I have a new piece that just came out in Foreign Affairs:

Paraguay's congress has voted to impeach Fernando Lugo, the first non-Colorado Party president in living memory, a former Bishop who was brought to the presidency in a dramatic grassroots election in 2008. Keep in mind that Lugo's term was supposed to end in 2013 and so Paraguay is in the throes of campaigning for the 2013 elections. Although this move is "constitutional" on the part of the parliament, popular opinion (even of those who didn't vote for him) is that this was a golpe, a coup by the parliament to overthrow a democratically-elected president and install a new political coalition. People are gathering in the streets to protest. An online poll by Última Hora shows 54% of responders disagree with the ousting of Lugo.

How did this happen? And, what does this mean for Paraguay?

The short answer is this: Lugo's coalition government has always been a fragile alliance and after a number of dramatic political events of the past three weeks, the major political parties have united to impeach Lugo in favor of his vice president Federico Franco (Liberal Party). This is being called a "coup" by many in Paraguay--including those who disagree with Lugo--because it's seen as a power move by congress. And it's being called a "coup" by government officials from other countries in Latin America.

In late May, a broad movement called Occu.Py, consisting of young people across the political spectrum, began a series of protests against Paraguay's congress for anti-democratic actions (creating new government jobs solely for vote-buying, rejecting a ban against "listas sábanas"--the current practice where you can only for a party, not for individual candidates). Occu.Py's momentum has grown and looked like it would create new electoral opportunities in 2013.

And then a massacre happened. [Video Here] Last Friday, a group of police officers attempted to remove a group of landless peasants (campesinos) from land that they were occupying in Eastern Paraguay. The peasants claimed that the land on which they'd built their homes was illegally claimed by a former Colorado Party senator (this was later backed up). As the police entered the estate in Curuguaty, shots rang out. A fire fight erupted and at the end, 6 police officers and 11 peasants were killed. It was recorded on a cellphone camera and gives ammunition to the claim that the peasants started it.  Because Lugo is seen as a supporter of the campesinos and a leftist, this was framed as the result of his policies.

This gave congress all the ammunition they needed to impeach Lugo and put in his place the old guard of traditional parties. On Thursday June 21, 2012, the lower house--Chamber of Deputies--voted to impeach Lugo. The Senate, which has the final vote, gave Lugo 17 hours to prepare against the final vote, to be held on Friday, June 22, 2012.

It looks like Lugo's former allies, the Liberal Party, have made a deal with one of their rival parties (probably UNACE--a group of former Colorados led by multi-billionaire drug-trafficker Lino Oviedo, who attempted a coup in 1996 and accused of planning the assassination of vice president Luis Argaña in 1999) so that Federico Franco will assume the presidency, leading a coalition government.

"What Would You Do With $50 Million?"

Region of Oil/Gas Exploration Circled

Paraguay's Chaco region borders Argentina's and Bolivia's petroleum and natural gas zones and for many years there's been speculation that there might be oil and gas in northwest Paraguay. Amerisur Resources (UK-based) has just received permission from the Paraguayan government to explore the Piriti-Pilar Basin for oil and natural gas.

Another company, Texas-based Crescent Group, has held a concession for the Piriti Basin since 2008, but it's hit a few legal road bumps which have recently been resolved in drafting a new agreement.

These developments are interesting for a few reasons. First, none of the potential petro stuff is new news--every few years there are announcements that exploration and drilling in the Chaco are set to start. But what is interesting is where the authority over oil and gas lies within the Paraguayan government: the Ministry of Public Works and Communication. And this might be why there's so much confusion with the Crescent Group (and why Paraguay's public learned of the Amerisur developments via the London Stock Exchange rather than any government announcement in Paraguay). Rather than creating a separate energy ministry (which is how Brazil's government is organized) to administer the hydroelectric and now potentially hydrocarbon resources, there is a Vice-Ministry of Mines and Energy under Public Works. 

The Vice-Ministry has been traditionally focused on Paraguay's vast hydroelectric resources and so the oil-gas concerns are but a side note. Currently it's headed by leftist Mercedes Canese, the daughter of well-known Itaipú-dam activist Ricardo Canese who has been involved with pressuring Brazil to renegotiate the amount of money Paraguay receives for its Itaipú energy sold on the Brazilian market. The Vice Minister is from the part of the President Lugo coalition that is most leery of foreign investment (and certainly of private firms) and that most admires the way Morales has steered Bolivia's energy policy in a nationalistic and social re-investment direction.

Thus, the Vice-Ministry's posture and the little institutional development for how to administer oil and gas resources (e.g., the person in charge of hydrocarbons within the Vice-Ministry has a background in biology and ecology but not in energy) imply that there will likely be more road bumps ahead.

A new mosque and cultural center is being built in Ciudad del Este (Paraguay). The cornerstone was laid this morning in a construction project that's estimated to take another year and a half. The building, which is located a little less than two miles west of Ciudad del Este's commercial center, is likely to prove controversial on a number of levels.

The area surrounding Ciudad del Este, the Triple Frontier where Argentina, Brazil, and Paraguay meet is home to a sizable Lebanese-Syrian population (some 3% of the total population in the region) which has come under international scrutiny. The security concerns are that the community in the Triple Frontier is connected to Islamic terrorist groups and provides financing/shelter/logistical support for violence in South America and beyond. The construction of a new mosque, financed entirely by the local community, might seem like a reaffirmation of this.

Última Hora, an important Paraguayan newspaper, reported on the cornerstone-laying ceremony that took place today and the user comments are fascinating. The majority (all written in Spanish, presumably by Paraguayans) are upset with the new mosque because they see it as an example of Muslim expansion into a Christian country: "Very bad. What lack of respect. They kill Catholics. Why let them build a mosque in a country that is 98% Catholic?" Another commentator worries that this will serve as a pretext for foreign military intervention: "This puts us in the sights of the gringos, so that they'll invade us in the future under the pretext of 'a hotbed of Arab terrorism' in order to get hold of our natural resource: water. Careful!" 

It'll be interesting to see how this conflict unfolds.

Disagreement over Venezuela's membership in Mercosur is pitting the sovereignty of Paraguay against the political authority of the larger region.

In brief: the majority in Paraguay's congress oppose a proposal to make Venezuela a full member of Mercosur. The other three member countries (Argentina, Brazil, Uruguay) have supported Venezuela's entrance, as does the current president of Paraguay (Fernando Lugo). Rumors are spreading that Mercosur will force Venezuela's full entry through some sort of declaration that effectively circumvents the authority of Paraguay's congress and, by extension, the will of the Paraguayan people.

Within Paraguay, this is seen as a violation of Paraguay's sovereignty. Uruguay is hosting a Mercosur summit today, which will be attended by all four presidents, foreign ministers, and the heads of the central banks. Other agenda items have been overshadowed by the question of whether Venezuela's membership will be imposed upon Paraguay.

The Common Market of the Southern Cone (Mercosur) was created in 1991 by the Treaty of Asunción, signed by the four initial member countries: Argentina, Brazil, Paraguay, and Uruguay. According to the Treaty (Article 20), new members must be approved by unanimous consent of current members. Treaties (unlike "Agreements") require the approval by national parliamentary bodies--this is why they have so much more weight than just agreements signed by presidents. The former presidents of the four countries approved Venezuela's full membership in 2006, which was later ratified by the congresses of Argentina, Brazil, and Uruguay. Only Paraguay held out.

In Paraguay and Uruguay, Mercosur is often depicted as yet another way for the two large countries to impose their will on their smaller neighbors. While there has been a "leftward turn" in Latin America (all four countries are governed by left-of-center presidents), Hugo Chavez is not popular in Paraguay. Although the previous Paraguayan president (a Colorado Party conservative) approved Venezuela's full membership, there is a perception that leftist former Bishop Fernando Lugo is forcing Paraguay into a Bolivarian revolution. Moreover, this is framed within Paraguay (and now Uruguay) as a recapitulation of the War of the Triple Alliance (1865-1870), where the combined forces of Argentina, Brazil, and Uruguay demolished Paraguay.

But what this ultimately may be about is a classic power struggle within Paraguay between the executive and legislative branches, not between "right" and "left."

UPDATED:
Venezuela and Ecuador are in the process of becoming full member countries of Mercosur. Presidents Hugo Chavez and Rafael Correa were present at the meeting today in Mercosur, arguing for the full admission of their countries. Correa has urged a greater closeness between Mercosur and CAN (the Andean Community-- Venezuela used to be a full member until 2006, when it withdrew from the agreement and sought to enter Mercosur).

As expected, some kind of solution that would work around the stalemate in Paraguay's congress was offered: a Special Commission has been created to determine the terms by which Venezuela and Ecuador will enter Mercosur. The commission will be directly appointed by the presidents of the full member countries (read: not depend on congress).

And though tomorrow I'll discuss the "energy integration" components of today's summit, I want to end with the terrible tragedy that shook the meeting: Iván Heyn was found hanged in his hotel room this afternoon, an apparent suicide. Mr Heyn, Argentine, 34 years old, was Cristina Kirchner's newly appointed Undersecretary of Foreign Trade and was participating in the meetings in Montevideo.

Monday Falls (Saltos del Monday) are located in eastern Paraguay, close to the majestic Iguazú Falls and the Saltos del Guairá, a region of spectacular natural beauty. (Guairá Falls were drowned to build Itaipú dam.)

As part of a plan to build tourism and protect Paraguay's natural beauty, the Paraguayan government has undertaken an investment of $6.5 million USD to construct a look-out on Monday Falls, to develop the proper road work that can hold the kind of traffic they'd like to see, etc. Government planners took Iguazú Falls as their inspiration--a major tourist attraction not just for Argentina and Brazil, but for the entire world. The hope was to bring in millions of revenue to the government which could then be re-invested in social development.

Instead, the government will get $220 USD a month.

For the next twenty years, Acqua Paraná Tour, SA will pay the municipality of Presidente Franco a paltry $220 a month for the right to run the national park, to charge admission, to sell food and souvenirs. Within Paraguay, this smacks of an illicit deal where government funds were used to build massive infrastructure and then the financial benefits were problematically transferred to private hands. The local mayor is claiming this is a great deal for the municipality.

The political side of electricity.

Following the passage of the Joint Declaration's Itaipú energy provisions, Paraguay's government has embarked on a more aggressive strategy for Itaipú Binational hydroelectric dam. Paraguay owns 50% of the electricity produced by the world's largest dam (in 2010, Itaipú produced 87,970 GWh), but most of this is consumed within Brazil because Paraguay lacks the demand for its energy. Since 2008, the new government in Paraguay has sought to use its hydroelectric resources in a targeted way, to fund social and economic development. One part of this strategy includes increasing consumption and demand within Paraguay by attracting foreign investment.

Rio Tinto Alcan, the aluminum giant, is in talks with the Paraguayan government to open a smelting plant in Paraguay, but among the chief sticking points is just how much Paraguay's public utility company, ANDE, will charge Rio Tinto Alcan for electricity. Figuring out this number isn't just difficult because of various technical and financial factors that have to be considered. It's difficult because there are political hopes and promises and expectations that are attached to Itaipú energy for Paraguay. And these aren't minor hurdles, but significant competing priorities that drive the actions of decision-makers within Paraguay. The dam is an arena for major political battles within Paraguay--promises to change the way Itaipú dam's energy and financial resources were spent within the country was a key campaign pledge in the new government. And because of historical tensions between Paraguay and Brazil, the dam gets interpreted through a patriotic frame of reference.

And so, while the base cost of electricity from Itaipú is about $43.80/MWh, one of Paraguay's most influential engineers/members of Fernando Lugo's leftist government insists that $60/MWh is the minimum that should be charged. This contradicts CRU Strategies' (a UK consulting firm focused on mining, metals, and fertilizer) recommendation that the price be set somewhere between smelting industry standard: $35-$38/MWh. For a sense of perspective, recently in the U.S., a representative from Rio Tinto Alcan complained that the amount they were paying for electricity in Kentucky--$43.50/MWh--was 65% greater than the average cost for aluminum smelting worldwide--$26/MWh. And, to further complicate matters, it seems that smelting electricity costs in China run between $49 to $55/MWh.

The likely resolution will fall somewhere between the extremes ($26 and $60/MWh), but the process will be troubled by the intangibility of these numbers. What I mean is this: in Paraguay, electricity price seems to have nothing to do with the product delivered. There are regular black-outs (some caused by apparent error within the Paraguayan half of Itaipú itself), people often have illegal electricity connections, and the degree of financial mismanagement within the electricity sector (often described as "corruption") means that there's no trust that a price reflects value. Price instead reflects social power. You pay a set price not because that's what something is worth, but because that's what someone more powerful than you has said you should pay for it.

And so, one of the hidden factors in the price of electricity that Rio Tinto Alcan and the Paraguayan government are debating is that of trust. How much do Paraguayans trust that their government is demanding a fair price for the nation's natural resources? If the answer is "not much," then that means that no matter what the final number, it'll be perceived as "not enough." And this is the pressure that's being placed on Paraguay's negotiators.

I'll be presenting at the Annual Meeting of the American Anthropological Association, in Montreal, as part of a panel entitled "Managers Of Things, Or What Do Managers Imagine Themselves To Be Managing?" on Friday, November 18, from 8-9:45am.

Managing Expectations: Spectacles of Corruption, Rituals of Patronage

Because of its symbolic and economic weight within Paraguay, Itaipú hydroelectric dam--the world's largest--has come to embody what its planners hoped: the physical manifestation of an all powerful state. With the recent presidential election of leftist former Bishop Fernando Lugo, a new group of technocrats and politicians appointed to the helm did not merely manage the energy potential of the dam, but through it distilled the "promise" of the Paraguayan nation--promise in the sense of commitment and of hope for the future. As the engine of the Paraguayan state apparatus, the dam stood at the nexus of an intricate patronage system that grew concomitantly with the energy production. How and what favors were asked and answered by technocrats appointed to manage electricity production--a public secret--unmasks more than just the balancing act performed by high level employees as they juggled partisan obligations, political aspirations, and social pressure to portray generosity as a hallmark of power. Rather, this gets to the heart of how the fractured and tentative "state" is constituted in Paraguay--protecting privilege through the management of resources and relationships. Campaign promises to end patronage and administer the dam's wealth to bring development clashed with entrenched models of state-to-nation obligations and the personal ambitions of a new class of political elites. This paper explores how the top managers at the dam straddled informal expectations of patronage with formal responsibilities of energy production in the midst of a push towards "transparency" thwarted and abetted by mediatic "corruption" scandals. Based on eighteen months of fieldwork among Paraguay's political elite, this paper analyzes rituals of approach and request, how Itaipú managers configured multiple vectors of obligation, and how a hydroelectric dam embodied fantasies of prosperity. Itaipú's managers explicitly described this process as a way not just to remake the dam, but as a way to remake the Paraguayan state itself.

A few computer geeks in Paraguay have come up with a brilliant idea: to use Paraguay's vast renewable electricity surplus to support internet data centers (IDCs) for companies like Google.

The situation is this: Paraguay has a huge surplus of electricity. It consumes something like 6,000,000 MWh a year, but produces about 50,000,000 MWh a year via its two binational hydroelectric dams Itaipú and Yacyretá. Right now, this excess energy is sold to its neighbors, the co-owners of the two dams (Brazil and Argentina, respectively). This excess, however, could be used to power data centers and, even were Paraguay's domestic consumption to double or treble in the next ten years (an unprecedented growth rate), there'd still be plenty. Itaipú electricity costs about $44 per MWh--a bargain compared to what the average cost is for industry in the U.S., $67.2 per MWh in 2011.

Paraguay is a developing country and this would bring in not only revenue, but improved infrastructure. It's geologically stable (landlocked--no hurricanes or tsunamis; not on a fault line--no volcanoes or earthquakes). And it's physically close to the growing South American giant: Brazil, whose internet and data consumption is continuing to skyrocket.

The place to develop this kind of data park would be in the eastern "department" ("state") of Alto Paraná, probably actually on the site of Acaray (a small hydroelectric dam) or the Paraguayan side of Itaipú, where there's already engineering capacity, security, and the beginning of necessary infrastructure.

The entire proposal, written in Spanish, is here: Uso de energía excedente en Paraguay para alimentar centros de cómputo.