A New Day for Paraguay: Lugo Takes Office on August 15. Key Issues.

On August 15, Fernando Lugo will begin his term as President of the Republic of Paraguay. It will be the first time in 62 years that the ANR (the Colorados) are not in power and it represents an amazing moment in that country because hopes and expectations are high for the former bishop. Nevertheless, he will face great economic and political challenges emanating from internal and external forces.

1) Significant natural resources from ITAIPU & YACYRETA. These are two gargantuan hydroelectric plants (dams) on Paraguay's water borders with Brazil and Argentina (respectively). Given that energy prices are up globally, Paraguay should have seen a significant increase in revenues from these binational partnerships. This has yet to materialize as a result of a number of issues: corruption and graft (elite politicians finance their lifestyles through the agencies charged with distributing the largesse from the dams); Yacyreta's supposed ongoing technical problems; and unequal access to its share of the energy produced by Itaipu (wherein it has the requirement to sell any excess energy only to Brazil at below-market prices a tenth of what Brazil can then resell it as). Lugo has capitalized on popular resentment in Paraguay and has said that he will make renegotiating these two treaties a top priority.

It remains to be seen what he could possibly use as a bargaining chip to induce any flexibility on the part of Brazil or Argentina. Perhaps the Brazilian anthropologist I put this question to a few months ago is right: Brazil's President Lula will, for the sake of supporting the leftish government in Paraguay, concede a bit on the price that it pays Paraguay for unused energy, but will argue that, for the sake of political and economic stability within Brazil (who gets 20-25% of its annual energy from Itaipu), it cannot afford to pay market price.

2) Relations with Brazil & Argentina and Paraguay's place in Latin America, as well as the "leftward" turn to the continent. Lugo, even in the few months following his election, has internationalized Paraguayan diplomacy to an extent not seen in decades. He has traveled widely in the continent. But the question of where he falls in the two South American axes will be one to resolve in order to move forward: whether Paraguay will accede to the Brazil-Chile-Argentina left or whether it will lean towards Venezuela-Bolivia-Ecuador.

While Venezuela's Chavez may have popular appeal chiefly stemming from his anti-US rhetoric and the distribution of US-based petrol profits and despite Paraguayan anxieties over Brazilian incursions (a widespread popular fear is that Brazil will invade, militarily, when it can no longer get what it wants via informal invasions and imperialist expropriations-- namely water, territory for soy, and hardwoods), my intuition is that based on Lugo's personality and Paraguay's expediencies, Paraguay will continue its close relationship to Brazil.

While the posture of Brazil and Argentina towards Paraguay might at best be characterized as general, forgetful neglect, Paraguay is possibly more key to Brazil's internal functioning economy (in addition to its energy contribution, a great deal of cheap merchandise enters the Brazilian market via the Tri-Border area at Paraguay's Ciudad del Este) while Argentina benefits from cheap Paraguayan labor, chiefly in Buenos Aires as Paraguayans work to send remittances home.

3) Recrafting Paraguayan Political Culture. The ANR is a powerful opposition (because of its infrastructure, which largely remains intact) that is nevertheless still re-consolidating itself after the resounding indictment of April 20. Lugo will also need to tread carefully with the Liberal party (his vice-president Federico Franco is a member and it was in part their political machine that helped Lugo to victory). Though they have been in the opposition for decades, even facing organized violence and oppression by Stroessner's ANR (where even playing their theme song became an act of resistance), in practice they differ little from the ANR in those provinces where they have ruled: corruption and graft. There will be Liberales who are looking for the spoils of the government coffers.

How will Lugo avoid the corruption scandals that have beset other Latin American countries?

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