Déjà Vu? Paraguay and the Return of the Partido Colorado

04/26/2013 02:53 pm ET | Updated Jun 26, 2013
  • Fiona Mackie Senior Editor/Economist, The Economist Intelligence Unit

The Partido Colorado (PC) is set to return to power after a decisive victory in the presidential election on April 21st. The PC's return follows a brief interruption to its 60-year reign between 2008 and 2013. The millionaire businessman Horacio Cartes, who led the Colorados back to power, won easily. But Mr Cartes, a political novice who has never voted and joined the party just a few years ago, could find governing much harder. The controversial issue of land reform that eventually saw previous president Fernando Lugo kicked out of office will not go away; neither will the deep-rooted problems of poverty and income inequality

Even with his own party, Mr Cartes will not find it easy going. The president-elect is a political outsider and his alliance with the PC is something of a marriage of convenience. While Mr Cartes presents himself as a moderniser, the Colorados still represent an "old-style" politics based on clientelism and political patronage. Mr Cartes will find it difficult as he moves ahead to challenge this system, assuming he wants to.

A strong mandate, and a lot to do

The PC's victory in the April 21st general election was comprehensive. Mr Cartes himself won the presidency with a margin of victory of almost ten percentage points. The Colorados did even better in the congressional elections. Against expectations, the party won a majority of 41 seats in the 80-member Chamber of Deputies, 19 seats in the 45-member Senate and 15 of 17 governorships.

Mr Cartes now has a strong mandate to press ahead with his agenda. Top of the list will be kick-starting economic growth. Mr Cartes's victory partly reflected a perception among voters that the candidate, one of Paraguay's richest men and a successful businessman who only very recently entered politics, would know how to return the country to economic growth after last year's recession. This should, in fact, be a relatively easy task, with a strong harvest expected to return the agriculturally-dependent economy to firm growth this year. The Central Bank has in fact recently revised up its growth forecast for 2013 to 13%.

But such stellar growth rates belie the fact that Paraguay remains one of the poorest and most unequal countries in Latin America. Tackling these problems will be incredibly challenging for Mr Cartes. The president-elect has at least sent the right signals, portraying himself as a moderniser seeking to improve productivity and create jobs by improving human capital. He has also signalled an intention to increase foreign direct investment (FDI) to a country that has historically received little foreign investor interest. Apart from its vast arable lands (the country is a major exporter of soybeans and beef), Paraguay boasts abundant hydropower and potentially large but as yet mostly unexplored mining resources (a huge titanium deposit was recently discovered).

The biggest obstacle to Mr Cartes's efforts will come from his own party. During its several decades in power (which included the 35-year dictatorship of General Alfredo Stroessner), the PC developed a system of political control based on patronage and clientelism, and its time out of office does appear to have produced any thoughts of reform. This will complicate any efforts by Mr Cartes to reform substandard political institutions, and will ensure most public enterprises remain firmly in state hands.

In some areas, Mr Cartes's own interests will preclude progress. Any movement on fiscal reform (to increase the minuscule tax contribution of agricultural producers) or land reform (to address the long-standing demands of landless peasants) seems unlikely, given Mr Cartes's ties to powerful agricultural interests.

A broad anti-Colorado alliance?

A shifting balance of power after the elections could also cause problems for Mr Cartes. Paraguay's smaller right-wing parties, who have often played power-broker in Congress, were trounced at the election, and their influence could now shift to the left. The ousting of President Fernando Lugo of the leftist Frente Guasu in June 2012 deeply divided the left-wing parties, which ran multiple presidential candidates. But collectively, they saw a significant increase in their presence in Congress. in the Senate Mr Lugo's Frente Guasu came third with five seats, and the other left-wing parties garnered another six.

But to have real influence, the left-wing parties may now have to reconsider the possibility of a rapprochement with their erstwhile allies, the centrist Partido Liberal Radical Auténtico (PLRA). A historic alliance between the left and the PLRA finally broke the PC's hold on power in 2008 and ushered Mr Lugo into power. However, the pact quickly unravelled. The PLRA supported Mr Lugo's "express" impeachment last year, and took on the interim presidency under Federico Franco.

This now appears to have been a mistake. The Franco government was dogged by accusations of nepotism and corruption, and the party failed to hold on to power despite the benefits of incumbency, which allowed the Franco government to ramp up public spending before the April polls. The PLRA also attempted to highlight allegations of vote-buying by the PC and of money-laundering by Mr Cartes linked to drug-trafficking, but amid the PLRA's own problems with corruption scandals, neither claim appears to stuck. Recriminations will now ensue, and major shifts in the party leadership are likely.

Ultimately, a revamped PLRA could manage to mend fences with Mr Lugo's Frente Guasu, and with the other left-wing parties in Congress. This would open up the possibility of a broad anti-Colorado alliance in the legislature. Combined with likely resistance to his agenda from within his own party, this could make Mr Cartes's task of governing much more difficult than the election results suggest.

Fiona Mackie is a Senior Editor/Economist at The Economist Intelligence Unit.