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Paraguay - US Relations

US interests in Paraguay are focused on strengthening democratic institutions, promoting sound economic policies and good governance, disrupting criminal organizations, and combating terrorist financing. It could be of major importance to the US as a potential staging area or safe haven during crises in neighboring countries. The US maintains bilateral assistance programs dealing with combating narcotics trafficking, money laundering, intellectual property violations, and trafficking in persons.

During the Cold War the US had two predominant interests in Paraguay. The US was primarily concerned with Paraguay's continuing support for US positions on international policy matters, an interest increasingly important given the proliferation of nations whose actions in international forums were often "irresponsible" and subject to manipulation by the Soviet adversary. Secondly, the US was interested in Paraguay’s successful development under conditions of internal security and political stability. These primary interests were closely related since a stable and relatively prosperous Paraguay was more likely to maintain its pro-US orientation than would be the case if the country were to relapse into political instability and serious economic depression.

The significance of Paraguay to the United States was less than that of most other independent countries of South America. Paraguay is small and land-locked, no important mineral resources had been discovered, private American investment was of modest proportions, the American resident community was small, and Paraguay was not a major market for American products.

Paraguay has an interest in United States cooperation and support not only because of the United States’ great power status and free world leadership, but also as a counterweight to any pressure from Argentina or Brazil; the Paraguayan Government recognizes that the United States is directly or indirectly the country’s principal source of development capital; the United States has an important share of the Paraguayan commercial banking field; the United States is a major trading partner for Paraguay; and an American meatpacking firm is the country’s largest private employer.

The primary interest of the United States in Paraguay was that Paraguay not became a trouble-spot, whether by the acquisition of power by elements hostile to the United States, by the adoption of repressive measures resulting in widespread unrest, or by any other development adversely affecting United States hemispheric interests.

The United States and Paraguay have an extensive relationship at the government, business, and personal level. Paraguay is a partner in hemispheric initiatives to improve counternarcotics cooperation, combat money laundering, trafficking in persons, and other illicit cross-border activities, and adequately protect intellectual property rights. The United States looks to Paraguay, which has tropical forest and riverine resources, to engage in hemispheric efforts to ensure sustainable development. The United States and Paraguay also cooperate in a variety of international organizations.

Paraguay has taken significant steps to combat illegal activity in the tri-border area it shares with Argentina and Brazil. It participates in antiterrorism programs and fora with its neighbors and the United States. The United States strongly supports consolidation of Paraguay's democracy and continued economic reform, the cornerstones of cooperation among countries in the hemisphere. The United States has played important roles in defending Paraguay's democratic institutions, in helping resolve the April 1996 crisis, and in ensuring that the March 1999 change of government took place without further bloodshed.

Total two-way trade between the United States and Paraguay increased by about 7% in 2011 over 2010. Imports from Paraguay in 2011 were $110 million, up from $62.1 million in 2010. U.S. exports to Paraguay in 2011 were $1.97 billion, up from $1.81 billion in 2010, according to U.S. Census data. More than a dozen U.S. multinational firms have subsidiaries in Paraguay. These include firms in the computer, agro-industrial, telecom, banking, and other service industries. Some 75 U.S. businesses have agents or representatives in Paraguay, and more than 3,000 U.S. citizens reside in the country. The U.S. Government has assisted Paraguayan development since 1942. Building on the successes of the $34.9 million 2006-2008 Millennium Challenge Corporation's (MCC) Threshold Country Program (TCP) with the U.S., Paraguay signed a second 2-year MCC TCP for $30.3 million in 2009. Its objective is to reduce corruption and strengthen the rule of law. This second Threshold program involves key ministries and agencies of the Government of Paraguay, including the Economic Crimes and Corruption Unit of the Public Ministry, the Administrative Case Tribunal of the Supreme Court, the Controller General of the Ministry of Finance, the Ministry of Health, the customs authorities, the Ministry of Industry and Commerce, the Ministry of the Interior, and the National Police Academy.

Since March 2010, the U.S. also works closely with the Paraguayan Ministries of Agriculture, Finance, Industry and Commerce, and Interior as well as with local authorities on the Northern Zone Initiative. With Section 1207 funding of $6.5 million, this program aims to build the capacities of the National Police and to strengthen public management and respond to citizen priorities through service provision and job creation in historically underserved municipalities in the country’s northern zone.

Separately, the U.S. Agency for International Development (USAID) provides technical assistance in the areas of democracy and governance, economic growth, health, and the environment. USAID supports democracy and good governance by working closely with the judicial branch and civil society organizations to strengthen the mechanisms that detect and prevent corruption. USAID provides support for small and medium-sized enterprises in Paraguay to increase sales and reduce poverty through job creation with emphasis on rural producers. USAID’s health program supports the Government of Paraguay’s commitment to improving the health system, reducing corruption, and improving access to basic health services for all citizens. This program had been reduced in recent years and was phased out in 2012.

In response to a growing number of environmental challenges, including massive deforestation and threats to freshwater resources and biodiversity, USAID works with diverse stakeholders to form alliances and mobilize additional resources to support the sustainable management of key and specific vulnerable areas in Paraguay. The total amount of the program was $11.287 million in fiscal year 2010 and $5.5 million in 2011.

The U.S. Department of State, the Drug Enforcement Administration, the Department of Justice, and the Department of Treasury provide technical assistance, equipment, and training to strengthen counternarcotics enforcement, combat trafficking in persons, promote respect for intellectual property rights, and to assist in the development and implementation of money laundering legislation and counterterrorism legislation. In 2009, U.S. and Paraguayan officials renewed a 2003 memorandum of understanding (MOU) to strengthen the legal protection and enforcement of intellectual property rights in Paraguay. The United States and Paraguay discussed ongoing work under that MOU during an October 2010 United States-Paraguay Joint Commission on Trade and Investment meeting in Asuncion. The countries also discussed joint work in creating opportunities for small and medium-sized enterprises in the United States and Paraguay.

The Peace Corps opened its program in Paraguay in 1967; since that time nearly 3,500 Volunteers have served in Paraguay. To help address Paraguay’s critical needs, approximately 230 Volunteers are assigned to projects in the areas of agriculture, community economic development, education and youth development, environment, and health and HIV/AIDS. The Office of Public Diplomacy also is active in Paraguay, funding Fulbright and other scholarships to the United States, U.S. scholars to Paraguay, other short- and long-term exchanges, English scholarship programs, donations of books and equipment, and a cultural preservation project to restore Paraguay's National Library.

The U.S. Department of Defense (DOD) and the Massachusetts National Guard provide technical assistance and training to help modernize and professionalize the military, including by promoting respect for human rights and obedience to democratically elected civilian authorities. Putting the training into practice, Paraguay sent its first UN peacekeepers--a company of engineers--to Haiti in December 2010. For 1 year, they helped rebuild Haiti’s earthquake-ravaged infrastructure. A larger engineering company replaced them in December 2011 to continue that work.

Paraguayan armed forces have conducted joint training with the United States. In 2005 Paraguay agreed to allow U.S. troops to enter Paraguay for up to 18 months, ostensibly to monitor the tri-border region of Paraguay, Argentina, and Brazil for terrorist operations. U.S. troops will train their Paraguayan counterparts in methods to deter drug trafficking, government corruption, and terrorism. Before being granted access by Paraguay, the United States had been refused entry rights by both Brazil and Argentina.

The Tri-Border Area (TBA), the area of Paraguay that meets Brazil and Argentina, near the city of Ciudad del Este, is a primary area of US concern due to the high rate of transnational crime that impinges on US interests. The area is notorious for drug and other smuggling, including trafficking in persons, intellectual piracy, document forgery, counterfeit cigarette manufacturing and loose border controls, especially at the Friendship Bridge connecting Paraguay with Brazil. A priority concern for that region is terrorist fundraising, especially by Hezbollah.

The Office of Defense Cooperation (ODC) developed a robust JCET/CNT program, by 2005 second to only that of Colombia in the region, and implemented the Counter Terrorism Fellowship Program contributing significantly toward establishment of host nation CT capability, including designation and creation of a Paraguayan Tier 1 unit. Funding from the Enhanced International Peacekeeping Cooperation (EIPC) program had facilitated the training of over 700 observers and peacekeepers and the deployment of approximately 252 Paraguayans in support of peacekeeping operations in this hemisphere and Africa.

Separately, ODC has also launched an outreach program, leveraging the State Partnership Program, designed to encourage the military to build institutional links with legislators in part through visits by Paraguayan Congressmen as well as Flag officers from the Joint Staff and Ministry of Defense with their counterparts in the US. The partnership with the Massachusetts National Guard is robust; the MARNG designation of a full time TCA coordinator from MARNG has greatly promoted this lash up. These visits have generated greater appreciation for the value of military cooperation and helped solidify support in Congress for approval of protections and authorizations for U.S. participants in the exercises.

The impact of MEDRETES and other humanitarian deployments in poor areas over the years is invaluable. During one public controversy, one legislator answered critics of military exercises by citing the poor who have vision, hearing, or their lives saved. US military support after a tragic fire in August 2004 also made a lasting impression.

In the absence of a SOFA, the US gained protections for US participants in a diverse range of US-Paraguay joint military exercises for defined periods of time, such as gaining Congressional approval of immunities for exercises scheduled from July 2005 through December 2006. In June, however, an article in an Argentine newspaper criticizing the Paraguayan Senate's decision to extend the immunities for these exercises and suggesting these exercises were a harbinger to creation of a US base in Paraguay, prompted significant press treatment here on the issue. FM Rachid and MOD Gonzalez defended the decision, qualifying it as consistent with GOP treatment of cooperation agreements with other countries and with Paraguay's commitments under the Rome Treaty. In late June 2005, the Senate granted the US participants permission to enter for these exercises over the next 18 months.

The election of Horacio Cartes in 2013 repositioned Paraguay as the dependable US ally it was for decades before Lugo came to power. Cartes assumed the mantle of US client regime in the region, going further than some of his right-wing neighbors, such as Argentina's Mauricio Macri.

The Department of State released its annual International Narcotics Control Strategy Report in April 2016 in which it characterized Paraguay as a principle center for money laundering and a transit point for illicit narcotics shipments. Foreign Minister Loizaga labeled the report as out of date and not taking into account the progress he said that Paraguay had made over the last year.

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Page last modified: 30-08-2016 19:46:41 ZULU