Paraguay's main challenges, according to the candidates

 

General elections will be held in Paraguay in April 2023. It will be the opportunity to elect president and vice president, chamber of senators, chamber of deputies, and, at the level of the 17 departments, governors and members of the departmental councils. In December 2022, the primaries of the different political forces will be held. There are two important primaries. On the one hand, that of the ruling party (the National Republican Association or Colorado Party) that has two main candidates for the presidency, and, on the other, that of the National Concertación in which 6 badges of candidates for president and vice president identified with the opposition are debated, and which includes the opposition party of more weight,  the Authentic Radical Liberal Party.

On this occasion we would like to concentrate more on the issues mobilized by the pre-candidates, than on the electoral competition per se.  We assume that an outline of the current political debate foreshadows future trade-offs at the public policy level. Thus, we try to characterize the themes that we manage to extract from the strident cacophony that usually accompanies electoral campaigns. 

1. The resources of the Itaipu binational entity:

One of the first questions I was asked when I agreed to a radio interview, after Lula's victory in Brazil, was about the situation of the large Itaipu hydroelectric plant. Brazil and Paraguay will begin in 2023 the revision of Annex C, of the Itaipu Treaty that governs the scope of the binational entity.  It is expected that this revision will create the conditions for Paraguay to redefine what will be done with 50% of the energy that corresponds to it. The country will no longer have to cede the part of the energy it does not consume to Brazil for compensation, but will be able to use that energy for domestic consumption and for sale to others at a market price. In both cases, Paraguay's great commitment is to achieve the greatest possible advantages to make a qualitative leap in its development, either by strengthening its capacity to use energy, through an improved electrical infrastructure, or as a source of resources available for public investment in other sectors. The hope is that on the Brazilian side Lula's presence and his vision of Latin American integration will help to have friendly counterparts when it comes to specifying the details of that review.

2. The worsening fiscal situation:

The question of resources for public investment is in this case of paramount importance, because the well-known fiscal balance for which Paraguay has received praise is progressively eroding. There is a growing tendency for tax revenues to be absorbed entirely by current expenditures of the national budget, especially personnel, and the proportion of revenues from the same source that are dedicated to subsidizing the deficit of the Fiscal Fund that maintains the pensions of teachers, military and police is increasing.

Today, public investment depends on the country's borrowing capacity. However, that capacity is also running out. In 2014 public debt represented 15.59% of GDP, while in 2021 it reached 37.22%. It is also a debt contracted mostly in dollars, which, in the current situation of rising dollar, can generate greater pressure than planned. Although the country has bandwidth left to borrow. According to IMF parameters, an acceptable debt margin can be understood as up to 50% of GDP. However, given and considering the situation and the capacity of the State to generate more revenue, the Ministry of Finance has set a limit of 40% and it is not in sight to continue with the same debt strategy. Hence the importance of income in Itaipu.

3. Absence, weakness and corruption of the State:

The additional difficulty is that at the moment it is not politically feasible to propose an increase in the tax burden. There is very little appetite for approaches to creating new taxes. Only from the left is it proposed in a very timid way a greater control of agro-export and livestock production, or the increase of the tax on tobacco and alcoholic beverages.

The argument is widely based on prioritizing spending and combating corruption. This is a strong argument, since the country remains in the lowest rankings of Transparency International and the capacity to achieve the results that the State itself proposes are, in certain key areas, undemonstrable. This explains why public opinion is increasingly focused on the idea that this is a state that consumes taxes to pay for staff who do not do their job well. Although generalizations are always odious and unfair, because there is a good, honest and professional civil service that is doing its job well, the problem is that those good apples cannot be properly appreciated by the multiple examples of political cronyism and ineffectiveness that contaminates the management of the State. 

4. The Emerging Drug State:

Corruption and inefficiency have created the best conditions for Paraguay's incorporation into drug trafficking routes. Paraguay is not a failed state, but its institutional weaknesses and gaps in proper law enforcement are cleverly exploited by organized crime. Today, border territories are tightly controlled by criminal groups from Brazil and Paraguay. Former President of the Republic Horacio Cartes has been designated as "significantly corrupt" by the US State Department for cover-up and involvement in the smuggling business. The hiring of hitmen and murders on public roads have increased and the political influence of organized crime is growing at the level of political collegiates, in deputies, senate and departmental and municipal boards. The police, the penitentiaries, the judiciary, the prosecutor's office, the armed forces have all been penetrated by organized crime, to what extent we cannot specify.

5. Social vulnerability and vulnerability:

This expansion of organized crime is undoubtedly linked to the problem of lack of social protection and vulnerability.  When we evaluated a project on forced labour, child labour and human trafficking, we found that poverty and vulnerability were the main determinants. The same human trafficking networks fed on needy family members who sometimes encouraged their teenage and young daughters or relatives to accept proposals for "work" abroad. This became more evident during the pandemic. It turns out that, when it comes to poverty reduction, the country has been stagnant for almost eight years. In 2014 total poverty was at 27.2% and in 2020 it was at 26.9."

On another note, I remember that a judge complained that it is not through judicial convictions that exploitative child labour would be eliminated, and she was crying out for a social policy and a much stronger social protection system than the existing one. Indeed, in Paraguay, approximately 20 per cent of the working-age population has access to decent work and can claim some form of social security. That's the middle class. The rest of the population depends on families and communities for crisis support. A proportion of the extreme poor can access some of the social programmes, but the levels of coverage leave much to be desired. For a large number of Paraguayans, life goes on day by day, trying to ensure what is essential to survive. A large percentage of informal self-employed and domestic workers do not generate income equivalent to the minimum wage (currently about US$360 per month), so any catastrophic crisis or illness can seriously affect their livelihoods.

6. Continuity or change of model:

In general, the current political discourse revolves around change. There is no discourse that appeals to continuity, but everyone sees the urgency of improvement. Even the slogan of the candidate of the ruling party with the best chances of winning (Santiago Peña, according to polls) the primary says "we will be better."

There are variants in what is said to change. The opposition competing in the Concertación emphasizes ending corruption and the narco-state, while promising greater and better opportunities for decent work. The theme of entrepreneurship and the promotion of micro and medium enterprises are also presented as ways to generate income and employment.

The ruling party emphasizes certain reforms to the model, but insists that trends already underway should be prioritized, such as the diversification of opportunities to generate work and foreign exchange through the promotion of foreign direct investment in other agricultural areas and maquilas. They argue that with the investment that has been made in road infrastructure and the macroeconomic stability of the country, new investors can be attracted and return to the path of growth.

From the most progressive sectors, the "extractivist" model is criticized, which consists of the development of agribusiness, the export of soy combined with the use of agrotoxins harmful to the environment and health. It is noted that it is an exclusionary model and that a more diversified productive base that hires intensive work should be encouraged while strengthening existing options for peasant family farming that has fallen into poverty and marginalization

In general, there is a certain consensus among the candidates that, although the agro-export model generates foreign exchange for the country, it is reaching a limit in terms of its capacity for expansion. On the other hand, there is a growing recognition that barriers can no longer be put to the sustainable development approach, including both the social and environmental pillars. On the other hand, there is awareness that deforestation and climate change will sooner or later dictate their conditions because the extractivist model can continue.  

Reviewing all that swarm of positions, we can only point out an entry point that has the merit of adding agreements. It is the commitment to an economy with more added value. A manufacturing and service production base that allows for more decent jobs.  This can be those starting points that bring together the different political actors of the country.