Download Summary: President Cartes approved the enabling regulations for

BREAKING FROM THE PAST
MARCH 2014 (#166)
Summary: President Cartes approved the enabling regulations for the law to allow
public / private sector alliances for infrastructure projects. GDP growth in 2013 may
be higher than estimated by the Central Bank. A peaceful one-day general strike
elicited a promise by the Executive to set up working groups to hear out labor
concerns. Foreign Minister Loizaga was active in getting closer to the Pacific Alliance
countries while maintaining correct relations with the rest of MERCOSUR
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Government and Politics: General Strike: Major labor organizations led a oneday general strike March 26. Their demands included the striking down of the
recently passed law allowing Public – Private (APP) sector alliances for various
infrastructure projects; a 25% increase in the minimum wage; agrarian reform, and a
host of other issues. The private sector expressed its support for the right to strike
but questioned the seriousness of this strike at a time when the economy was growing
as never before and foreign and local investments were increasing rapidly.
The strike itself was peaceful despite calls from the left to shut down the country.
President Cartes gave a conciliatory address and promised to closely analyze all the
demands of the demonstrators at working group meetings beginning March 27.
Security Zone: Congress shelved a bill that created a border security zone
prohibiting foreigners from purchasing Paraguayan land within a certain distance
from the border.
The so-called People’s Army of Paraguay (EPP) was active at the beginning of the
month when it destroyed farm machinery at a ranch near Horqueta. The government
has permanently stationed a military contingent in the region and is working to
increase its intelligence capabilities.
Economy: Inflation: The inflation rate for February was 0.7%, bringing the yearly
rate to 5.4%, slightly above the 5% target set by the Central Bank for 2014.
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An IMF representative, on a recent visit, questioned the high rates for loans being
charged by banks operating in Paraguay. The high spreads were adopted a decade
ago to deal with the then banking crisis but should be revised now, he said.
Growth: The Central Bank reported that final GDP growth figures for 2013 could be
in the range of 14.4%, higher than the current 13.6% estimate, as a result of strong
growth in construction, agriculture (soya and wheat), and in the export of beef.
Agriculture: The U.S. Department of Agriculture is reported to have increased by 23%
its estimate of the amount of soya to be processed into edible oil in Paraguay in 2014.
This would make Paraguay the world´s 8th largest processor of soya.
Contraband: Paraguayan customs officials uncovered a warehouse containing 160
tons of contraband sugar. In general, Paraguayan customs has been more aggressive
in going after contraband trade given the negative effects this trade has had on local
production.
Mining: The government has approved more than 40 mining permits over the past
few years for prospecting, exploration and exploitation of minerals, according to a
spokesman in the Vice ministry of Mines and Energy. He also said there were enough
titanium reserves to supply a plant for decades. (23 March, ABC Color, p. 27)
Investment and Trade: Paraguay signed a Memorandum of Understanding with
Uruguay in which it agreed to participate in the construction of a deep water port
project in Rocha, Uruguay. At present 90% of Paraguay´s trade goes through
Argentina and Paraguay would like to lower that to 50%, with the other 50% going
through Uruguay. The project is motivated by continued obstacles applied by
Argentina toward Paraguayan products that must pass through Argentine waters to
foreign destinations.
Bids have been received in Brasilia for construction of a second bridge with Paraguay
that would connect the Paraguayan city of President Franco with Puerto Neira in
Brazil. The winning bid should be announced in late April.
APP: The President signed the implementing legislation for the law permitting
Public-Private Alliances. The government expects major investments under the APP
in the areas of roads, waterways, airports and urban transport.
Exchange Rate: The dollar was selling at 4520 guaranies on March 31, 20 points
higher than a month earlier.
Foreign Relations: Venezuela and UNASUR: Paraguay’s Foreign Minister, Eladio
Loizaga, did not attend the meeting of UNASUR Foreign Ministers in Caracas on the
grounds that he had not received the expanded agenda, also requested by Peru and
Colombia, which would include hearing from all the interested parties involved in the
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troubles in Venezuela country. Paraguay has also favored an OAS meeting on the
subject, putting it at odds with the other, “Bolivarian,” members of MERCOSUR.
Argentina: Issues that Paraguay has with Argentina include the following:
-- Argentine construction of a uranium processing plant in Formosa, on the border
with the Paraguayan city of Pilar. Paraguay has formally requested a detailed report.
Argentina had not informed Paraguay of the project and has yet to respond in detail.
-- Review of the treaty governing the Yacyretá hydro electric plant. There are strong
opinions that Paraguay has lost billions of dollars to Argentina over what is seen as an
unjust treaty signed in 1974 by Peron and Stroessner. The treaty allows for review
after 40 years or as of March 27, 2014. A negotiating team is being sent to Buenos
Aires.
-- Limiting the number and size of Paraguayan barges taking soya and other products
to foreign markets, with serious losses for Paraguay’s exporters.
-- Periodic requirements that increase the production costs for Paraguay´s exports.
-- On the positive side, bilateral meetings continue and have resolved issues such as
dredging and maintaining the waterways.
Chile: President Cartes attended the inauguration of President Michelle Bachelet on
March 10. Chile has become more important to Paraguay as the latter searches for
ways to reduce its dependence on MERCOSUR and looks to the Pacific Alliance
countries of Mexico, Colombia and Peru as an alternative.
Mexico: Following a meeting between President Cartes and President of Mexico
Enrique Peña Nieto, Paraguay´s Foreign Minister told reporters that he would be
meeting with his Mexican counterpart to work out an economic agreement, a step that
is required in order to move to observer status in the Pacific Alliance.
Colombia: Foreign Minister Maria Angela Holguin visited Paraguay March 24 to
discuss the Pacific Alliance, reflecting a growing friendship with the Pacific Alliance
group.
United States: Undersecretary of State for Latin America Roberta Jacobson visited
Paraguay March 20 and praised the development and strength of its democracy.
What to look for in April 2014: … results of working group meetings between
government and labor leaders … negotiations with Argentina over revision of the
treaty governing the Yacyretá hydro electric plant … bilateral meetings with Argentina
to resolve trade disputes …
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