Paraguay Energy and Security

Paraguay Energy and Security

Economy and energy

The Paraguayan economy is characterized by the wide importance of the informal sector, by the thousands of micro-enterprises and by the many urban street vendors. A large percentage of the population, especially in rural areas, lives off agriculture, often on a simple subsistence basis.

Real per capita income stagnated at 1980 levels but, between 2003 and 2008, growing world demand for raw materials and favorable weather conditions allowed for an expansion of exports and rapid, albeit temporary, economic growth. The international crisis of 2008 and the extraordinary drought of 2009 (which hit the crops of the main agricultural products), together with the parliamentary stalemate caused by the defection of the Partido Liberal Radical Auténtico, blocked growth and the introduction of economic reforms. Paraguay thus remains poorly competitive economically. The system is also weighed down by the increase in crime, the persistence of corruption and the worsening of social conflicts. To these factors must be added the high levels of unemployment, the lack of infrastructure and the inefficiency of public enterprises in key sectors.

Recently, however, GDP has started to grow again. Starting from 2010, thanks also to the favorable climate for agriculture – which contributes about 21% to the GDP national -, important signs of recovery were recorded: exports of soybeans (of which Paraguay is the sixth producer in the world), meat, wood, leather, cotton and tobacco increased by 40%. These have been accompanied by the growth in imports of capital goods, including machines and engines, and other goods such as fuels, plastics, chemicals and pharmaceuticals, useful for developing industries. A further boost to the country’s economy could come from the discovery of an important titanium deposit and the expansion plan of the country’s still underdeveloped mining industry.

From the point of view of trade relations, about half of Paraguayan flows fall within the Mercosur area, where trade is currently recovering. Outside the Mercosur, favorable prospects are offered by trade with the European Union, which has included Paraguay in the generalized system of preference ‘Plus’ and continues negotiations for the free trade zone, and with China, second partner for imports. Foreign direct investment could increase if the government manages to heal the judiciary and initiate the structural reforms announced in the election campaign. One of these is, for example, the proposed privatization of the Asunción international airport, which, however, still remains far from being realized. An important economic achievement of the Lugo executive was the renegotiation of the 1973 agreement for the management of the Itaipú hydroelectric plant, half Brazilian. According to indexdotcom, while the original agreement was in favor of Brazil, the joint declaration signed in July 2009 provides for a more balanced distribution of profits. Currently 63% of the hydroelectric energy produced by Paraguay is exported to Brazil and the proceeds are sufficient to cover the entire expenditure of Paraguayan energy imports.

Defense and security

If from a regional point of view there do not seem to be particular reasons for threatening Paraguay’s security, on the domestic front there are at least two potential challenges. On the one hand – a Paraguayan peculiarity in the South American region – in the country there are historically elements linked to the Lebanese armed group of Hezbollah, which has an important logistical base in terms of size and international projection. The presence of Hezbollah appears to be the direct consequence of the massive immigration of the Lebanese population during the first Arab-Israeli conflicts in the 1940s and, later, during the Lebanese civil war in the 1980s. Elements believed to be close to Hezbollah partly control the illicit markets along the ‘ triple frontier ‘and derive funding for the organization’s activities from such traffic. The attacks that hit the Jewish community of Buenos Aires, Argentina, in 1992 and 1994 (the first against the Israeli embassy and the second against a Jewish cultural center, for a total of more than 100 victims), have been claimed. precisely from Hezbollah, which may have used the small South American country as a base. To eradicate its presence, Paraguay avails itself of the help of US troops, which have included Hezbollah among the terrorist organizations.

Another internal threat is constituted by the Ejército del Pueblo Paraguayo (Epp), a Marxist-Leninist guerrilla group, rooted in the central-eastern part of the country and probably linked to the Colombian Farc. The radical action taken by Cartes against the PP does not seem to have produced concrete results so far. L ‘Epp is not, however, neither the only nor the biggest threat to national security. The most serious cause of tension is the long- standing land conflict between Paraguayan peasants (the campesinos) – who are fighting for a fair redistribution of land – and the wealthy Brazilian entrepreneurs, now naturalized Paraguayans (the brasiguayos), who illegally seized land to be used for soy monoculture. Land speculation has triggered a spiral of violence with episodes of xenophobia to the detriment of Brazilians and severe conflicts that tend to worsen in the pre-election periods, when farmers try to put the land issue on the agenda.

To increase the security of the country, Paraguay is part of the so-called ‘Three Plus One Security Dialogue’, the dialogue that involves, in addition to Asunción, Argentina, Brazil and the USA. In terms of international missions, the country is present in Haiti with a contingent of 114 soldiers, within the United Nations mission Minustah, and in Cyprus, as part of the Unficyp mission, with 14 soldiers.

Paraguay Energy