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Paraguay - Brazil Relations

During the 1960s and 1970s, the main foreign influences on Paraguay were Brazil and the United States. Both countries aided Paraguay's economic development in ways that enhanced its political stability. A 1956 agreement with Brazil to improve the transport link between the two countries by building roads and a bridge over the Rio Parana broke Paraguay's traditional dependence on Argentine goodwill for the smooth flow of Paraguayan international trade. Brazil's grant of duty-free port facilities on the Atlantic Coast was particularly valuable to Paraguay.

Closer relations with Brazil paralleled a decline in relations with Argentina. After Peron's expulsion, Paraguay slipped from the orbit of Buenos Aires as Argentina declined politically and economically. Argentina, alarmed by Itaipu and close cooperation between Brazil and Paraguay, pressed Stroessner to agree to participate in hydroelectric projects at Yacyreta and Corpus. By pitting Argentina against Brazil, Stroessner improved Paraguay's diplomatic and economic autonomy and its economic prospects.

Stroessner' s interests coincided with those of Brazil, which desired to increase its influence at the expense of Argentina and to establish transportation linkages with countries to the west. In the 1950s, Brazil funded the construction of new buildings for the National University in Asuncion, granted Paraguay free-port privileges on the Brazilian coast at Paranagua, and built the Friendship Bridge over the Rio Parana, thereby linking Paranagua to Asuncion. The signing of the Treaty of Itaipu in April 1973 symbolized that Paraguay's relationship with Brazil had become more important than its ties with Argentina. The Stroessner regime benefited politically and economically from its relationship with Brazil.

The intimacy of Paraguayan-Brazilian relations generated a variety of problems. First, Paraguayan opposition groups charged that Brazil had become Paraguay's colonial warder. For example, PLRA leader Lamo wrote a book denouncing Brazil's designs on Paraguay. The opposition pointed to Paraguay's mounting debt problem in the late 1980s and attributed much of it to unnecessary and inefficient Brazilian construction projects. Some US$300 million of this debt resulted from the controversial Paraguayan Steel (Aceros Paraguayos—Acepar) mill that the Brazilians financed and built. Acepar was completed after the demand from Itaipu had passed, its steel could not be consumed by Paraguay, it imported raw materials from Brazil, and its product was too expensive to be sold abroad. The Itaipu project itself also represented a source of embarrassment for the Stroessner regime. ABC Color, among others, pointed out that the Treaty of Itaipu authorized Paraguayan sales of excess electricity to Brazil at a price highly advantageous to Brazil. Opposition pressure forced a renegotiation of the rate in 1986.

For its part, Brazil also objected to several actions of the Stroessner government. In the late 1980s, a number of public and private Paraguayan institutions failed to pay their debts to Brazilian creditors. As a result, Itaipu electricity payments were withheld, and several Paraguayan accounts were frozen in Brazil.

Brazil has repeatedly encroached on Paraguayan territory during military and police operations. Paraguay's bilateral relations with Brazil soured in October 2008 over large-scale Brazilian military exercises on the Paraguayan border. The exercise -- dubbed "Operation Southern Frontier II" -- began October 13 and concluded October 24. It included land, air, and amphibious operations involving up to 3,000 soldiers, 250 patrol vehicles, seven helicopters, and live ammunition. The Brazilian military destroyed several ports used for smuggling on the Paraguay River, and set up check points near the Brazilian border crossing near Ciudad del Este, where it inspected over 6,000 vehicles.

The press reported that the military exercises notably dampened the flow of commerce between Paraguay and Brazil. When Ambassador traveled with President Fernando Lugo to the border town of Capitan Bado in Amambay Department October 20, local officials reported that the Brazilians had removed six tanks and a large number of troops only hours before their arrival. Paraguayan Minister of Agriculture Vera Beranjano privately told the Ambassador during the trip that he considered her presence a show of U.S. support for Paraguay to Brazil.

Although Brazil officially informed Paraguay of its plans to conduct military exercises, Paraguayan officials claimed Brazil did not give Paraguay enough notice and objected to Brazil's show of force, taking the exercise as an affront to Paraguay's sovereignty. Paraguayan Ambassador to Brazil Luis Gonzalez Arias said that the military exercises along the Paraguayan border "should not scare us, because they are military exercises which Brazil has been carrying out for more than ten years."

Tensions between Paraguay and Brazil further increased after several landless farmer groups illegally occupied properties owned by Paraguayans of Brazilian origin ("Brasiguayos" lands]. Campesino groups have targeted large Brazilian landowners, who are widely believed to illegally own Paraguayan land, to refuse to hire Paraguayan farm workers, and to contaminate the environment with agrotoxins. Between 300,000-500,000 Brasiguayos live in Paraguay [that is, roughly five to ten percent of the total population]. A 2005 law allows foreigners to own land for any purpose as long as it is not located within 50 miles of Paraguay's borders.

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