Paraguay’s current president, Mario Abdo Benitez, was elected in April 2018. When he was sworn into office in August that year, it represented a second consecutive five-year term in power for the conservative Colorado Party, following the right-wing presidency of Horacio Cartes. At 48, Abdo Benitez is one of the youngest heads of state in Latin America along with Nayid Bukele in El Salvador, Luis Lacalle Pou in Uruguay and Ivan Duque in Colombia. Before becoming president, Abdo Benitez, who is also known for his entrepreneurship in the construction and infrastructure industry, served five years as senator, one of them as the body’s president.

Throughout the last century, Paraguay has struggled with a military dictatorship and ultra right-wing political movements. Between 1954 and 1989, the country was ruled by the military dictator Alfredo Stroessner, who was a Nazi sympathizer of German descent. Stroessner’s 35-year reign came to an end with a coup led by General Andres Rodriguez, who subsequently acted as president from 1989 to 1993. Stroessner was exiled in Brazil, where he lived until his death in 2006, never acknowledging the numerous crimes committed during his regime.

Both Stroessner and Rodriguez were officially affiliated with the Colorado Party, which formally ruled Paraguay between 1948 and 2008. In 2008, the Colorado’s right-wing hegemony was pierced by the election of a former Catholic bishop-turned-leftist politician, Fernando Lugo. However, President Lugo’s term in office was marked by a great deal of resistance from the country’s establishment and ended abruptly in June of 2012 with a legislative impeachment process that some in the country and the region denounced as a parliamentary coup.

Paraguay’s Haunted History

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Lugo’s mandate was completed by Vice President Federico Franco as interim president. Since then, the Colorado Party has regained power in Paraguay. Nonetheless, Fernando Lugo has served as senator in Paraguay since 2013 and is still a popular figure amongst the country’s progressive bases.

More recently, in 2017, President Horacio Cartes tried to modify the post-Stroessner constitution to allow his own reelection, but this move sparked a wave of protests that forced the proposal’s withdrawal. Constitutionally barred from seeking reelection, President Cartes passed the party’s leadership and nomination to Mario Abdo Benitez, himself a descendant of the traditional Colorado lineage from the days of the dictatorship.

Domestic and Regional Agenda

Both Cartes and Abdo Benitez have focused on making Paraguay a fiscally attractive and economically stable destination for foreign investment. Efforts to achieve this have been so successful, that earlier this year Paraguay placed $1 billion in a dollar-denominated 10-year (weighted average life) government bond issuance to support the country’s recovery from COVID-19. Paraguay’s strong fiscal and macroeconomic fundamentals led to an oversubscribed offering and a favorable net interest cost for the landlocked South American nation.

Nevertheless, low tax rates and lax fiscal controls have also created headaches for Paraguay’s national treasury, compliance and other financial institutions as they seek to curb money laundering and the financing of illegal actors. In addition to smuggling and contraband, Abdo Benitez’s government has faced the mounting challenge of addressing the presence of illegal groups such as Hezbollah and the Paraguayan People’s Army (EPP), a leftist guerilla founded in 2008 with an estimated force of 100-200 members.

On the diplomatic front, President Abdo Benitez has been an active leader within Latin America’s Lima Group and was one of the first heads of state in the region to recognize Juan Guaido’s proclamation as interim president in Venezuela, breaking ties with the Maduro regime. In 2019, President Abdo Benitez also announced Paraguay’s withdrawal from UNASUR, an increasingly moribund multilateral institution that was created by the continent’s leftist “pink tide” leaders between 2008 and 2011 as South America’s alternative to the Organization of American States, which they perceive as too influenced by Washington.

Meanwhile, Paraguay has maintained stable relations with its neighbors, particularly as they seek greater regional integration and policy coordination. Nonetheless, porous borders, particularly at the tri-border region with Argentina and Brazil, remain a challenge in terms of tax evasion, drug and human trafficking, and money laundering.

Global Projection

Paraguay is currently one of the few remaining countries in Latin America — and the last one in South America — to diplomatically recognize Taiwan as the legitimate representative of the Republic of China. To this end, Asuncion hosts one of Taipei’s last embassies in Latin America after Panama and the Dominican Republic switched their diplomatic recognition to Beijing in recent years, driven largely by the promise of trade and investment benefits.

Nevertheless, President Abdo Benitez is also exploring the possibility of following the path that US President Nixon opened up for Latin America back in 1972 by recognizing Beijing at Taipei’s expense. Intentions by the region’s Mercosur trade bloc, which includes Paraguay, Argentina, Brazil and Uruguay, to sign a trade agreement with Beijing are also putting pressure on Asuncion to switch its diplomatic recognition.

A relatively small capital city for the Southern Cone region, Asuncion doesn’t host many diplomatic missions from countries outside of the Western Hemisphere because many European and Asian governments fold representation to Paraguay into their embassies in larger capitals such as Buenos Aires or Brasilia. However, in December 2018, Turkey’s President Recep Tayyip Erdogan visited Asuncion for the first time, following the opening of a new Turkish Embassy there, and announced plans by both countries to increase trade and commercial exchanges.

Part of a diplomatic waltz, Turkey’s government inaugurated its new embassy following Abdo Benitez’s reversal of his predecessor’s decision to relocate the Paraguayan Embassy in Israel from Tel Aviv to Jerusalem on the heels of the Trump administration’s controversial move.

COVID-19 and the Itaipu Dam

Like most countries around the world, Paraguay has taken measures to prevent the spread of COVID-19. For example, Abdo Benitez’s government has suspended in-person classes nationwide until at least December. In recent weeks, given the low infection numbers, the national government began a staged reopening of the Paraguayan economy after months of quarantine. While seeking aid from the International Monetary Fund, in addition to the debt emission, President Abdo Benitez has allowed the reactivation of small and mid-sized businesses in specific sectors throughout Paraguay.

Although Paraguay’s Constitution only allows heads of state to serve a single term, the Colorado Party’s hold on power and President Abdo Benitez’s legacy will be tied to two key issues: the handling of the COVID-19 crisis and the renegotiation of an accord with Brazil that governs the joint Itaipu Dam. A central policy issue in Paraguay since its inception in 1973, Itaipu is Latin America’s largest hydropower generator. Located on the Parana River, this mega-dam was constructed jointly with the Brazilian government and, at the time, the Stroessner regime didn’t negotiate as favorable of a deal as it could have on the partition of the electricity generated, which represents over 90% of Paraguay’s energy consumption and about 20% of Brazil’s energy mix.

Under the current treaty, which is set to expire in 2023, Paraguay sells its excess Itaipu electricity to Brazil on terms that are very generous to Brazil while short-changing the Paraguayan people and its economy. Thus, for decades, Paraguayans have regarded the unfavorable terms of the Itaipu Treaty as a source of national shame and as one of the dictatorship’s lasting failures. Paraguay negotiated the terms of the Treaty in 1973 from a position of weakness vis-à-vis Brazil, and it is still unclear whether President Abdo Benitez will be able to negotiate from a stronger position than the Stroessner regime. Whatever happens across the table from Brazil’s Jair Bolsonaro, this final year in office will shape the Paraguayan president’s legacy, giving him a unique opportunity at historical redemption of the Abdo Benitez surname in Paraguay.

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.