Paraguay: Political and Economic Conditions and U.S. Relations

Paraguay has friendly relations with the United States and has been a traditional ally. Paraguay's turbulent political history and tradition of political authoritarianism have resulted in international isolation that the country is seeking to overcome. The April 2008 election of Fernando Lugo -- a former Roman Catholic bishop and leader of the Patriotic Alliance for Change -- as President ended 61 years of one-party rule by the still dominant Colorado Party. The United States has encouraged the strengthening of democracy in Paraguay and hailed the peaceful transition of power. Known as the "bishop of the poor" after a decade of work in an impoverished rural diocese, Lugo pledged to introduce land and agrarian reform, improve education and health services to better serve Paraguay's poor majority, and combat widespread corruption. Yet, as he entered his second year in office, there were more frequent calls for his impeachment. His loose electoral alliance had splintered, and he faced broad opposition in the opposition-dominated Paraguayan Congress that had stymied his center-left agenda at nearly every turn. At the end of 2009, polls indicated that Lugo had one of the lowest popularity ratings of any leader in the region. The United States and Paraguay cooperate in a number of areas but especially in the fight against corruption and on anti-drug, counterterrorism, and anti-smuggling initiatives. In 2006 and 2009, the United States and Paraguay signed two Millennium Challenge Corporation threshold agreements totaling more than $60 million dollars to combat corruption and strengthen the rule of law. Paraguay is a major transit country for cocaine and produces the largest crop of marijuana in South America. The United States remains concerned about illegal activities in the loosely controlled tri-border region with neighboring Brazil and Argentina, such as money-laundering, drugs and arms trafficking, and trade in counterfeit and contraband goods.
CRS Report for Congress.