By Sara Kozameh | CEPR Americas Blog | October 9, 2013
On August 15, Horacio Cartes, a millionaire, businessman, and alleged drug-trafficker assumed the presidency in Paraguay, leading the Colorado Party back into power after a four-year interruption from its 61-year rule by Fernando Lugo, who was deposed last year in a “parliamentary coup.” Cartes has been investigated by the U.S. government for money laundering and drug trafficking, according to this 2010 U.S. diplomatic cable released by Wikileaks.
Since Cartes started his term eight weeks ago, several announcements have been made regarding Paraguay’s social and economic policy that are worth noting.
Militarization
Only a week after having taken office, Paraguay’s Congress –in which the Colorado Party has a majority in both houses– granted the president the power to deploy the military within the country to carry out policing activities. Despite opposition from human rights organizations who fear a return to dictatorship-era military operations, three days later Cartes ordered 400 military personnel to areas in which disputes over land tenure are ongoing. On August 28th the military entered an elementary school with demands to interview children on the whereabouts of suspected rebels and arrested several land rights activists and peasant leaders in the area.
The military powers granted to Cartes are especially alarming in a country that spent most of the 20th century either in political turmoil or under brutal dictatorship. The increased militarization of the Cartes regime is occurring in a context of growing discontent over public sector layoffs and privatization plans.
Austerity
Paraguay lacks an adequate system for collecting taxes and has a hard time financing social spending. With few mechanisms for distributing wealth and increasing what little there is of social services to the population, any gains from high economic growth rates that Paraguay has been experiencing this year and last are likely to benefit mostly the wealthy.
Seventy-seven percent of Paraguay’s land is still owned by 1 percent of the population and poverty reduction has been slower in Paraguay than in other countries in the region. The UN’s Economic Commission for Latin America and the Caribbean and Paraguayan government’s estimates for poverty in 2011 and 2012 have differed, with figures ranging between 32-50 percent, but showing a significant reduction during Fernando Lugo’s unfinished presidency. Cartes claims that his government’s “obsession” will also be to fight poverty and increase social spending.
But a little over 10 days ago Cartes announced a massive layoff of 4,000 government workers. This week he announced that another 15,000 layoffs are expected by December. Cartes says that the government lacks the funds necessary to pay the salaries of all 258,000 government employees. Despite accusations from at least one opposition senator who insists that layoffs are being used to strengthen the power of the Colorado Party, the Cartes government maintains that there is no persecution involved in the layoffs, and that it is implementing a system based on meritocracy. Additionally, according to this Associated Press interview with Treasury Minister Germán Rojas, public workers’ salaries will cease to be adjusted to keep up with inflation.
Privatization
Cartes’ government has used the argument of budget shortfalls to defend a move toward privatization. A bill introduced in mid-September and currently waiting for approval from congress would open Paraguay up to the privatization of infrastructure services in the transport, electric and sanitation sectors, including the dredging of the Paraguay River; construction of, and tolls for, roads, railroad and electric services. Cartes has framed his bill as a “public-private alliance,” but five of the largest unions in the country and the center-left opposition Frente Guasú insist on the “privatizing” nature of the bill, also criticizing it for granting the executive complete decision-making power over concessions, and the guarantee that losses will be covered by the state, not the company. The first three days of October have been met with protests and roadblocks throughout the country in response to mounting anxieties over privatization and one-time cuts to teacher’s salaries following their month-long strike.
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The last eight weeks in Paraguay have stirred up controversies, anxieties and memories of an unpleasant past. While it is impossible to know what the outcomes of Cartes’ policies will be, militarization, massive layoffs, and privatization have often been followed by increased inequality, greater poverty, and major discontent among the populace in other countries where governments have pursued a similar path. It is these types of neoliberal policies that coincided with a collapse in economic growth throughout Latin America in the 1980s and 1990s, and it is the rejection of these policies that has led to the repeated election of center-left governments in much of Latin America since the end of the ‘90s, (including Paraguay’s own recently-ousted president Fernando Lugo) that gives us some notion about what could be in store for Paraguay’s future.
