Paraguay at a Crossroads

The Republic of Paraguay is a small, sparsely populated country nestled between Argentina and Brazil. A mostly agrarian society, its main sources of wealth are soy, beef, and Itaipu, the world’s second-largest hydroelectric dam, co-owned with Brazil. Paraguay has been a more-or-less functioning democracy since 1989, when General Alfredo Stroessner, who ran the country as a dictator for more than thirty years, was finally overthrown. But Stroessner’s Colorado Party, whose reign preceded him, is still in power all these years later. Since 1989, the party has won every presidential contest except one. It is a clientelist institution that relies on a disciplined base of civil servants and rural and small-town voters. The opposition, an ideologically diverse coalition led by the Liberal Party, blames the country’s systemic corruption, lack of social progress, and grotesque inequality on the Colorado Party’s almost unassailable dominance. Until last summer, it seemed all but certain that the “Colorados” would win the upcoming presidential election on April 30.

That was before Marc Ostfield, the American ambassador to Paraguay, made a big announcement: two Colorados, Horacio Cartes and Hugo Velázquez, were now officially designated as “significantly corrupt” by the U.S. government. Velázquez is the current vice president of Paraguay. Cartes, one of the most powerful men in Paraguay, is the owner of a conglomerate of twenty-five companies, which includes a tobacco importer, media outlets, and a supermarket chain. President from 2013 to 2018, he is widely believed to be a major influence in the administration of Mario Abdo Benítez, his successor. (Paraguay’s constitution forbids presidents from running for reelection.)

In January, the United States raised the stakes. The Treasury Department imposed sanctions on both Velázquez and Cartes “for their involvement in the rampant corruption that undermines democratic institutions in Paraguay.” It linked both men to narcotraffickers and Hezbollah. The Lebanon-based terrorist group is suspected of laundering money in the tri-border area of eastern Paraguay. The sanctions have effectively cut Cartes and Velázquez off from international banking and investment and plunged the Colorado Party into crisis. The black mark on Cartes’s name means that the party can no longer finance its campaigns. (“I’m on the verge of opening an OnlyFans account,” one Colorado lawmaker joked.)

It’s a bold move to impose sanctions on the current vice president and former president of a friendly nation right before an election. These sanctions are in keeping with the Biden Administration’s policy of promoting democracy, which includes “strengthening anticorruption ecosystems” abroad. But it’s unclear how—or indeed whether—they serve U.S. strategic interests. Efraín Alegre, the opposition candidate, has suggested that he might support opening relations with mainland China and ending Paraguay’s recognition of Taiwan, an undesirable outcome for the United States. In fact, China’s influence is growing throughout Latin America. Some wonder if the sanctions have something to do with the culture wars. Paraguay is very Catholic and probably the most culturally and morally traditional country in the Southern Cone region. Influential progressives, who have already taken their complaints about Paraguay’s abortion laws to the United Nations, may have lobbied for the Biden administration to support Alegre. But why, in that case, did Santiago Peña, the Colorado Party’s presidential candidate (and Cartes ally), meet with the U.S. State Department on the same day that Ostfield announced the sanctions?

Whatever its motivation, the U.S. government’s decision to impose sanctions just months before the election was political. Few would dispute that Paraguay’s political class is corrupt and that the country is in danger of becoming a narco-state. But is the only alternative to become a pawn in the Great Power struggle between the United States and China?

—March 22, 2023