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Paraguay International Factors and the Economy
During the 1960s and 1970s, the main foreign influences on
Paraguay were Brazil and the United States. Both countries aided
Paraguay's economic development in ways that enhanced its political
stability. A 1956 agreement with Brazil to improve the transport
link between the two countries by building roads and a bridge over
the Río Paraná broke Paraguay's traditional dependence on Argentine
goodwill for the smooth flow of Paraguayan international trade.
Brazil's grant of duty-free port facilities on the Atlantic Coast
was particularly valuable to Paraguay.
Brazil's financing of the US$19 billion Itaipú Dam on the Río
Paraná between Paraguay and Brazil had far-reaching consequences
for Paraguay. Paraguay had no means of contributing financially to
the construction, but its cooperation--including controversial
concessions regarding ownership of the construction site and the
rates for which Paraguay agreed to sell its share of the
electricity--was essential. Itaipú gave Paraguay's economy a great
new source of wealth. The construction produced a tremendous
economic boom, as thousands of Paraguayans who had never before
held a regular job went to work on the enormous dam. From 1973
(when construction began) until 1982 (when it ended), gross
domestic product
(GDP--see Glossary)
grew more than 8 percent
annually, double the rate for the previous decade and higher than
growth rates in most other Latin American countries. Foreign
exchange earnings from electricity sales to Brazil soared, and the
newly employed Paraguayan workforce stimulated domestic demand,
bringing about a rapid expansion in the agricultural sector
(see Growth and Structure of the Economy
, ch. 3).
There were, however, several drawbacks to the construction at
Itaipú. The prosperity associated with the major boom raised
expectations for long-term growth. An economic downturn in the
early 1980s caused discontent, which in turn led to demands for
reform. Many Paraguayans, no longer content to eke out a living on
a few hectares, had to leave the country to look for work. In the
early 1980s, some observers estimated that up to 60 percent of
Paraguayans were living outside the country. But even those people
who were willing to farm a small patch of ground faced a new
threat. Itaipú had prompted a tidal wave of Brazilian migration in
the eastern border region of Paraguay. By the mid-1980s, observers
estimated there were between 300,000 and 350,000 Brazilians in the
eastern border region. With Portuguese the dominant language in the
areas of heavy Brazilian migration and Brazilian currency
circulating as legal tender, the area became closely integrated
with Brazil
(see Immigrants
, ch. 2). Further, most of Paraguay's
increased wealth wound up in the hands of wealthy supporters of the
regime. Landowners faced no meaningful land reform, the regime's
control of labor organizers aided businessmen, foreign investors
benefited from tax exemptions, and foreign creditors experienced a
bonanza from heavy Paraguayan borrowing. Although the poorest
Paraguayans were somewhat better off in 1982 than they were in the
1960s, they were worse off relative to other sectors of the
population.
Closer relations with Brazil paralleled a decline in relations
with Argentina. After Perón's expulsion, Paraguay slipped from the
orbit of Buenos Aires as Argentina declined politically and
economically. Argentina, alarmed by Itaipú and close cooperation
between Brazil and Paraguay, pressed Stroessner to agree to
participate in hydroelectric projects at Yacyretá and Corpus
(see Electricity
, ch. 3). By pitting Argentina against Brazil,
Stroessner improved Paraguay's diplomatic and economic autonomy and
its economic prospects.
Stroessner also benefited from the 1950s and 1960s Cold War
ideology in the United States, which favored authoritarian,
anticommunist regimes. Upon reaching Asunción during his 1958 tour
of Latin America, Vice President Richard M. Nixon praised
Stroessner's Paraguay for opposing communism more strongly than any
other nation in the world. The main strategic concern of the United
States at that time was to avoid at all costs the emergence in
Paraguay of a left-wing regime, which would be ideally situated at
the heart of the South American continent to provide a haven for
radicals and a base for revolutionary activities around the
hemisphere. From 1947 until 1977, the United States supplied about
US$750,000 worth of military hardware each year and trained more
than 2,000 Paraguayan military officers in counterintelligence and
counterinsurgency. In 1977 the United States Congress sharply cut
military assistance to Paraguay.
Paraguay regularly voted in favor of United States policies in
the United Nations (UN) and the Organization of American States
(OAS). Stroessner, probably the United States' most dependable ally
in Latin America, once remarked that the United States ambassador
was like an extra member of his cabinet. Relations faltered
somewhat during the administration of President John F. Kennedy, as
United States officials began calling for democracy and land reform
and threatened to withhold Alliance for Progress funds (an amount
equal to about 40 percent of Paraguay's budget) unless Paraguay
made progress. Although pressure of this sort no doubt encouraged
Stroessner to legalize some internal opposition parties, it failed
to make the Paraguayan ruler become any less a personalist
dictator. Regime opponents who agreed to play Stroessner's
electoral charade received rewards of privileges and official
recognition. Other opponents, however, faced detention and exile.
Influenced by Paraguay's support for the United States intervention
in the Dominican Republic in 1965, the United States became
friendlier to Stroessner in the mid-1960s under President Lyndon B.
Johnson. New United States-supported military governments in Brazil
and Argentina also improved United States-Paraguay ties.
Relations between Paraguay and the United States changed
substantially after the election of President Jimmy Carter in 1976.
The appointment of Robert White as United States ambassador in 1977
and the congressional cut-off of military hardware deliveries in
the same year reflected increasing concern about the absence of
democracy and the presence of human rights violations in Paraguay
(see
The United States, ch. 4).
Data as of December 1988
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