Reed Lindsay
SPECIAL TO THE WASHINGTON TIMES

     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, Mrs. Diaz emerges from her sheet-metal and
plyboard hovel behind the pink building.
     On the street, children fetch water at a spout jutting from the pavement, and women wash clothes in plastic basins outside their shacks.
     Smoke rises from outdoor charcoal stoves. A policeman, holding an automatic rifle, sits in a chair in the shade of the Senate building.
     Mrs. Diaz makes the equivalent of $2 per 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," said Mrs. Diaz, 43, her eyes squinting against the midmorning sun. "It's what ruined Paraguay."
     Throughout Latin America, people have given up hope in democratic governments that have brought them deepening poverty as politicians padded their bank
accounts. But perhaps in no other country have the failings of democracy been so clear as in Paraguay, where many look back fondly to the days of economic
stability and violent repression under Alfredo Stroessner, a dictator who ruled for 35 years before being deposed in a military coup in 1989.
     Leading recent polls for the presidential election in April is Lino Oviedo, a former army chief exiled in Brazil. Gen. Oviedo was a leading actor in the coup that
ousted Gen. Stroessner, but he is cut from a similar mold — a strong-armed populist.
     As in much of Latin America, economic pain is blamed for the disillusionment with democracy in this largely agrarian nation of 5.8 million. After four years of
recession, Paraguay's export-driven economy has nose dived this year, a victim of the regional decline accelerated by Argentina's financial meltdown.
     Migrating to Argentina, a traditional escape for Paraguay's poor, has become unfeasible. More than a third of Paraguay's work force is jobless or underemployed
as urban slums grow with new arrivals from the even poorer countryside.
     "There are no jobs here," said Pastor Rojas, 46, a community leader in Banados Sur, one of the capital's poorest neighborhoods. "Either you work as a street
vendor or you go to the trash dump" — to scavenge.
     High unemployment and poverty have raised crime rates in the cities and countryside.
     "During the dictatorship, our terror was the police and the army. Now we're afraid of everyone," Mr. Rojas said.
     Like many Paraguayans, he blames the economic hardship on "corrupt politicians" — starting with President Luis Gonzalez Macchi.
     In 1999, unidentified gunmen assassinated Vice President Luis Maria Argana, provoking street protests in Asuncion. The prime suspects were Gen. Oviedo, Mr.
Argana's archenemy, and President Raul Cubas, elected a year earlier and considered to be Gen. Oviedo's protege. The protesters braved police repression and
sniper fire from suspected Oviedo supporters, and seven people were killed. Within days, both Gen. Oviedo and Mr. Cubas fled the country.
     Mr. Gonzalez Macchi, then next in the line of succession as president of the Senate, filled the void amid high hopes, backed by a multiparty coalition. Three years
later, he has lost both.
     Mr. Gonzalez Macchi's reputation has been stained by numerous scandals, including the revelation that he was using a stolen BMW as his presidential limousine.
In recent months, his approval rating has dropped close to the 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 lynchpin of Mr. Gonzalez Macchi's economic
plan, as campesinos blocked roads and joined unionists at protests in Asuncion.
     Privatizing the government-owned telephone company would have freed a multimillion-dollar line of credit from the International Monetary Fund — the first such
loan to Paraguay in more than 40 years. Now, the IMF is demanding that the Paraguayan Congress pass a series of belt-tightening measures to unlock the funds.
     Luis Alberto Meyer, the Gonzalez Macchi administration's planning secretary, blames the Colorado Party for blocking the privatization to keep its support among
the 200,000 or so government employees. The Colorados, a key institutional pillar of Gen. Stroessner's regime, 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 Mr. 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 bureaucracy that is to blame for the country's economic woes but a weak state that has done little to protect
local industry and invest in social services.
     Compared with other countries in the region, Paraguay hardly participated in the free-market frenzy of the 1990s, during which import tariffs were slashed,
government regulations streamlined and state-owned industries auctioned off. The region's economic downturn has fueled criticism of those policies, which are
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, and therefore, there were relatively few trade barriers to knock down or
state-owned companies to dismantle, argues 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 providing public welfare.
     Spending on social services such as education and health has been consistently lower than in other Latin American countries, Mr. Masi said.
     Paraguay also opened its borders long before the move to free trade swept across the hemisphere. Called triangular trade, finished products from the United
States and Asia were imported, then re-exported — mostly illegally, meaning without added taxes — to Brazil and Argentina, which had highly protectionist regimes.
     But the open-borders policy severely hampered industrialization in Paraguay.
     The triangular trade blossomed under Gen. Stroessner, but in recent years it has collapsed as Brazil reduced its tariffs and cracked down on contraband, and
demand has shrunk amid the regional economic decline.
     The Paraguayan central bank's reserves have dwindled to half their 1998 levels, and the currency has lost 20 percent of its value against the dollar this year,
causing inflation. At the same time, the government has struggled to pay its employees, provoking recent strikes and demonstrations at public hospitals and the
courts.
     But what most worries administration officials about the economic instability is Gen. Oviedo, whom they suspect of planning a takeover from his exile in Brazil.
     In mid-July, Mr. Gonzalez Macchi declared a five-day state of emergency as pro-Oviedo demonstrators clashed with police in nationwide protests that left two
dead and dozens injured.
     Gen. Oviedo's tough anti-corruption rhetoric and populist image — he speaks fluent Guarani, the first language among most of Paraguay's poor — win favor in
rural areas and Asuncion's slums. The Guarani lived as settled farmers in Paraguay long before the arrival of European colonists.
     Gen. Oviedo is barred from running for president until he serves a 10-year prison term after being convicted of leading a 1996 barracks uprising. Analysts say a
coup is unlikely because he no longer has enough support in the military but that he could seize power if social unrest forced the ouster of the president, as happened
in Argentina in December.
     "I like Lino Oviedo," said Mrs. Diaz, the maid who lives in the slum near the Senate. "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.
     When Eulalio Lopez was a child, his father disappeared for days, sometimes weeks, at a time, arrested and interrogated by Gen. Stroessner's feared police. His
father, a campesino 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 Gen. Stroessner, Mr. Lopez joined thousands of other landless campesinos in takeovers of immense estates, called latifundia.
Paraguay has one of the most unequal distributions of land in the world.
     Now Eulalio Lopez, 33, leads an organization comprising more than 7,000 squatters who have won rights to land in the rural San Pedro province. They have
formed cooperatives to negotiate better prices for their products and have invested in seeds and farm equipment.
     In June, they also spearheaded the roadblocks that helped halt privatization. None of this would have been possible under Gen. Stroessner, said Mr. Lopez,
whose organization opposes both Mr. Gonzalez Macchi and Gen. Oviedo.
     But so far, social movements and a stronger civil society have not brought forth 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, political apathy prevails.
     "This is a stolen democracy," said the Rev. Francisco de Paula Oliva, a leading figure of the grass-roots protests that helped oust President Cubas after the
assassination of Vice President Argana.
     "We have freedom now, and that is a big difference. But when there is a lot of poverty, when those who govern are mafiosi, there are limits to this freedom," the
priest observed.

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