Paraguay

PARAGUAY

LOCATION, SIZE, AND EXTENT
TOPOGRAPHY
CLIMATE
FLORA AND FAUNA
ENVIRONMENT
POPULATION
MIGRATION
ETHNIC GROUPS
LANGUAGES
RELIGIONS
TRANSPORTATION
HISTORY
GOVERNMENT
POLITICAL PARTIES
LOCAL GOVERNMENT
JUDICIAL SYSTEM
ARMED FORCES
INTERNATIONAL COOPERATION
ECONOMY
INCOME
LABOR
AGRICULTURE
ANIMAL HUSBANDRY
FISHING
FORESTRY
MINING
ENERGY AND POWER
INDUSTRY
SCIENCE AND TECHNOLOGY
DOMESTIC TRADE
FOREIGN TRADE
BALANCE OF PAYMENTS
BANKING AND SECURITIES
INSURANCE
PUBLIC FINANCE
TAXATION
CUSTOMS AND DUTIES
FOREIGN INVESTMENT
ECONOMIC DEVELOPMENT
SOCIAL DEVELOPMENT
HEALTH
HOUSING
EDUCATION
LIBRARIES AND MUSEUMS
MEDIA
ORGANIZATIONS
TOURISM, TRAVEL, AND RECREATION
FAMOUS PARAGUAYANS
DEPENDENCIES
BIBLIOGRAPHY

Republic of Paraguay
República del Paraguay

CAPITAL: Asunción

FLAG: The national flag, officially adopted in 1842, is a tricolor of red, white, and blue horizontal stripes. The national coat of arms appears in the center of the white stripe on the obverse, and the Treasury seal in the same position on the reverse.

ANTHEM: Himno Nacional, beginning "Paraguayos, república o muerte" ("Paraguayans, republic or death").

MONETARY UNIT: The guaraní (g) is a paper currency of 100 céntimos. There are notes of 1, 5, 10, 50, 100, 500, 1,000, 5,000, and 10,000 guaraníes. g1 = $0.00016 (or $1 = g6,158.47) as of 2005.

WEIGHTS AND MEASURES: The metric system is the legal standard.

HOLIDAYS: New Year's Day, 1 January; San Blas Day, 3 February; National Defense Day, 1 March; Labor Day, 1 May; Independence Days, 1415 May; Peace Day, 12 June; Founding of Asunción, 15 August; Constitution Day, 25 August; Victory Day (Battle of Boquerón), 29 September; Columbus Day, 12 October; All Saints' Day, 1 November; Our Lady of Caacupé, 8 December; Christmas, 25 December. Movable religious holidays are Holy Thursday, Good Friday, and Corpus Christi.

TIME: 8 am = noon GMT.

LOCATION, SIZE, AND EXTENT

One of South America's two landlocked countries, Paraguay has a total area of 406,750 sq km (157,047 sq mi). Comparatively, the area occupied by Paraguay is slightly smaller than the state of California. The western 246,925 sq km (95,338 sq mi) of the country constitute a dry, sparsely populated region known as the Chaco, while the remaining 159,827 sq km (61,709 sq mi) lie in the more verdant east. Paraguay extends 992 km (616 mi) ssennw and 491 km (305 mi) enewsw. Bounded on the ne and e by Brazil, on the se, s, and w by Argentina, and on the nw and n by Bolivia, Paraguay has a total boundary length of 3,920 km (2,436 mi).

Paraguay's capital city, Asunción, is located in the southwestern part of the country.

TOPOGRAPHY

The eastern part of Paraguay contains luxuriant hills, meadows, and forests. The western three-fifths is a waterless prairie covered with dry grass and sparsely dotted with shadeless trees. The southward-flowing Paraguay River, the nation's most important water-way, divides the two sections; this river, which for a long time was Paraguay's principal contact with the outside world, rises in south-western Brazil and extends for a total length of 2,549 km (1,584 mi). The Pilcomayo River, which rises in the mountains of southern Bolivia and extends about 1,600 km (1,000 mi), flows south-east, forming the southwestern border between Argentina and Paraguay, and joins the Paraguay near Asunción.

The eastern sector of Paraguay comprises the western part of the great Paraná Plateau, varying from 300 to 610 m (1,000 to 2,000 ft) in altitude. The Paraná Rivercalled Upper (Alto) Paraná in Paraguayflows southward from south-central Brazil through the center of the plateau, dropping in the Guairá Falls at the easternmost point in the Paraguay-Brazil frontier. Between the Guairá Falls and the confluence with the Paraguay River at the southwestern tip of the country, the Paraná passes through a deep canyon that forms the eastern and southern frontier with Argentina.

Just west of the plateau is an area of gently rounded hills descending to the low plains that stretch westward to the Paraguay River. These hills occur in two series, one extending northwest-ward to the Paraguay River just north of Concepción, and the other meeting the river at Asunción. The remaining territory east of the Paraguay River is composed of lowland plain, much of it subject to annual floods.

West of the Paraguay River is the Chaco, part of the larger Gran Chaco, which includes portions of Argentina, Bolivia, and Brazil. The Gran Chaco, a vast alluvial plain composed of unconsolidated sands and clays, is crossed by the Pilcomayo and Bermejo rivers, but over much of the area there are no surface streams. The water table, however, is only a few feet below the surface, and patches of alkali frequently appear during the long dry season. In many places the groundwater is salty.

CLIMATE

Two-thirds of Paraguay is within the temperate zone, one-third in the tropical zone. The climate varies from mild to subtropical. During the winter months (roughly May through August), the temperature range is 1621°c (6070°f); nights are occasionally colder. During the summer (October through March), the temperature range is 2538°c (77100°f), with extremes of 43°c (109°f) and above in the west. Paraguay is open to dry, cold polar winds from the south and to hot, humid north winds from southwestern Brazil; sudden sharp drops in temperatures are not uncommon. Rainfall averages about 152 cm (60 in) a year along the eastern frontier with Brazil, gradually diminishing toward the west to an average of 127 cm (50 in) along the Paraguay River and 76 cm (30 in) in the Chaco. Asunción has an annual average of about 130 cm (50 in), which is moderate for its latitude. There is no definite rainy season, although violent thunderstorms sometimes occur in the summer.

FLORA AND FAUNA

The vegetation, like the rainfall, is concentrated in the Paraná Plateau and diminishes toward the west. Tall broadleaf trees, some evergreen and some deciduous, cover eastern Paraguay, thinning out on the red sandy soils of the hilly perimeter. Scrub woodland and palm also dot the sandy plateau areas. Between the semideciduous forest and the Paraguay River, the vegetation is mostly the savanna type mixed with scattered palms. In contrast, the Chaco supports primarily deciduous scrub woodlands, luxuriant along the Paraguay River but becoming more and more xerophytic as the rainfall decreases toward the west.

The eastern forests abound in hardwoods, including indigenous varieties such as urunday, cedron, curupay, and lapacho. Softwoods are scarce. In the northern Chaco, along the Paraguay River, there are scattered stands of quebracho and many large, spreading trees, such as the ceiba. Medicinal herbs, shrubs, and trees abound, as well as some dyewoods. Yerba maté, a holly popularly used in tea, grows wild in the northeast.

Animals found in Paraguay include the jaguar (especially numerous in the Chaco), wild boar, capybara, deer, armadillo, anteater, fox, brown wolf, carpincho, and tapir. Paraguay abounds with crocodiles along its watercourses, and the boa constrictor thrives in the west. The carnivorous piranha is common.

As of 2002, there were at least 305 species of mammals, 233 species of birds, and over 7,800 species of plants throughout the country.

ENVIRONMENT

Agencies responsible for environmental protection include the National Environmental Health Service, the Ministry of Public Health, and the Ministry of Public Works and Communications.

Nearly all forests are privately owned and little was done to develop a national forest policy until the establishment in 1973 of the National Forest Service. Paraguay's forests are currently threatened by the expansion of agriculture. At most recent estimate, about a third of the nation's forest and woodland area has been lost. The absence of trees contributes to the loss of soil through erosion.

Water pollution is also a problem. Its sources include industrial pollutants and sewage. The nation has 94 cu km of renewable water resources with 78% of the annual withdrawal used to support farming and 7% used for industrial purposes. Only about 62% of the rural people have access to improved water sources. Some of Paraguay's cities have no facilities for waste collection.

According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included 11 types of mammals, 27 species of birds, 2 types of reptiles, and 10 species of plants. Threatened species include the black-fronted piping guan, black caiman, spectacled caiman, and broad-nosed caiman. The glaucous macaw has become extinct.

POPULATION

The population of Paraguay in 2005 was estimated by the United Nations (UN) at 6,158,000, which placed it at number 100 in population among the 193 nations of the world. In 2005, approximately 4% of the population was over 65 years of age, with another 32% of the population under 15 years of age. There were 102 males for every 100 females in the country. According to the UN, the annual population rate of change for 200510 was expected to be 1.7%, a rate the government viewed as too high. The projected population for the year 2025 was 8,565,000. The overall population density was 15 per sq km (39 per sq mi), but over 98% of the population is located in the eastern two-fifths of the country; the vast western Chaco region is virtually uninhabited.

The UN estimated that 54% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 3.25%. The capital city, Asunción, had a population of 1,639,000 in that year. Other leading cities and their estimated populations include Ciudad del Este, 239,000; Pedro Juan Encarnación, 72,300; Caballero, 66,400; Concepción, 62,000; and Pilar, 26,352.

MIGRATION

Emigration was a problem historically for Paraguay. During 195570, some 650,000 Paraguayans emigrated, mainly to Argentina, Uruguay, or Brazil. Much of the labor force of agricultural regions in Argentine border provinces is made up of Paraguayan nationals. The greatest exodus occurred after the 1947 civil war, but in the 1960s there were new waves of political emigration.

Immigration to Paraguay was limited to a few thousand Europeans during the 19th century. A major attempt by the Paraguayan government to encourage new settlers led to negotiations with Japan in 1959 for the immigration of 85,000 Japanese by 1990, but only about 8,000 arrived. An immigration agreement was signed with the Republic of Korea (ROK) in 1966. In 1985, the immigrant population totaled 199,500; the leading immigrant groups were Germans, Japanese, Koreans, Chinese, Brazilians, and Argentines. It was believed, however, that the actual number of Brazilians was 300,000350,000. The number of migrants residing in Paraguay in 2000 was 203,000. The net migration rate in 2005 was an estimated -0.08 migrants per 1,000 population. Worker remittances in 2004 amounted to $506 million. The government views the migration levels as satisfactory.

ETHNIC GROUPS

About 95% of the population is mestizo, principally a mixture of Spanish and Guaraní Amerindian. The others are pure Amerindian (13%), black, or of European or Asian immigrant stock. The Guaraní Amerindians, belonging to the Tupi-Guaraní linguistic group, had spread throughout a large area of South America east of the Andes before the Spaniards arrived. Within Paraguay, extensive intermarriage between the races resulted in almost complete assimilation.

LANGUAGES

Paraguay is a bilingual nation. Spanish, the dominant language, is taught in the schools and is spoken by slightly more than half of the people. However, the great majority of Paraguayans speak Guaraní, an Amerindian language that evolved from the southern dialect of the Tupi-Guaraní group. It is also the language of widely esteemed literature, drama, and popular music. Both Spanish and Guaraní are official languages.

RELIGIONS

Roman Catholicism is the dominant religion, accounting for about 90% of the total population. The remaining 10% consisted of mainline Protestant, evangelical Christian, Jewish, Mormon, Muslim, and Baha'i groups. There are also substantial Mennonite communities, whose practitioners originally came to the country in several waves between 1880 and 1950 in order to avoid religious persecution.

The constitution provides for freedom of conscience and recognizes no official religion. Religious groups must register through the Ministry of Education and Culture. Certain Catholic holidays are recognized as national holidays.

TRANSPORTATION

Inadequate transportation facilities have been a major impediment to Paraguay's development. For a long time, some 3,100 km (1,925 mi) of domestic waterways provided the chief means of transportation, with most vessels owned by Argentine interests. Hampered by the high costs and slow service of Argentine riverboats transporting cargo to and from Buenos Aires, the Paraguayan government put its own fleet of riverboats in operation. This remedy, however, did not solve the underlying problems of Paraguayan transport. Drought conditions frequently affect navigation, and while the Paraguay is open to river traffic as far as Concepción (about 290 km/180 mi north of Asunción), passage is sometimes hazardous to vessels of even medium draft. The inland waterways and the Río de la Plata handle more than half of Paraguay's foreign trade with Argentina, Brazil, Chile, Europe, Japan, and the United States.

Asunción, the chief port, and Concepción can accommodate oceangoing vessels. In 2005, Paraguay had 21 merchant vessels of 1,000 GRT or more, totaling 31,667 GRT. In addition, Paraguay has been given free port privileges at Santos and Paranaguá, Brazil. More than 90% of Paraguay's foreign trade passes to Asunción through ports in Argentina and Uruguay.

Road construction is another critical focus of development. In 2001, highways totaled an estimated 29,901 km (18,580 mi). Of these roads, however, only 3,067 km (1,906 mi) were paved. Two major road projects of the 1960s were the Friendship Bridge on the Brazilian border in the Iguaçu Falls area, inaugurated in 1961, and the 770-km (480-mi) all-weather Trans-Chaco Road, which extends from Asunción to Bolivia. The Friendship Bridge permits highway travel from Asunción to the Brazilian Atlantic port of Paranaguá. A bridge over the Paraguay River, linking the western and eastern parts of the country, was inaugurated in 1978. All-weather roads connecting Asunción with Buenos Aires and Puerto Presidente Stroessner with Paranaguá have also been completed. In 2003, there were 81,837 passenger cars and 80,400 commercial vehicles in use.

In 1961, the 441-km (274-mi) British-owned Paraguayan Central Railroad was sold to Paraguay for $560,000. It was subsequently renamed Ferrocarril Presidente Carlos Antonio López Railroad. There is a direct line between Asunción and Buenos Aires. Altogether as of 2004 there were some 441 km (274 mi) of standard gauge trackage, excluding narrow gauge industrial lines in the Chaco.

In 2004, there were an estimated 878 airports and airfields, only 12 of which had paved runways as of 2005. S. Pettirossi is the principal airport at Asunción. Paraguayan Air Lines (Líneas Aéreas ParaguayasLAP) provides both domestic and international service. Three carriers provide domestic service. In 2003, about 313,000 passengers were carried on scheduled domestic and international airline flights.

HISTORY

The original inhabitants of present-day Paraguay were Guaraní Amerindians of the Tupi-Guaraní language family. As many as 150,000 Amerindians may have been living in Paraguay at the time of the earliest European contacts. The first European known to have explored Paraguay was the Italian Sebastian Cabot, sailing from 1526 to 1530 in the service of Spain. The first permanent Spanish settlement, Nuestra Señora de la Asunción (Our Lady of the Assumption, present-day Asunción), was founded at the confluence of the Paraguay and Pilcomayo rivers on Assumption Day, 15 August 1537.

Paraguay's next two centuries were dominated by Jesuit missionaries, whose efforts to protect the Amerindians from Portuguese slave traders and Spanish colonists resulted in one of the most remarkable social experiments in the New World. Shortly after the founding of Asunción, missionary efforts began. The priests organized Guaraní families in mission villages (reducciones ) designed as self-sufficient communes. Amerindians were taught trades, improved methods of cultivation, and the fine arts, as well as religion. Above all, they were protected from exploitation by the Spanish colonists. As the settlements prospered and grew in number to around 30 (with over 100,000 Amerindians), the jealousy of the colonists sparked a campaign to discredit the Jesuits. Eventually, the king of Spain became convinced that the order was trying to set up a private kingdom in the New World, and in 1767, he expelled the Jesuits from the New World. Once they had left, the reducciones disappeared. As for the Spanish colony at Asunción, it dominated the area of the Río de la Plata throughout this period. However, in 1776, when Buenos Aires became the capital of the new viceroyalty of La Plata, Asunción was reduced to an outpost.

In achieving independence, Paraguay first had to fight the forces of Argentina. Buenos Aires called on Paraguay in 1810 to follow its lead in a virtual declaration of independence. Paraguay declared independence from Spain but rejected the leadership of Buenos Aires. An Argentine expedition was decisively defeated, and Paraguay completed its move toward independence by deposing the last of its royal governors in 1811.

Since then, Paraguay has been dominated by dictatorships or near-dictatorships. The first and most famous of the dictators was José Gaspar Rodríguez de Francia (known as "El Supremo"), originally a member of the five-man junta elected in 1811 to govern the newly independent nation. He was granted full dictatorial powers for three years in 1814 and thereafter had the term extended for life. Francia attempted to cut Paraguay off from all contact with the outside world. Commerce was suspended, foreigners were expelled, relations with the papacy were broken off, and an anticlerical campaign was begun. All criticism was stifled, and a widespread spy network was developed. However, at the same time, Francia was honest and tireless in his devotion to his personal concept of the country's welfare. Francia governed until his death in 1840. Today, he is regarded as Paraguay's "founding father."

The next dictator was Carlos Antonio López. López loosened the ties of dictatorship only slightly, but reversed Francia's paranoid isolationism. He reestablished communications with the outside world and normalized relations with the papacy. López encouraged road and railway building, improved education some-what, and became the largest landowner and the richest man in Paraguay. He made his son Francisco Solano López commander-in-chief of the army, thereby ensuring the younger López's succession to power in 1862, when the elder López died.

During his dictatorship, Francisco Solano López provoked quarrels with Argentina, Brazil, and Uruguay, who allied and attacked Paraguay. The War of the Triple Alliance (186570), sometimes called the Paraguayan War, was the bloodiest in Latin American history. López, who fancied himself a Latin Napoleon, drafted virtually every male in Paraguay over the age of 12, with no upper age limit, and insisted that his troops never surrender. The war was a disaster for Paraguay, which lost two-thirds of all its adult males, including López himself. Paraguay's population fell from about 600,000 to about 250,000. The war also cost Paraguay 142,000 sq km (55,000 sq mi) of territory, its economic well-being, and its pride.

For the next 50 years, Paraguay stagnated economically. The male population was replaced by an influx of immigrants from Italy, Spain, Germany, and Argentina. Politically, there was a succession of leaders, alternating between the Colorado and Liberal parties. Then, a long-smoldering feud with Bolivia broke into open warfare (193235) after oil was discovered in the Chaco, a desolate area known as the "green hell." Although outnumbered three-to-one, the Paraguayans had higher morale, were brilliantly led, and were better adapted to the climate of the region. Moreover, they regarded the conflict as a national undertaking to avenge the defeat of 1870. Paraguayans conquered three-fourths of the disputed territory, most of which they retained following the peace settlement of 1938.

Although President Eusebio Ayala emerged victorious from the Chaco War, he did not last long. The war produced a set of heroes, all of whom had great ambitions. One such man, Col. Rafael Franco, took power in February 1936. In 1939, after two more coups, Gen. José Felix Estigarribía, commander-in-chief during the Chaco War, was elected president. Estigarribía was killed in an airplane crash only a year later, and Gen. Higinio Morínigo, the minister of war, was appointed president by the cabinet. Through World War II, Morínigo received large amounts of aid from the United States, even though he allowed widespread Axis activity in the country. Meanwhile, he dealt harshly with domestic critics.

Morínigo retired in 1948, but was unable to find a successor. After a one-year period of instability, Federico Chávez seized control, and ruled from 1949 until 1954. In May 1954, Gen. Alfredo Stroessner, commander-in-chief of the armed forces, used his cavalry to seize power. He had himself elected president as the candidate of the Colorado Party, and then was reelected in another single-slate election in 1958, although he did permit the Liberal Party to hold its first convention in many years. With help from the United States, he brought financial stability to an economy racked by runaway inflation, but he used terrorist methods in silencing all opposition. Exiles who invaded Paraguay simultaneously from Argentina and Brazil in December 1959 were easily routed. Six other small invasions during 1960 were also repulsed. Stroessner won a third presidential term in February 1963, despite the constitutional stipulation that a president could be reelected only once. In August 1967, a constitutional convention approved a new governing document that not only provided for a bicameral legislature but also established the legal means for Stroessner to run for reelection. Stroessner did so in 1968, 1973, 1978, 1983, and 1988, all with only token opposition permitted. On 17 September 1980, the exiled former dictator of Nicaragua, Anastasio Somoza Debayle, who had been granted asylum by the Stroessner government, was assassinated in Asunción, and Paraguay broke off relations with Nicaragua.

During the 1980s, Stroessner relaxed his hold on Paraguay. The state of siege, which had been renewed every three months since 1959 (with a partial suspension from February 1978 to September 1980), was allowed to lapse in April 1987. Opponents of the regime gave credit for the ending of the state of siege to the United States, which had kept pressure on the Stroessner administration. However, allegations of widespread human rights abuses continued to be made. In April 1987, Domingo Laíno, an opposition leader exiled in December 1982 who had tried unsuccessfully to enter the country on five earlier occasions, was allowed to return to Paraguay. Part of this liberalization may have been in response to mounting criticism from the Roman Catholic Church, whose position moved closer to that of the various dissident groups.

On 3 February 1989 Stroessner's 35-year dictatorship came to an end at the hand of Gen. Andrés Rodríguez, second in command of the Paraguayan military. Immediately after the coup, Rodríguez announced that elections would be held in May. With only three months to prepare, little opposition beyond Domingo Laíno was mounted, and Rodríguez won easily with 75.8% of the vote. There followed an immediate easing of restrictions on free speech and organization. Labor unions were recognized and opposition parties allowed to operate freely. Rodríguez promised and delivered elections in 1993. In those elections, Colorado candidate Juan Carlos Wasmosy was elected to the presidency, the first time a civilian had become president through popular election since 1954. Paraguay had experienced an unprecedented transfer of political power through a constitution from one elected government to another. Wasmosy began to push for economic liberalization, including the sale of state-owned enterprises, but it was unclear whether the military was willing to support such measures.

In April 1996, General Lino Cesar Oviedo staged a brief rebellion when asked by Wasmosy to resign his post as army commander, but a coup was averted and Oviedo was eventually acquitted of charges of armed insurrection. Oviedo, now a civilian, has become the leader of an opposing faction of Wasmosy's Colorado Party. Other than Oviedo's short-lived rebellion, however, no serious threats to Wasmosy's economic and political reforms have been offered. In fact, the more democratic environment was tested and proven in 1993 by the first general labor strike in 35 years. Although the government responded with some force to this first strike, subsequent strikes have been met with a much gentler governmental hand. Unfortunately, the economy itself has been slow to respond to the new reforms. In the 1990s, Paraguay experienced 0% economic growth.

In the 1998 presidential elections, Raúl Cubas of the Colorado Party became president with 55.3% of the vote, but a year later he had to resign after the assassination of Vice President Luis Argaña. Cubas was closely associated with General Oviedo and the latter was linked to the political assassination. Upon Cubas' resignation, the president of the Senate, Luis González Macchi, was sworn in as president. Cubas sought exile in Brazil and Oviedo sought refugee in Argentina. González was correctly considered as a caretaker until new elections were held in 2003.

On 27 April 2003, Colorado Party candidate Oscar Duarte won the presidential election with 37.1% of the vote. Duarte promised to fight corruption in his party and the country. He sought to distance himself from former Colorado Party leaders and sought to portray himself as a modernizer and democratizing leader that would open Paraguay to the world economy. Yet, his tenure had been rather modest in accomplishments. Duarte's party commanded support from 37 of the 80 members of the Chamber of Deputies and from 16 of the 45 members of the Senate. Thus, in order to advance his legislative initiative, he had to seek support from minority parties. Because he promised to fight corruption and promote transparency, it was difficult to bargain with corruption-prone parties. Moreover, because he failed to command majority control of congress, many of his anticorruption initiatives failed to materialize. The economy grew due primarily to a strong growth in Brazil, Paraguay's most important trade partner. Yet, government reform did not follow suit. The country remained somewhat isolated from the world and failed to seize trade opportunities. Poverty remained high and despite the good intentions, Duarte's tenure did not deliver on many of the promises made during the campaign. Yet Duarte helped consolidate democratic order and brought about stability which was threatened under the Cubas government.

GOVERNMENT

Under the constitution of 25 August 1967, Paraguay was a republic, with substantial powers conferred on the executive. The Constituent Assembly revised the constitution on 20 June 1992, but kept most of the structure from the previous document, while limiting many of the powers Stroessner used during his administration. The judicial system was also slated for overhaul.

The president is directly elected for a five-year term. The president is commander-in-chief of the military forces and conducts foreign relations. He appoints the 11-member cabinet, most administrators, and justices of the Supreme Court. He is advised by the Council of State, consisting of the cabinet ministers, the president of the National University, the archbishop of Asunción, the president of the Central Bank, and representatives of other sectors and the military.

The 1967 constitution provided for a bicameral legislature, consisting of the 45-member Senate and the 80-member Chamber of Deputies. Representatives must be at least 25 years of age and are elected for five-year terms. Voting is by secret ballot and is compulsory for all citizens ages 1860. Women were first allowed to vote in 1963.

POLITICAL PARTIES

Since the end of the War of the Triple Alliance, two parties have dominated politicsthe National Republican Association (Asociación Nacional Republicana), generally known as the Colorado Party, and the Liberal Party. Both parties have exemplified the uncompromising nature of Paraguayan politics and used their position to stifle the opposition. Consequently, changes of administration have been effected principally by armed revolt.

The Colorado Party governed from its founding in 1887 until 1904, and again after 1947. Conservative and nationalistic, the Colorados split during the 1950s into two factions: the "officialist" Colorados supported the Stroessner dictatorship, while the People's Colorado Movement (Movimiento Popular ColoradoMOPOCO) styled itself a supporter of "representative democracy." Most of the MOPOCO leadership chose exile in 1959. In the 1980s the Colorados became even more divided. Three groups emerged: a "militant" pro-Stroessner faction; "traditionalists," pushing for Stroessner to step down; and a reformist "ethical" faction, which is interested in cleaning up government corruption.

The 1989 coup was engineered by a leader of the "traditionalist" faction. Wasmosy, the first freely elected civilian president who took office in 1993, was more reformist in his approach. Raúl Cubas was elected party president in 1998. He ran against his fellow party member Wasmosy and was supported by Gen. Lino Oviedo, who had attempted a military coup against Wasmosy in 1995. After the assassination of Colorado Party vice president Luis Argaña in 1999, Cubas had to resign. Senate president Luis González, also from the Colorado Party, became president. González faced accusations of corruption but an effort to impeach him failed in 2002. Even with the hefty parliamentary majority45 out of 80 seats in the Chamber and 24 out of 45 seats in the Senatethe Colorados remained badly split and in disrepair until 2003. That year, the Colorado Party only won 37 seats in the Chamber and 16 seats in the Senate, falling short of a majority control in either chamber.

The Liberal Party, like the Colorados, appeared in 1887. They seized power in 1904 and governed until 1936. Banned in 1942, the Liberals were reconstituted during the 1960s. There has never been a recognizable ideological distinction between the Liberals and Colorados, but the two parties are similar in their disunity. Liberals had, by 1982, split into three factions: the Authentic Radical Liberal Party (Partido Liberal Radical AuténticoPLRA), the Liberal Teeté Party (Partido Liberal TeetéPLT), and the Radical Liberal Party (Partido Liberal RadicalPLR). After 1989, the PLRA and the PLR reemerged to compete for votes, with the PLRA considerably stronger. The PLRA, led by Domingo Laíno, was the largest opposition party in 1996. In the 1998 presidential and parliamentary elections Laíno obtained 43.9% of the vote and his party secured 27 out of 80 seats in the Chamber of Deputies and 13 out of 45 seats in the Senate. The 2003 presidential candidate, Julio César Franco, obtained a disappointing 24% of the vote, and the Liberal Party secured 21 seats in the Chamber and 12 seats in the Senate.

A number of short-lived parties have formed. The National Encounter Party (PEN), which appealed to the urban middle class, consisted of an alliance of several smaller parties and civic organizations. The PEN won eight seats in the Senate and nine seats in the Chamber of Deputies in the 1993 elections. But in 2003, it failed to win seats in either chamber. In 2003, three smaller partiesthe populist Movement Fatherland of the Best, the conservative National Union of Ethical Citizens, and the left-wing Party for a Country of Solidarityalso won 10, 10, and 2 seats respectively in the Chamber and 8, 7, and 2 seats respectively in the Senate.

Electoral reform has purged the voter rolls of the deceased (who usually "voted" for Colorado Party members), made voting more than once in an election a punishable crime, and established a tribunal to oversee the electoral process. These reforms appear to be working, as evidenced by fair municipal elections in 1996 and presidential and parliamentary elections in 1998 and 2003.

LOCAL GOVERNMENT

Paraguay is divided into 17 departments, which are subdivided into districts, which, in turn, comprise municipalities (the minimum requirement for a municipality is 3,000 persons) and rural districts (partidos ). A governor, elected by popular vote, runs each department. Municipal government is exercised through a municipal board, chosen by direct election, and an executive department. In the principal cities and capitals, the executive department is headed by a mayor appointed by the minister of the interior; in other localities, the mayor is appointed by the presidents of the municipal boards. Police chiefs are appointed by the central government.

JUDICIAL SYSTEM

The five-judge Supreme Court exercises both original and appellate jurisdiction. There are four appellate tribunals: civil/commercial, criminal, labor, and juvenile. There are special appellate chambers for civil and commercial cases and criminal cases. Each rural district (partido ) has a judge appointed by the central government to settle local disputes and to try accused persons and sentence those found guilty. Federal judges and magistrates are appointed by the executive for a term of five years coinciding with the presidential term, so that the judges of the Supreme Court and lesser tribunals are always named by the president in power. The Council of State must approve the appointment of members of the Supreme Court and may remove them by impeachment. Justices of the peace deal with minor cases. The judicial system has been modernized and has been identified as the main tool to end widespread corruption historically associated with the government bureaucracy. Because Paraguay has been historically considered a safe haven for smuggling of goods (with Argentina and Brazil being the final destinations), an independent and powerful judiciary is deemed essential to instill the rule of law in trade and commerce in Paraguay.

The 1992 constitution provides for selection of judges by an independent body working with the congress and the executive. As of 1997 based on recommendations from the Magistrates Council, the Supreme Court nominated 215 lower court judges and magistrates. There is also a military court system for the armed forces. The judicial system is based on civil law, mainly influenced by French and Argentine codes.

ARMED FORCES

Paraguay's armed forces in 2005 amounted to 10,300 active personnel, and was supported by some 164,500 reservists. The Army numbered 7,600, and whose equipment included 12 main battle tanks and 5 light tanks, all of World War Two vintage. The Navy of 1,400 included 900 Marines and 100 naval aviation personnel. Major naval units included 28 patrol/coastal vessels and 2 amphibious landing craft. The Air Force had 1,100 active personnel with 10 combat capable, including 4 fighter ground attack aircraft. It had no armed helicopters. The country's paramilitary force consisted of the 14,800-member Special Police Service. Paraguay had compulsory military service of one year for all males 18 years of age. The defense budget in 2005 totaled $57.6 million.

INTERNATIONAL COOPERATION

Paraguay is a charter member of the United Nations, having joined on 24 October 1945; it participates in ECLAC and several nonregional specialized agencies, such as the IAEA, the World Bank, ICFTU, ILO, IMF, UNESCO, UNIDO, and the WHO. Paraguay is also a member of the South American Community of Nations, G-77, the Inter-American development Bank, the Latin American Economic System (LAES), the Latin American Integration Association (LAIA), Mercosur, the OAS, and the Río Group.

Paraguay has offered support to UN missions and operations in Ethiopia and Eritrea (est. 2000), Liberia (est. 2003), Burundi (est. 2004), Côte d'Ivoire (est. 2004), and the DROC (est. 1999). The country is a signatory of the 1947 Río Treaty, an inter-American security agreement. Paraguay belongs to the Agency for the Prohibition of Nuclear Weapons in Latin America and the Caribbean (OPANAL) and the Organization for the Prohibition of Chemical Weapons.

In environmental cooperation, Paraguay is part of the Basel Convention, the Convention on Biological Diversity, Ramsar, CITES, the Kyoto Protocol, the Montréal Protocol, and the UN Conventions on the Law of the Sea, Climate Change, and Desertification.

ECONOMY

Landlocked Paraguay has a limited economy based predominantly on agriculture (cotton and soy), livestock production, forestry, and the basic processing of materials. The country has vast hydroelectric resources, including the world's largest hydroelectric generation facility built and operated jointly with Brazil (Itaipú Dam), but it lacks significant mineral or petroleum resources. Partnering with Brazil on the Itaipú, with Argentina on the Yacyreta, and operating the Acaray dam on the Acaray River, allows Paraguay to generate all of the country's electrical power from hydroelectric plants, and even export the remaining to neighboring countries. The relative importance of agriculture has declined, and the value of services has risen; however, cattle raising remains a key economic activity. The large informal sector consists mainly of the reexport of consumer goods from Asia and the United States to neighboring countries, and of the many small street vendors and businesses that provide services.

Paraguay suffered for years from runaway inflation. The International Monetary Fund (IMF) joined with the US government in 1957 to provide stabilization loans which enabled Paraguay to establish a free exchange system and to accelerate the pace of public investment. During the 1960s, inflation ranged between 2% and 3%, but the rate increased during the following decade to 28.2% in 1979. The rate was an estimated to be 3040% through the 1980s, fueled by rapid expansion of the money supply.

During the 1980s, construction of the Itaipú hydroelectric project (which was finished in 1982) stimulated Paraguay's economic expansion. At the end of the Itaipú building boom, currency devaluations in Argentina and Brazil (and thus the relative overvaluation of the guaraní), and declining international market prices for Paraguay's agricultural products led to an economic slowdown that was exacerbated by the impact of adverse weather on the agricultural sector.

An economic reform package instituted in the early 1990s included judicial reform, a macroeconomic stabilization program featuring fiscal austerity, liberalization of the exchange rate, and efforts to privatize state-owned enterprises. But the banking crisis of 1995 required a government bailout and sent shock waves through the economy, causing a sharp drop in commercial sales. Progress on the reforms continued in 1996 but at a slow pace due to stiff political opposition. Reforms were all but abandoned in 1997 and 1998. The economy grew at a rate of 2.7% between 1988 and 1998, but GDP contracted by 0.4% in 1998, when the financial crisis was aggravated by El Niño crop damage. Inflation was at 7% in 1997, but rose to 14.6% in 1998, mainly because of the impact of the Brazilian currency devaluation, which led to a devaluation of the local currency, Paraguay's third banking crisis since 1995.

Similar to many Latin American countries during the 1980s and 1990s, Paraguay experienced small contractions alternating with slow growth; however, in 2002, the contraction in real GDP was estimated at 4.4% as the political situation became increasingly unstable. Unemployment rose to 16% in 1999, to 18% in 2000, and to 25% in 2001. An estimated 65% of the population was living below the poverty line in 2001. The integration into Mercosur (Southern Cone Common Market), did not bring the hoped-for benefits of increased foreign investment and increased exports, primarily because of the melt-down of the Argentinean economy in 2001 and 2002.

The election of President Duarte Frutos in August 2003 stabilized the situation. Aided by a firmer exchange rate and perhaps a greater confidence in the economic policy of the Duarte administration, the economy rebounded from 2003 to 2005, posting modest growth each year. Paraguay's real GDP in 2004 of $7.98 billion (in 1994 dollars) represented an increase of 3.9% from 2003 (IMF data using the prior base year of 1982 shows real GDP growth of 2.9% in 2004). Official foreign debt rose slightly in 2005, to $2.35 billion, but inflation dropped to 2.8%, down from 9.3% in 2003, the lowest rate since 1970. However, given the importance of the informal sector, accurate economic measures are difficult to obtain.

INCOME

The US Central Intelligence Agency (CIA) reported that in 2005 Paraguay's gross domestic product (GDP) was estimated at $30.9 billion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $4,900. The annual growth rate of GDP was estimated at 3.3%. The average inflation rate in 2005 was 7.5%. It was estimated that agriculture accounted for 27.5% of GDP, industry 24%, and services 48.5%.

According to the World Bank, in 2003 remittances from citizens working abroad totaled $222 million or about $39 per capita and accounted for approximately 3.7% of GDP. Foreign aid receipts amounted to $51 million or about $9 per capita and accounted for approximately 0.8% of the gross national income (GNI).

The World Bank reported that in 2003 household consumption in Paraguay totaled $5.29 billion or about $937 per capita based on a GDP of $6.0 billion, measured in current dollars rather than PPP. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the period 1990 to 2003 household consumption grew at an average annual rate of 2.8%. It was estimated that in 2005 about 32% of the population had incomes below the poverty line.

LABOR

In 2005, Paraguay's labor force totaled an estimated 2.68 million. As of 2003, agriculture accounted for 31.5% of the workforce, with 15.8% in the industrial sector and 52.7% in the services sector. In 2005, it was estimated that 16% of the labor force was unemployed.

The constitution provides Paraguayans in both the public and private sector the freedom to form and join unions without government interference. The constitution also protects fundamental worker rights, including the right of association. There also are provisions for antidiscrimination, employment tenure, severance pay, collective bargaining, and the right to strike. As of 2001, 15% of the labor force (about 121,000 workers) belonged to unions, which numbered approximately 1,600.

Labor laws provide for a maximum workweek of 48 hours for day work and 42 for night work, with one day of rest. The law also provides for an annual bonus of one month's salary. The minimum wage was $170 per month in 2001 for the private sector; the public sector has no mandated minimum. It is estimated that 50% of workers earn less than the minimum amount. The minimum working age is 15, although minors as young as 12 may work in family enterprises. In reality these provisions are not effectively enforced and thousands of children work both on farms and in urban areas.

AGRICULTURE

Cultivation utilizes about 7.9% of Paraguay's total land area. The total area under cultivation rose from 245,636 hectares (606,976 acres) in 194041 to an estimated 3,136,000 hectares (7,749,000 acres) in 2003. Primary agriculture accounts for 20% of GDP and about 35% of employment. The principal areas of cultivation are in the clearings around Asunción and Encarnación. Arable land outside these regions is sparsely settled, and inhabitants there rely principally on livestock and forestry for a living.

The two most widely cultivated crops are manioc (cassava) and corn, which, with meat, are the staples of the Paraguayan diet. Cotton, tobacco, and sugarcane are among the leading cash and export crops. A national wheat program increased production from 7,000 tons in 1965 to 23,000 tons in 1973, 55,000 tons in 1981, and 715,000 tons in 2004, eliminating the need for wheat imports. Enough beans, lentils, sweet potatoes, peanuts, coffee, and fruits are grown for home use, and slightly more than enough rice. Crops yielding edible oils are widely grown, and yerba maté is cultivated on plantations. Production of principal crops for 2004 (in tons) included sugarcane, 3,637,000; manioc, 5,500,000; soybeans, 3,583,000; corn, 1,120,000; yerba maté, 115,000; cotton, 109,000; and tobacco, 16,500. In 2004, Paraguay exported $1.35 billion in agricultural products, 68% of total exports.

ANIMAL HUSBANDRY

During the 1960s and 1970s, the meat-packing industry developed appreciably, with meat and related products constituting Paraguay's most important single export. Since the late 1970s, however, market conditions for beef exports have deteriorated, and the value of exported meat products has declined significantly. Exports of livestock and livestock products typically account for 7% of total exports and in some years comprise as much as 14%. In 2004, meat exports amounted to $159.7 million. About 7080% of beef exports are sent to Mercosur countries.

In 2005, livestock totaled 9,622,000 head of cattle, 1,600,000 hogs, 500,000 sheep, and 360,000 horses. There were also an estimated 17 million chickens that year. Beef production was about 215,000 tons. Other livestock products in 2005 included 372,400 tons of cow's milk and 100,000 tons of eggs.

FISHING

Paraguay has no appreciable fishing industry, and the consumption of fresh fish is low. The country has potential resources for fisheries, however. Dorado weighing up to 18 kg (40 lb) are caught in the Upper Paraná River, and the Paraguay River yields salmon, surubi, pacú, boga, and mandi. The catch was 25,000 tons in 2003.

FORESTRY

Although forest resources are immense, exploitation is limited by lack of roads and mechanized transport facilities. About 59% of Paraguay's total land area consists of forest (23.4 million hectares/57.7 million acres in 2000). However, much of that lies in the western Chaco, the forest resources of which have never been exploited. Roundwood cuttings totaled 9.99 million cu m (352.6 million cu ft) in 2004, with 60% used for fuel wood.

Exportation of logs was banned in 1973 in order to encourage the domestic lumber industry; forest products earned $37.5 million on the export market during 2004.

The chief forest products are quebracho, various cabinet and other tropical hardwoods, and oil of petitgrain. Quebracho, the source of the tannin used by the leather-tanning industry, is the wood of the greatest commercial importance. Paraguay is the world's largest producer of petitgrain oil, a perfume base distilled from the leaves and shoots of the bitter orange tree. Since wood and charcoal are the only fuels produced in Paraguay, about two-thirds of all wood cut is used for burning.

MINING

Paraguay's mining potential has been restricted by limited exploration, inadequate infrastructure, large fiscal and trade deficits, scarcity of foreign exchange, and limited private investment, and the reforms deemed necessary to alleviate the country's economic stagnation were impeded by political uncertainty. The mineral industry in 2003 accounted for less than 1% of GDP, and was focused on the production of cement, and the extraction of industrial minerals such as clays, gypsum, kaolin, limestone, marble, ocher, ornamental stone, silica sands, and pryophyllite soapstone talc. No minerals were among the country's top export commodities. Production for 2003 included an estimated 66,600 metric tons of kaolin and an estimated 16,300 metric tons of limestone for cement and lime. In 2003, Paraguay also produced lime, rock, dimension stone, other stone, and hydraulic cement. In addition, sandstone, mica, copper, and salt have been exploited modestly in recent years.

There were small deposits of iron ore, and a few mines were worked before 1865, but there was no evidence, until recently, of any metallic mineral deposits of commercial value. Lateritic iron ore deposits along the Paraná River near Encarnación were estimated at 300 million tons with 35% iron. Manganese deposits were known to exist near the Guairá Falls. Excellent limestone, found in large quantities along the Paraguay River north of Concepción, was quarried for the cement industry. There were also known deposits of azurite, barite, lignite, malachite, peat, pyrite, pyrolusite, and uranium. Under Paraguayan law, all mineral rights belong to the government, which has sought to encourage mining development by the privatization of some state-owned companies. A diamond-drilling and igneous exploration program begun in 1997 was completed, and there was ongoing exploration throughout the country by foreign companies.

ENERGY AND POWER

Paraguay has no known proven reserves of oil or natural gas. However, it is a major exporter of hydroelectric power.

Hydroelectric power accounts for nearly all of the country's electric power capacity. In 2002, electric power generating capacity totaled 7.416 million kW, of which hydroelectric capacity accounted for 7.410 million kW, with the remaining capacity dedicated to conventional thermal generation. Electric power output in 2002 totaled 47.774 billion kWh, of which hydroelectric plants generated 47.730 billion kWh. Geothermal/other sources generated 0.030 billion kWh, and conventional thermal sources 0.14 billion kWh. However, domestic demand for electric power totaled only2.660 billion kWh. Exports of electric power that year came to 41.770 billion kWh.

Although Paraguay has no reserves of oil, it does have a modest crude oil refining capacity. As of 1 January 2004, the country's refining capacity was estimated at 7,500 barrels per day. Crude oil imports in 2002 averaged 2,020 barrels per day, while imports of all petroleum products, averaged 25,340 barrels per day, for that year. Demand for refined petroleum products in 2002, averaged 25,050 barrels per day.

INDUSTRY

Paraguay is one of the least industrialized countries in South America. Because of the limited quantities of proven mineral reserves, there is mining only of limestone, gypsum, and clays, mostly for the building trade. Manufacturing is generally small-scale and directed toward processing agricultural products. The principal industry of Paraguay is farming; agriculture accounted for 24.1% of GDP in 2004. The leading agricultural products are cotton, sugarcane, corn, soybeans, potatoes, bananas, oranges, wheat, beans, tobacco, mandioca (yucca), and yerba maté (Paraguayan tea, which is very popular among country residents). Livestock breeding is also a major occupation, and the most favored areas are located at the Chaco and southern oriental region. Forestry is also important to the economy, while tourism plays a minor role. Most visitors are from Brazil and Argentina, demonstrating the strong economic ties with those countries.

Processing of agricultural, animal, and forestry products, mainly for export, and small-scale manufacture of consumer goods for local needs are of greatest importance. Most manufacturing is done in the Asunción area; some plants, however, are near the source of their respective raw materials. Import-substitution industries encouraged by the government include petroleum refining, foodstuffs, wood processing, and chemicals. The re-export of imported consumer goods to neighboring countries is a recent economic development. Maquila assembly operations began in 2000, with the export of leather car seats to France. Manufacturing accounted for 14.5% of GDP in 2004.

Industries include two cement plants, at Vallemí and Itapucumi, and a Paraguayan-Brazilian steel mill at Villa Hayes. Food-processing plants include slaughterhouses; flour mills; sugar mills; oil mills producing cottonseed and peanut oils for domestic consumption, as well as castor, tung, cocoa, and palm oils for export; related industries that process the by-products of oil extraction; and mills that produce yerba maté. There are numerous sawmills. A considerable but decreasing number of hides are also produced for export. Although there is a considerable textile industry, imports still run high.

SCIENCE AND TECHNOLOGY

In 1993, there were eight scientific and technological research institutes and learned societies in Paraguay, all of them located in Asunción. Notable among them are the Paraguayan Scientific Society, founded in 1921, and the South American Union of Engineers' Associations, established in 1935. The Nuestra Senora de la Asunción Catholic University, founded in 1960 at Asunción, has a faculty of science and technology. The National University of Asunción, founded in 1889, has faculties of medicine, dentistry, chemistry, exact and natural sciences, physical sciences and mathematics, veterinary sciences, and agricultural engineering. The Higher School of Philosophy, Sciences and Education, also in Asunción, was founded in 1944. In 198797, science and engineering students accounted for 20% of college and university enrollments.

In 2002, Paraguay's expenditures on research and development (R&D) totaled $24.852 million, or 0.10% of GDP. Of that amount, 63.1% came from government sources, followed by 21.8% from foreign investors. Higher education accounted for 12.7% and private nonprofit groups accounted for 2.3%. In that same year there were 83 researchers and 118 technicians that were engaged in R&D per million people High technology exports in 2002 totaled $7 million, or 3% of the country's manufactured exports.

DOMESTIC TRADE

Offices that deal with foreign concerns and most important retail establishments are in Asunción, the only significant commercial center. Most retail trade is in small shops dealing in a limited variety of goods.

Legislation in 1961 provided for governmental and private commercial credit companies to aid in the development of agricultural, livestock, and industrial activities. Consumer credit facilities have been expanding. Many of the larger Asunción stores offer installment credit.

Most commercial activity is focused on reexport of items from Asia and the United States to Argentina and Brazil. Much of this activity takes place through an underground market system, which some business groups claim is just as large as Paraguay's formal economy. The informal sector features thousands of small enterprises and urban street vendors, along with reexports of select imported consumer goods (electronics, whiskeys, perfumes, cigarettes, and office equipment).

FOREIGN TRADE

Paraguay's foreign trade is typical for an agricultural country, but the re-export trade on the black market is the country's largest foreign exchange earner. Over a third of Paraguay's reported commodity export returns comes from oil seeds (34%), while another

Country Exports Imports Balance
World 1,241.5 1,672.1 -430.6
Brazil 424.9 511.5 -86.6
Uruguay 243.1 61.5 181.6
Cayman Islands 119.8 119.8
Switzerland-Liechtenstein 97.1 67.0 30.1
Argentina 66.4 344.6 -278.2
United States 45.0 83.6 -38.6
Italy-San Marino-Holy See 40.4 14.9 25.5
Bolivia 21.4 21.4
Peru 17.9 17.9
China 16.7 211.4 -194.7
() data not available or not significant.

9.1% comes from cotton. Other exports include meat (8.3%), leather (6.0%), wood and plywood (5.5%), and vegetable oil (4.8%).

The main imports are machinery, petroleum and petroleum products, chemicals, automobiles and buses, principally from Brazil and the United States. Bilateral European Union-Paraguay trade represented 10.8% of GDP in 2004, with imports decreasing and exports increasing as a percentage of GDP for the last five years.

BALANCE OF PAYMENTS

The US Central Intelligence Agency (CIA) reported that in 2001 the purchasing power parity of Paraguay's exports was $2.2 billion while imports totaled $2.7 billion resulting in a trade deficit of $500 million. The International Monetary Fund (IMF) reported that in 2001 Paraguay had exports of goods totaling $2.41 billion

Current Account 146.0
   Balance on goods -260.2
     Imports -2,520.7
     Exports 2,260.5
   Balance on services 241.7
   Balance on income -0.1
   Current transfers 164.6
Capital Account 15.0
Financial Account 217.6
   Direct investment abroad -5.5
   Direct investment in Paraguay 90.8
   Portfolio investment assets
   Portfolio investment liabilities -0.4
   Financial derivatives
   Other investment assets 202.3
   Other investment liabilities -69.6
Net Errors and Omissions -145.8
Reserves and Related Items -232.8
() data not available or not significant.

and imports totaling $2.95 billion. The services credit totaled $580 million and debit $410 million.

Paraguay presently maintains a balance-of-payments surplus. It runs a deficit in the trade of goods, but a large surplus in services, reflecting large exports of electricity from Paraguay's two large hydroelectric dams shared with Brazil and Argentina. In 2004, official foreign exchange reserves increased almost 50% from 2002.

BANKING AND SECURITIES

The Central Bank of Paraguay (BCP) was founded in 1952 as a state-owned, autonomous agency charged with establishing the government's monetary credit and exchange policies. Recommendations in early 1961 by an economic mission of the IDB and IBRD led to the establishment of the National Development Bank to provide an effective source of medium- and long-term agricultural and industrial credits. Savings and loan institutions are regulated by the superintendent of banks. There are two state-owned banks, some locally owned banks, and nine foreign banks. Foreign-owned banks account for 86% of total deposits and 83% of all loans, and the two largest banksBanco de Asunción and Citibankare foreign-owned.

In 1995, there were 35 banks operating in Paraguay, 9 of which had opened since 1990. During the same period the number of finance companies nearly doubled, to 68. The increase in the number of banks and finance companies, out of all proportion to the size of the economy, was generally believed to be related to the rapid increase in "hot money" flows through Paraguay associated with drug smuggling. In late 1995, the Central Bank announced a freeze on the opening of new banks and finance companies on the grounds that the local market was saturated. In the same year, a currency crisis caused the collapse of ten institutions, requiring $400 million in government subsidies. The 1996 Banking Law strengthened supervision of the banking system; in 1997 Banco Union was liquidated, as were two of the largest public banks due to poor performance. There are now 40 finance companies. The International Monetary Fund (IMF) reported that in 2001, currency and demand depositsan aggregate commonly known as M1were equal to $668.1 million. In that same year, M2an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual fundswas $2.6 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 13.45%. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 20%.

Paraguay's first stock market began trading in October 1993. There are 60 local companies traded on the exchange. All companies have a minimum paid-up capital of $50,000. However, the tradition of family ownership and almost universal practice of "double accounting" for tax evasion purposes places limits on the growth of a capital market. In 1998, the stock market handled approximately $1015 million per a month in transactions.

INSURANCE

All insurance business in Paraguay is regulated by the government through the superintendent of banks. Foreign companies are permitted to operate in the country, but are under stringent requirements calling for the investment of capital and reserves. In 1995, there were 40 insurance companies operating in Paraguay. Workers'

Revenue and Grants 6,065.6 100.0%
   Tax revenue 3,676.4 60.6%
   Social contributions 369.4 6.1%
   Grants 163.3 2.7%
   Other revenue 1,856.4 30.6%
Expenditures 6,299.8 100.0%
   General public services
   Defense
   Public order and safety
   Economic affairs
   Environmental protection
   Housing and community amenities
   Health
   Recreational, culture, and religion
   Education
   Social protection
() data not available or not significant.

compensation and public transport liability are both compulsory insurances in Paraguay, with the government providing workers' compensation as a part of the social security scheme.

PUBLIC FINANCE

The Paraguayan government depends upon import duties for revenue, especially from the reexport trade. The government is the largest employer, and the budget represents 40% of GDP. The majority of the budget (80%) goes to public employee salaries, 15% to servicing the foreign debt, and 5% for investment.

The US Central Intelligence Agency (CIA) estimated that in 2005 Paraguay's central government took in revenues of approximately $1.3 billion and had expenditures of $1.3 billion. Revenues minus expenditures totaled approximately -$36 million. Public debt in 2005 amounted to 36.1% of GDP. Total external debt was $3.535 billion.

The International Monetary Fund (IMF) reported that in 2003, the most recent year for which it had data, budgetary central government revenues in guaraníes were g6,065.6 billion and expenditures were g6,299.8 billion. The value of revenues in US dollars was us$1 million, based on a market exchange rate for 2003 of us$1 = g6,424.3 as reported by the IMF.

TAXATION

In 2005 the basic corporate tax rate was 30%, but there are a number of exceptions. Reinvested income and investment in reforestation are taxed at 10%, and stock exchange companies are taxed at a reduced rate of 15% until 2008. In addition, the corporate rate was scheduled to be cut to 20% in 2006 and to 10% in 2007 and beyond. Capital gains on all assets are taxed at 30%, but in tandem with the corporate rate, was to be reduced to 20% in 2006 and to 10% in 2007. In 2005, dividends to resident shareholders were not taxed, but dividends paid to nonresident shareholders were subject to a 5% withholding tax. However, in 2006 the withholding tax rate on dividends paid abroad to nonresidents was scheduled to increase to 15%. In 2007, and onward, dividends paid to residents and nonresidents will be 5% and 15%, respectively. Branches of foreign companies established in Paraguay, apart from the maquila, free zone, and investment incentives regimes, are subject to a 35% corporate income tax rate for 2005 and 2006, which was slated to drop to 30% in 2007. There is a license tax payable by all persons and entities engaged in permanent forms of business.

Paraguay only directly taxes "high-level" executives on their income, but this may be handled through the corporation tax if the company only deducts the amount of executive salaries held to be tax-exempt under the law. If the company deducts all executives' salaries, individual executives are subject to income tax. Social security taxes total 25.5% of payroll, with 16.5% from the employer and 9% from the employee. All land and buildings are also subject to an annual property tax proportional to the fiscal valuation of real estate.

The main indirect tax is Paraguay's value-added tax (VAT) with a standard rate of 10%.

CUSTOMS AND DUTIES

In general, Paraguayan customs duties have been viewed as a source of revenue and a means of conserving foreign exchange, with relatively few of the high duties being intended as protection for manufactured products. Tariff rates, under the Mercosur common external tariff (CET) agreement, range from 0% for raw materials to 20% for automobiles. Import duties are specific, ad valorem, or both. Import pressures are such that the government has not kept a tight control on the purchase of nonessentials. In 2005, Paraguay imposed consumption taxes of 5% on imported luxury items such as perfumes, toilet waters, cosmetics, precious and semiprecious stones and on watches, arms, ammunition and parts. A 1% rate will be applied to certain consumer appliances and electronic products. Toys, games, and musical instruments (and parts) will be zero-rated.

Paraguay has free port privileges in Brazil at Paranaguá, Santos, and Río Grande do Sul; in Argentina at Buenos Aires and Rosario; in Chile at Antogagasta; and in Uruguay in Montevideo and Nueva Palmira. Most trade is done through the Brazilian ports.

FOREIGN INVESTMENT

Paraguay's economy historically has been dominated by foreign interests, in particular by those of wealthy Argentineans, Britons, and Brazilians. Nevertheless, the Paraguayan government has encouraged foreign investment in recent years, as a means of developing the country. Foreign direct investment (FDI) inflows into Paraguay were approximately $100 million per year in 1993 and 1994. By 1997, FDI inflow had increased to $230 million, peaking at $336 million in 1998. FDI inflows fell sharply in 1999 to only $66 million amid the political violence and chaos that ensued after President Cubas released General Lino Oviedo from prison. FDI inflows increased to $95 million in 2000, and to $152 million in 2001. During the period of August 2003 through July 2004 the Paraguayan government approved foreign investment projects worth $45.2 million, which represented 29% of all investment projects, foreign and national, approved during that period.

Government efforts to attract foreign investment through privatization have progressed slowly because of political opposition and uncertainty about the transparency of the process. Political realities impede the process even further, as the large state-run companies most attractive to foreign buyers (such as telecommunications, water/sewage, and electrical companies) employ thousands of potential voters and are outlets for political patronage. The telephone and utilities company were in the process of being privatized before the government suspended the process in June 2002, after bowing to political pressure. In 2004, Congress tried to reverse legislation that prohibited privatization but discontinued its efforts in the face of public demonstrations against privatization.

Currently, the United States has the largest foreign investment in Paraguay, with a total of US investments in Paraguay exceeding $440 million. Foreign investment was strongly concentrated in the services sector, mainly cellular telephones and hotels.

Foreign investment laws are among the most liberal in Latin America. Private property has historically been respected in Paraguay but despite the incentives, private investment has been insufficient to maintain a sustainable pace of growth.

ECONOMIC DEVELOPMENT

Paraguay has sought to develop closer economic ties with Brazil, the United States, and Western European nations, largely to reduce the country's dependence on trade with Argentina.

Economic planning is the responsibility of the Technical Planning Secretariat for Economic and Social Development, established in 1962. The first national plan covered 196566; the second, 196768. The third plan, a medium-term, five-year program for 196973, was replaced by a 197277 development scheme calling for a 26% increase in public investment in agriculture. Regional development, also given high priority, was to be accomplished through Paraguay's utilization of its water resources in the Itaipú hydroelectric project; a parallel development program for the Alto Paraná region was retarded by delays in the Yacyretá power project. The 197781 development plan aimed to achieve a more equitable distribution of social resources. A plan announced in September 1986 provided for comprehensive reform in exchange rates and in investment and fiscal policies. Government economic reforms during the 1990s were generally subsumed by opposition parties. Reforms in 1999 centered on a diversification of the economy, away from the re-exportation business, and on fighting corruption, which the government's comptroller office estimated to have cost $2.3 billion in 1997.

Foreign debt rose in early 2003 to $2.28 billion, inflation rose to 14.6%, and the currency lost over 50% of its value against the US dollar in 2002. In the early 2000s, the country's economy was marked by slow economic growth, increasing unemployment, and rising poverty rates. Paraguay was in arrears with the World Bank and the Inter-American Development Bank in 2003. That year the IMF encouraged the country to revive its privatization program and to strengthen the banking system.

Macroeconomic performance has improved significantly under the Duarte administration, with inflation falling significantly, and the government clearing its arrears with international creditors. Unemployment remains stubbornly high and the living standard of most households has not improved. However, the administration has placed a strong emphasis on participating in international institutions and has used diplomacy to promote the opening of international markets to Paraguayan products. To curb corruption, the president identified respected apolitical officials to head the ministries of finance and industry. The ministry of industry has created a transparent, internet-based government procurement system that has won the praise of the private sector. Six Supreme Court justices were selected with input from civil society and public hearings in the congress, both a first for Paraguay.

SOCIAL DEVELOPMENT

All employed persons are covered by the social insurance system, first established in 1943, and most recently updated in 1992. The program is funded by a contribution of 9% of earnings from employees and a contribution of 14% of payroll by employers, and a contribution of 1.5% of earnings by the government. The program provides for free medical, surgical, and hospital care (not always available) for the worker and dependents, maternity care and cash benefits, sickness and accident benefits, retirement pensions for people ages 5559, and funeral benefits. Coverage for work injury is also available for all employees including domestic servants and teachers.

Although women have full legal rights, in practice they face discrimination in education and employment, and their literacy rates are much lower than those of men. Domestic violence and sexual harassment remain serious problems for women and have been targeted as key issues by both the government and nongovernmental organizations. Spousal abuse is common and punishable only by a fine. The majority of women face harassment in the workplace. As of 2004, women had a higher illiteracy rate than men. The secretariat of women's affairs sponsors programs to increase opportunities for women.

Human rights abuses include arbitrary arrest and detention, corruption in the judiciary, and poor prison conditions. Discrimination against indigenous people continues.

HEALTH

Hospital and medical facilities are generally concentrated in Asunción and other towns. There were an estimated 117 physicians, 36 dentists, and 20 nurses per 100,000 people in 2004. Total health care expenditure was estimated at 5.2% of GDP.

Average life expectancy in 2005 was 74.89 years; the infant mortality rate averaged 25.63 per 1,000 live births. As of 2003, the crude birth rate and overall mortality rate were estimated at, respectively, 30.5 and 4.7 per 1,000 people. Maternal mortality was 190 per 100,000 live births. More than half of the married women ages 1544 used contraceptives. The principal causes of death are bacillary dysentery and other intestinal diseases, heart disease, pneumonia, and cancer. Approximately 79% of the population had access to safe drinking water and 95% had adequate sanitation Immunization rates for children up to one year old were: tuberculosis, 87%; diphtheria, pertussis, and tetanus, 82%; polio, 82%; and measles, 60%. About 26% of children under five years old were considered malnourished.

There were an estimated 600 deaths from AIDS in 2003. The HIV/AIDS prevalence was 0.50 per 100 adults in 2003. As of 2004, there were approximately 1,500 people living with HIV/AIDS in the country.

HOUSING

As of 1998, the country continued to face serious housing shortages with a cumulative deficit of about 350,000 dwelling units. About 30% of the population live with overcrowded conditions; the average number of people per dwelling is 4.6. A majority of housing units lack basic utilities. At the 2002 census, there were about 1.1 million housing units.

A government agency, the Paraguayan Housing and Urban Institute, was created in 1964 with an IBRD loan of $3.4 million to aid in the construction of living units for low-income families. In 1973, a National Housing Bank was established to finance low-income housing development.

EDUCATION

Elementary education is compulsory and free for 9 years, usually for children ages 614 (ages 914 in rural areas). Primary education lasts for nine years followed by three years of secondary or professional school. The academic year runs from March to November.

In 2001, about 30% of children between the ages of three and five were enrolled in some type of preschool program. Primary school enrollment in 2003 was estimated at about 89% of age-eligible students. The same year, secondary school enrollment was about 51% of age-eligible students. It is estimated that about 92.8% of all students complete their primary education. The student-to-teacher ratio for primary school was at about 27:1 in 2003; the ratio for secondary school was about 12:1.

The National University of Paraguay is located in Asunción, the capital city. Nuestra Señora de la Asunción Catholic University, a private institution, was founded in 1960. There are at least 12 other universities within the country. In 2003, about 27% of the tertiary age population were enrolled in some type of higher education program. The adult literacy rate for 2004 was estimated at about 91.6%.

As of 2003, public expenditure on education was estimated at 4.4% of GDP, or 11.4% of total government expenditures.

LIBRARIES AND MUSEUMS

Paraguay's modest cultural life is centered in Asunción, which has the nation's principal libraries and museums. The National Library and Archives, established in 1869, are located in Asunción and hold 44,000 volumes. The National University of Asunción holds 26,100 volumes, and the Natural and Ethnographic History Museum, also in Asunción, holds 30,000 volumes. The Centro Cultural Paraguayo-Americano has a 12,000-volume library with both Spanish and English titles and includes one of the country's most complete collections of Paraguayan works.

Asunción is the site of 13 historical, scientific, and art museums. Prominent art museums include the National Museum of Fine Arts and Antiquities; the Andrés Barbero Ethnographic Museum, devoted to Amerindian art; the Julián de la Herrería Ceramics and Fine Arts Museum; and the Museum of Modern Art of the Ministry of Education. There is an historic house museum in Yaguarón.

MEDIA

In 2003, there were an estimated 46 mainline telephones for every 1,000 people. The same year, there were approximately 299 mobile phones in use for every 1,000 people.

Radio Nacional del Paraguay is the primary state-owned station. Other station for radio and television are privately owned. In 2000, there were 218 television sets for every 1,000 people. In 2003, there were 188 radios for every 1,000 people. The same year, there were 34.6 personal computers for every 1,000 people and 20 of every 1,000 people had access to the Internet. There were nine secure Internet servers in the country in 2004.

Newspaper readership in Paraguay is among the lowest in Latin America. There were four major daily papers in circulation in 2004. The circulation of Ultima Hora, founded in 1973, was 40,000 in 2004. Noticias had a circulation of 50,000 in 2004 and ABC Color had a circulation of 35,000 (down from 75,000 in 2002). Diario Popular began publication in 1967; circulation figures in 2004 were unavailable.

As of 2006, the constitutionally guaranteed freedom of speech and the press is said to be respected by the government to a greater degree than any time in the country's recent history. An increasing amount of the media is independently owned.

ORGANIZATIONS

Several chambers of commerce promote local and international trade. Active trade associations include the Federation of Production, Industry, and Commerce, an importers' association, and various organizations of particular trades. Professional associations are also active, particularly in the field of healthcare.

The Paraguayan Atheneum sponsors lectures, concerts, and recitals, as well as courses in foreign languages, art, and music. The Paraguayan-American Cultural Center and the Argentine-Paraguayan Institute are important binational centers. Paraguay has an Academy of Language and several organizations devoted primarily to Guaraní culture, including the Academy of Guaraní Culture and the Indian Association of Paraguay.

Other organizations include the Women's Center and the Youth Atheneum. The Paraguay Association of Scouts and Guides, Junior Chamber, and the YMCA/YWCA are also active. Sports associations offer programs for all ages and there are active organizations of the Special Olympics.

Amnesty International, Caritas, Habitat for Humanity, and the Red Cross have national chapters.

TOURISM, TRAVEL, AND RECREATION

The monuments, museums, and parks of Asunción are the main tourist attractions. Also of interest are the Amerindian markets in and around the capital; at the famous market of Itauguá about 30 km (18 mi) from Asunción, the makers of ñandutí lace sell their wares. Other popular tourist attractions include the world famous Iguazu Falls at Paraguay's borders with Brazil and Argentina, the San Bernardino resort, on Lake Ypacarai, and the modern boom town of Ciudad del Este (formerly Puerto Presidente Stroessner). Football (soccer) is Paraguay's national sport, with some 30 clubs in Asunción alone. Tennis, horse racing, boxing, basketball, and rugby football are also popular.

Foreign tourists entering Paraguay are required to present a valid passport and visa. Visitors may be required to show proof of vaccinations against yellow fever. Strong precautions are recommended against typhoid and malaria.

In 2003, there were 268,175 tourist arrivals in Paraguay, of whom 66% came from Argentina. Tourist receipts totaled $81 million. That year there were 4,899 rooms in hotels and other facilities with 10,565 beds and a 38% occupancy rate. The average length of stay was 2.5 nights.

In 2004, the US Department of State estimated the daily cost of staying in Asunción at $153; in Encarnación, $47; and in Ciudad del Este, $122.

FAMOUS PARAGUAYANS

Paraguay acclaimsdespite their reputations as dictatorsthe first three leaders of the independent nation: José Gaspar Rodríguez de Francia (El Supremo, 1761?1840), his nephew Carlos Antonio López (17901862), and the latter's son Francisco Solano López (El Mariscal, 182770). Of nearly equal prominence is José Felix Estigarribia (18881940), president and Chaco War commander. Manuel Gondra (18721927), twice president of Paraguay, was a literary critic, educator, and diplomat. Eusebio Ayala (18751942), another president, was an authority on political economy and international law. Alfredo Stroessner (b.1912) was president of Paraguay from 1954 to 1989.

Leading writers include Juan Silvano Godoi (18501926), Manuel Domínguez (18691935), Pablo Max Ynsfrán (18941972), Justo Pastor Benítez (18951962), former president Juan Natalicio González (18971966), Gabriel Casaccia (190780), Augusto Roa Bastos (19172005), and Hugo Rodríguez Alcalá (b.1917). Pablo Alborno (18771958) and Juan Domínguez Samudio (18781936) were noted artists, while in music, José Asunción Flores (19041972) is best known.

DEPENDENCIES

Paraguay has no territories or colonies.

BIBLIOGRAPHY

Buckman, Robert T. Latin America, 2005. 39th ed. Harpers Ferry, W.Va.: Stryker-Post, 2005.

Calvert, Peter. A Political and Economic Dictionary of Latin America. Philadelphia: Routledge/Taylor and Francis, 2004.

Foster, Dean Allen. Global Etiquette Guide to Mexico and Latin America. New York: J. Wiley, 2002.

Health in the Americas, 2002 edition. Washington, D.C.: Pan American Health Organization, Pan American Sanitary Bureau, Regional Office of the World Health Organization, 2002.

Heenan, Patrick and Monique Lamontagne (eds.). The South America Handbook. Chicago: Fitzroy Dearborn, 2002.

Miranda, Carlos R. The Stroessner Era: Authoritarian Rule in Paraguay. Boulder, Colo.: Westview Press, 1990.

Nickson, R. Andrew. Historical Dictionary of Paraguay. 2nd ed. Metuchen, N.J.: Scarecrow Press, 1993.