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Monday, October 07, 2002

By Reed Lindsay, Special to the Post-Gazette

ASUNCION, Paraguay -- Angela Diaz lives in a shack across the street from the Senate. In the morning, as the senators step out of their land rovers and Mercedes Benz sedans at the columned entrance, Diaz emerges from her sheet metal and plyboard hovel behind the pink building.

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On the street, children fetch water at a makeshift spout jutting from the pavement and women wash clothes in plastic basins. Smoke rises from outdoor charcoal stoves. A policeman, holding an automatic rifle, sits in a chair in the shade of the Senate building.

Diaz makes two dollars a day as a chambermaid in a brothel. Her two sons, who share the one-room shanty with her, make half that washing cars and running errands for legislators at the Senate and the nearby Chamber of Deputies.

They are one family among thousands who live in the swelling Chacarita slum, which extends from the Senate to the marshy banks of the Paraguay River.

"Democracy is what ruined us," says Diaz, 43, her eyes squinting against the mid-morning sun. "It's what ruined Paraguay."

Throughout Latin America, people have given up hope on democratic governments that have brought them deepening poverty as politicians pad their bank accounts.

But perhaps in no country have the failings of democracy been so resounding as in Paraguay, where many now look fondly on the days of economic stability and violent repression under Alfredo Stroessner, a dictator who ruled for 35 years before being deposed in a 1989 military coup.

Last month, tractor-driving farmers blocked highways and taxi drivers went on strike in a weeklong nationwide protest that followed on the heels of violent police repression in Asuncion, which left dozens injured. Two months earlier, President Luis Gonzalez Macchi called a state of emergency as demonstrators clashed with police in protests that left two dead and dozens injured.

Leading recent polls for the presidential election next April is Lino Oviedo, a former Army chief exiled in Brazil. Oviedo was a leading actor in the coup that ousted Stroessner, but he is cut in a similar mold as the dictator -- a strong-armed populist -- and is suspected of inciting many of the anti-government protests.

As in the rest of the region, a slumping economy is largely to blame for the disillusionment with democracy in this agrarian nation of 5.8 million people. After four years of recession, Paraguay's export-driven economy has nosedived in recent months, a victim of the regional decline accelerated by Argentina's financial meltdown.

More than a third of the work force is jobless or underemployed as urban slums grow with new arrivals from the even poorer countryside. Migrating to crisis-racked Argentina, long the traditional escape valve for Paraguay's lower class, has become pointless.

"There are no jobs here," said Pastor Rojas, 46, a community leader in Banados Sur, one of Asuncion's poorest neighborhoods. "Either you work as a street vendor or you go to the trash dump [to scavenge]."

High levels of unemployment and poverty have translated into rising crime rates, both in the cities and in the countryside.

"During the dictatorship, our terror was the police and the Army -- now we're afraid of everyone," said Rojas.

Like many Paraguayans, Rojas attributes the economic woes to what he sees as the nation's corrupt politicians, starting with the president.

Political turmoil

In 1999, unidentified gunmen assassinated Vice-President Luis Maria Argana, triggering spontaneous street protests in Asuncion. The prime suspects were Oviedo, Argana's archenemy, and President Raul Cubas, elected a year earlier and considered to be Oviedo's protege.

The protesters withstood police repression and sniper fire from suspected Oviedo supporters, as seven people were killed. Within days, both Oviedo and Cubas fled the country.

Next in line as president of the Senate at the time, Luis Gonzalez Macchi filled the void on high hopes, backed by strong public approval and a multiparty coalition.

Three years later, he has lost both. Gonzalez Macchi's reputation has been stained by numerous scandals, including the revelation that he was using a stolen BMW as the presidential limousine. In recent months, his approval rating has dropped close to single digits and the leaders of his own Colorado Party have withdrawn their support.

In June, the Colorado-controlled Congress scrapped a bill to privatize the state-owned telephone company, the lInchpin of Gonzalez Macchi's economic plan.

The privatization would have freed a multi-million dollar credit line from the International Monetary Fund, the first such loan to Paraguay in more than 40 years. Now, the IMF is demanding Congress pass a series of belt-tightening measures to unlock the funds.

Luis Alberto Meyer, the administration's planning secretary, blames the Colorado Party for blocking economic reforms, such as the privatization, so as not to lose support among the some 200,000 state employees. The Colorados, a key institutional pillar of Stroessner's regime, continue to dominate Paraguayan politics through their control over government resources and patronage.

"We've advanced, but we're still up against this party of the State," said Meyer, who belongs to the opposition National Encounter Party. "With this patronage system, there can be no reform. And with the economic crisis it's worse, because everybody is asking the government for something."

But some economists argue that it is not Paraguay's inefficient bureaucracy that is to blame for the country's economic woes, but a weak state that has done little to protect local industry and to invest in social services.

Compared to other countries in the region, Paraguay hardly participated in the free market bonanza of the 1990s, during which import tariffs were slashed, government regulations streamlined and state-owned industries auctioned off. The economic downturn in the region has fueled criticism of these policies, which are widely blamed for driving up unemployment and widening the gap between rich and poor.

But unlike Argentina and Brazil, Paraguay never had a strong, interventionist state to begin with, and therefore there were relatively few trade barriers to knock down and state-owned companies to dismantle, according to Fernando Masi, co-director of the Asuncion-based CADEP think tank.

Since the early 1980s, the government has played a relatively feeble role in stimulating economic growth and in providing public welfare. Spending on social services like education and health has been consistently lower than in other countries in Latin America, says Masi.

Paraguay also opened its borders long before the move toward free trade swept across the hemisphere. Called "triangular" trade, finished products from the United States and Asia were imported and then re-exported -- most often illegally -- into Brazil and Argentina, which had highly protectionist regimes.

This severely hampered indigenous industrialization in Paraguay, and now that Paraguay's larger neighbors have reduced trade barriers, too, while cracking down on contraband, demand for re-imports from Paraguay has virtually disappeared.

The central bank's reserves have dwindled to half their 1998 levels and the currency has lost 20 percent of its value against the U.S. dollar this year, triggering inflation. The government has struggled to pay its employees, sparking strikes and demonstrations.

Oviedo's return a worry

What most worries administration officials about economic instability is the potential return of Oviedo, who they accuse of scheming a takeover from his exile in Brazil.

Oviedo's tough anti-corruption rhetoric and populist image -- he speaks fluent Guarani, the first language among most of Paraguay's poor -- have won favor in the country's indigent rural areas and Asuncion's slums.

Oviedo is barred from running for president until he serves a 10-year prison term for allegedly leading a 1996 barracks uprising. Analysts say a coup is now unlikely as he no longer has enough support in the military, but Oviedo could grab power if social unrest forces the ouster of the president, as happened in Argentina last December.

"I like Lino Oviedo," said Diaz. "He is a humble campesino like us. We need a president who will do things, who will put an end to crime."

Not everyone in Paraguay has given up on democracy, however.

When Eulalio Lopez was a child, his father disappeared for days, sometimes weeks, at a time, arrested and interrogated by Stroessner's feared police. His father, whose crime was attending meetings of the opposition Liberal Party, was one of the lucky ones. Countless others were tortured, maimed and killed.

Soon after the overthrow of Stroessner, Lopez joined thousands of other landless campesinos in takeovers of immense estates, called latifundios. Paraguay has one of the most unequal distributions of land in the world.

Now, the 33-year old Lopez heads an organization composed of more than 7,000 squatters, who have won rights to land in the poor, rural province of San Pedro. They have formed cooperatives to negotiate better prices for their products and have invested in seeds and farm equipment. They also spearheaded the June protests that helped halt the privatization process.

None of this would have been possible under Stroessner, says Lopez, whose organization opposes both Gonzalez Macchi and Oviedo.

But so far, growing social movements like Lopez's and a stronger civil society have not evolved into electoral alternatives. There are few new faces among the Colorados, and the opposition parties are widely seen as ineffectual and equally corrupt.

As elections approach, apathy and a declining faith in democracy is setting in.

"This is a stolen democracy," said Father Francisco de Paula Oliva, a leading figure of the grass roots protests that helped oust Cubas after the Argana assassination.

"We have freedom now and that is a big difference. But when there is a lot of poverty, when those who govern are mafiosos, there are limits to this freedom."

Reed Lindsay is a freelance writer based in Buenos Aires, Argentina.