li>Splits within the Liberal Party that lead to increasing opposition in the Congress </li></ul>
  19. 19. <ul><li>In other words, </li></ul><ul><li>Lugo wants to lead the Paraguayan people </li></ul><ul><li>but not the Paraguayan government. </li></ul><ul><li>But </li></ul><ul><li>Has he lost his way? </li></ul>
  20. 20. Scenarios <ul><li>Best case: getting your act together for substantial changes within the State and to promote welfare </li></ul><ul><li>Articulation within the Cabinet, and networking with political forces in the Congress </li></ul><ul><li>good policies </li></ul><ul><li>good politics </li></ul><ul><li>good management </li></ul><ul><li>Worst Case: continuing unrest an eventual impeachment of the President </li></ul><ul><li>Continuity: Stability without change </li></ul>