Paraguay country brief

Overview

Australia has a positive relationship with Paraguay. The depth and nature of the relationship has grown significantly since diplomatic relations were established in 1974. Australia's first Ambassador to Paraguay, H.A. Dunn, presented credentials on 2 December 1974.

Australia opened a Consulate headed by an Honorary Consul in Asunción in January 2011, which has provided enhanced consular services to Australians in Paraguay. Australia has non-resident accreditation to Paraguay through the Australian Embassy in Buenos Aires.

Paraguay established an Embassy in Canberra in September 2011.

The Republic of Paraguay is a landlocked country in the southern half of South America, about half the size of New South Wales. The Tropic of Capricorn runs through the centre of the country, dividing the country broadly into tropical and subtropical climate zones. More arid conditions prevail in the western region of ‘Chaco’. The south and south-east are dominated by the Paraná and Paraguay rivers as well as the low-lying tablelands and hills that extend into Paraguay from the south of Brazil. The highest point in Paraguay is Cerro Peró at 842 meters above sea level. Paraguay borders Argentina to the south and west, Bolivia to the north and Brazil to the east. The name Paraguay has a number of possible meanings, most of which derive from indigenous (Guarani) terms for ‘river’.

Paraguay's population is approximately seven million (2015) with the majority (95 per cent) being made up of mestizos or mixed European and Indigenous people. Roman Catholicism is the main religion, making up around 90 per cent of the population, with other Christian denominations making up around seven per cent. Paraguay has a youthful population, with around 65 per cent of Paraguayans under the age of 30. Spanish and Guaraní are the official languages of Paraguay.

New Australia

In 1893, a group of nearly 250 Australians established a settlement in Paraguay. The settlement, known as 'New Australia', was founded by William Lane, a prominent figure in the Australian labour movement, in an effort to develop a socialist utopia. The settlement eventually dissolved due to conflicts amongst members of the movement, particularly following the arrival of a second group of colonists in 1894. A town called "Nueva Australia" (New Australia) still exists today, with a population of approximately 300 people. The University of Sydney Library holds the 1893 New Australia Collection of rare books.

Political overview

Background

Spanish colonisation of the area which would become modern-day Paraguay began when Asunción was founded by explorer Juan de Salazar in 1537. Following the overthrow of the Spanish monarchy by Napoleon in 1808, the Paraguayans revolted against Spanish rule and achieved independence in 1811.

Paraguay was once the most industrialized country in South America, but the 1900 war against its larger neighbours, Argentina and Brazil, decimated both Paraguay's industrial base and indigenous population.

Following the Chaco War against Bolivia in the early 1930s, politics in Paraguay was characterised for several decades by repressive military dictatorship and internal instability under General Alfredo Stroessner, who took power in a coup in 1954. The regime was marked by the suspension of civil liberties, violent repression and violations of human rights.

General Alfredo Stroessner took power in a coup in 1954 and remained in control for more than 30 years. As the leader of the Colorado Party, Stroessner exercised nearly complete control over the nation's political scene. The Constitution was modified eight times to legitimise his consecutive elections to the presidency. Although opposition parties were nominally permitted after 1962 – the Colorado Party had been the only legal party in the country since 1947 – Paraguay remained largely a one-party state. During Stroessner's rule membership of the Colorado Party was a prerequisite for access to employment, job promotion, free medical care and other government services. While Stroessner's rule saw stability, it came at a high cost as corruption and human rights abuses became routine and accepted.

The regime was marked by the suspension of civil liberties and repression. This repression was at times brutal, including violent oppression of peasant uprisings and imprisonment of political critics, and at other times indirect, via self-censorship and co-optation. Human Rights violations such as torture, forced disappearance and extrajudicial executions, were commonplace and systematic. According to the Truth and Justice Commission, convened in 2004 to investigate human rights abuses committed in Paraguay between 1954 and 2003, an estimated 4,000 people were murdered, 400 "disappeared" and around 20,000 detained under Stroessner's rule.

In 1989 General Rodríguez was elected President as a candidate for the Colorado Party. Rodriguez instituted political reforms and international rapprochement, and democracy was consolidated through adoption of the 1992 Constitution. Juan Carlos Wasmosy was elected as Paraguay's first civilian President in 1993 in elections regarded as generally free and fair.

On 15 August 2008, the successful leftist candidate (and former Catholic priest) Fernando Lugo was sworn in as President of Paraguay. Prior to President Lugo's appointment, Paraguay had been ruled by the Colorado party for 61 years, of which only 15 years were democratic. Until Lugo's election, the Colorado Party's dominance of the Executive ensured control of the state bureaucracy. Clashes between the three branches of government were due to internal party factionalism, with the judiciary used as a political tool.

Despite coming to power with a clear mandate and much goodwill, Lugo failed to seize the opportunity to implement significant change and was unable to manage a disparate team and he lost the support of his coalition partners of the centrist Liberal Party.

The Colorado Party used an incident on 15 June 2012 (when police shot dead 11 people during an attack on a rural estate) to force Lugo out through impeachment, accusing him of incompetence and failing in his responsibilities.

Following his impeachment, Lugo was replaced by Vice-President Federico Franco. Lugo's removal was condemned by neighbouring states, and led to Paraguay's temporary suspension from regional organisations, the Southern Cone Common Market (Mercosur) and Union of South American Nations (UNASUR).

Colorado Party candidate Horacio Cartes, a successful businessman and political outsider, won the April 2013 presidential elections with approximately 46 per cent of the vote. President Cartes was inaugurated on 15 August 2013. Paraguay's suspension from Mercosur and UNASUR was lifted following his inauguration.

Recent developments

President Cartes's priorities during his term in office have been: to create a more competitive Paraguay; to reduce corruption and strengthen institutions; to reduce poverty; to promote inclusive growth that can trickle down to the less affluent. He believes the best way to reduce poverty and improve social conditions is to encourage investment and job creation, rather than targeted benefits and emphasis on social programs.

The ruling Colorado Party has pressed for constitutional amendment to allow presidential re-election in 2018 (currently prohibited). Former President and current Senator Fernando Lugo leads the left-wing opposition party "Frente Guasú".

In April 2016 the government agreed to restructure debts owed by small-scale farmers and postpone the introduction of a new value-added tax.

In August 2016 a guerilla group used explosives and gunfire to attack a military patrol in north Asuncion, leading to the deaths of eight military officers.

Paraguay continues to make solid economic progress. Agriculture is a key element of the economy, with Paraguay ranked as the seventh-largest beef exporter globally. Mining is an area of growth and great interest, as Paraguay has key resources and minerals (see the Economic Overview section).

System of government

Paraguay is a constitutional republic headed by a directly elected president, with a bicameral legislature. Legislative and presidential elections are due in late 2018.

Paraguay's National Constitution, enacted in 1992, radically decentralised and democratised the country's system of government, establishing a clear division of executive, legislative and judicial responsibilities, and vastly improved protection of civil rights.

The executive branch is headed by the President, elected by popular vote for a single five-year term, who appoints a Cabinet of ministers. The legislative branch consists of a bicameral Congress, with an 80-member Chamber of Deputies and a 45-member Senate. Members of both houses of Congress are popularly elected for a five-year term under a system of proportional representation, based on local electoral districts ("departments") for the Chamber of Deputies and on nationwide results for the Senate.

Foreign policy

Paraguay's most important political and economic partners are its immediate neighbours and fellow members of Mercosur, Argentina and Brazil. Mercosur is comprised of Argentina, Brazil, Paraguay, Uruguay, and Venezuela (now suspended) as well as associate members Chile, Colombia, Ecuador, Guyana, Peru and Suriname. Mexico is an Observer and Bolivia is in the process of becoming a full member. Membership provides Paraguay, a landlocked country, with preferential trade access to the markets of Mercosur members and associates. In 2016 Paraguay took on a more active role in the trading bloc Mercosur, including promoting human rights and free trade.

Paraguay is also a member of several regional organisations, including UNASUR, the Community of Latin American and Caribbean States (CELAC) and the Organization of American States (OAS), which seek to advance a variety of regional political and economic interests. In June 2013, Paraguay became an observer to the Pacific Alliance.

Paraguay and the United States maintain close ties through areas of mutual interest, including efforts to combat the trafficking of people and drugs, engagement on sustainable development and through economic ties. An increasing number of US multinational companies have established a presence in Paraguay.

Bilateral relations

Australia's growing relations with Paraguay centre on a shared interest in education, and a common drive for fairer international trade in agricultural products through membership of the Cairns Group and cooperation in other multilateral fora.

Paraguay has taken a more active role in multilateral trade issues since it became a member of the World Trade Organization in 1996, and joined the Cairns Group, chaired by Australia, in June 1997.

2016 was an active year for the educational relationship between Australia and Paraguay, including the signing of a government to government Memorandum of Understanding on Education, as well as at the university to university level, including through the "Memorandum of Understanding for Inter-Institutional Cooperation Between the Universidad Nacional de Asunción and University of Tasmania (UTAS). In 2016 there were 60 Paraguayan students studying in Australian educational institutions. In 2016 Australia is seeing growing numbers of students arriving in Australia through Paraguay's National Scholarship Program for Study Overseas (BECAL).

Paraguay participated in the 2014 Latin America Down Under Mining Conference in Sydney, highlighting opportunities for Australian companies to engage in Paraguay's nascent mining industry.

Development assistance

Since 2010, 24 Australia Award fellowships have been granted to Paraguayan students.

From 2010 to 2014, Australia provided $100 million in development assistance to Latin America, including 250 Australia Awards scholarships. Paraguay students received eight Australia Award scholarships. While the regional program has now closed, some activities which have already been funded will continue until 2017. As part of that program, Australia worked with Paraguayan, Chilean and German authorities on the 'Paraguay for All' project which ended in 2014. The project sought to improve the coordination and effectiveness of critical social services in Paraguay. Through the Inter-American Development Bank, Australia contributed to a microfinance project to economically empower low-income women through micro-franchise opportunities. Australia also supported projects in the field of human rights and undertook work to support human resources development.

In 2015-2016, through the Development Assistance Program, Australia funded five projects in Paraguay. The projects related to: water for health and development; preservation of indigenous traditional manufacturing capacities and knowledge; promotion of gender equality and eradication of violence against women; indigenous school infrastructure improvement; training opportunities for indigenous women.

Economic overview

At a glance

For latest economic data refer to the Paraguay fact sheet [PDF 54 KB].

Economic Outlook

Paraguay is predominantly an agricultural economy. The country's main export is soybeans (Paraguay is the world's 4th largest exporter), which makes it highly susceptible to climate and world price changes. Paraguay's other main exports include electricity, vegetable oils, maize, beef, leather and apparel. Paraguay's economic outlook is strongly influenced by the economic performance of its neighbours, particularly Brazil and Argentina. Paraguay, together with Brazil, runs one of the largest hydroelectric facilities in the world, the Itaipú dam located in the Paraná River, the border between Brazil and Paraguay. Hydroelectricity exports are another major income source for Paraguay.

In 2015, Brazil was both Paraguay's number one export destination (31.6 per cent) and import source (25 per cent), with China following closely as an import source at 23.5 per cent.

Paraguay's fiscal position is among the most manageable in the region, with comparatively low debt and ready access to international capital markets .Paraguay's GDP is estimated to be US$26.8 billion in 2016, down from US$30.9 billion in 2014 . Paraguay's real GDP growth rates have varied widely. Real GDP growth reached a high of 13.6 per cent in 2013, a low of  minus 1.2 per cent in 2012  and is now at 2.9 per cent in 2016, and foreign direct investment has increased in recent years.

Bilateral economic and trade relationship

Australia's bilateral trade with Paraguay is small, largely reflecting one-off deals rather than ongoing supply arrangements. In 2015 total two-way merchandise trade totaled A$3.2 million, of which A$2.2 million were imports from Paraguay, consisting predominantly of oil-seeds and hard oleaginous fruits. Major Australian exports to Paraguay in 2015 (A$908,000) consisted mainly of crude vegetable matter, medicaments, electrical circuits equipment and non-alcoholic beverages.

In 2009, P&O Maritime Australasia (who's Australian head office is in Melbourne) expanded operations in South America with the acquisition of 70% of the shares of the Dos Santos Group Bulk Barging business in Paraguay, providing bulk barges to transport grain and iron ore on the Paraguay-Paraná waterway.

Trade and Investment

There may be some openings for investment in the agribusiness sector and for the export of agriculture related and other products and services from Australia.

The mining industry in Paraguay has, to date, been relatively underdeveloped but the discovery of one of the world's three largest deposits of ilmenite (a titanium ore) has the potential to greatly expand mining in the country.

Australian companies with existing interests in Argentina, Brazil and Uruguay may find that the close commercial ties that these countries have with Paraguay may facilitate entry into the Paraguayan market.

In 2011 the Paraguayan-Australian Chamber of Commerce was formed. This organisation works closely with the Australian Embassy in Buenos Aires to facilitate and encourage trade and investment between our two countries.

High level visits

May 2014: Paraguay was represented at the 2014 Latin America Down Under Mining Conference in Sydney by an official from its Ministry of Mines and Energy.

April 2013: An Australian parliamentary delegation led by then Speaker Anna Burke visited Paraguay.

Last Updated: 23 January 2017