Paraguay - SOCIETY

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Paraguay - The Society

FOR MOST OF ITS HISTORY, a series of dichotomies characterized Paraguayan society. A contrast existed between rural and urban Paraguay and, even more pointedly, between Asunci�n--where economic, social, and political trends originated--and the rest of Paraguay. In rural Paraguay a divide existed between those holding legal title to land, usually the owners of large estates dedicated to commercial farming, and the mass of peasant squatters growing crops largely for their families' subsistence. Similarly, there was a gulf between the elite--educated, prosperous, city-based and - bred--and the country's poor, whether rural or urban. Finally, although most Paraguayans retained their fluency in Guaran� and this indigenous language continued to play a vital role in public life, there was a continuum of fluency in Spanish that paralleled (and reflected) the social hierarchy. These dichotomies not only continued into the 1980s but were exacerbated by the extensive, dramatic changes that had occurred in Paraguayan society since the 1960s.

Paraguayans of all classes viewed family and kin as the center of the social universe. Anyone not related through blood or marriage was regarded with reserve, if not distrust. People expected to be able to call upon extended kin for assistance as necessary and counted on them for unswerving loyalty. Godparents (whether or not they were kin) were important as well in strengthening social links within the web of kinship.

Migration was a perennial fact of life: peasants changed plots; men worked on plantations, factories, and river boats; women migrated to cities and towns to find employment in domestic service. Since the mid-nineteenth century there also had been a large contingent of emigr� Paraguayans in Argentina.

In the early 1970s, Paraguay's eastern border region--long underpopulated and undeveloped--replaced neighboring Argentina as the major destination of most Paraguayan migrants. Historically, land in the region had been held in immense plantations; the inhabitants were largely tropical forest Indians and mestizo peasant squatters. Beginning in the late 1960s, however, government land reform projects settled as many as 250,000 rural Paraguayans in agricultural colonies in this area. Many others bypassed the government entirely and settled in the region on their own.

Improvements in transportation and the construction of massive hydroelectric projects brought more far-reaching changes in the 1970s and 1980s. Economic growth drew tens of thousands of migrants--immigrants from neighboring Brazil as well as Paraguayan nationals--into the eastern border region. Their sheer numbers transformed the east from a sleepy hinterland into a maelstrom of change. In the process, both Indians and traditional small farmers were dispossessed of their lands and their traditional livelihood. As the construction projects were completed in the early 1980s, the region saw increased rural unrest as the peasants who had temporarily held jobs in construction found that there were no unclaimed agricultural lands for them to occupy.

The pace of urbanization--modest by world and Latin American standards--quickened during the boom years. Economic growth enabled the cities to absorb large numbers of rural Paraguayans who had been displaced by increased population pressures and the country's skewed land distribution. Economic downturns in the 1980s, however, stoked unrest among workers and peasants.

<> POPULATION
<> SOCIAL RELATIONS
<> RURAL SOCIETY
<> MIGRATION AND URBANIZATION
<> RELIGION
<> MINORITY GROUPS
<> EDUCATION
<> HEALTH AND WELFARE

Paraguay

Paraguay - Population

The 1982 census enumerated a population of slightly more than 3 million. Demographers suggested annual growth rates from 2.5 to 2.9 percent in the late 1980s. Thus, in mid-1988, estimates of total population ranged from 4 to 4.4 million. Assuming a yearly increase of between 2.5 and 2.9 percent until the end of the century, Paraguay would have a population of 5 to 6 million by the year 2000.

Modern censuses began under the direction of the General Office of Statistics following the War of the Triple Alliance (1865-70). In 1886-87 the census enumerated nearly 330,000 Paraguayans. Beginning with the 1950 census, population counts have been conducted by the General Directorate of Statistics and Census. Censuses were taken in 1886-87, 1889, 1914, 1924, 1936, 1950, 1962, 1972, and 1982. Demographers distrust the 1889 data since the numbers do not follow the generally accepted population growth curve.

After moderate growth in the 1930s and 1940s, the annual intercensal growth rate climbed sharply in the 1950s and 1960s. Population was concentrated most densely in an arc surrounding Asunci�n east of the R�o Paraguay. The Chaco was the least settled area; the region lost population in the 1970s at an annual rate nearly equal to the national rate of population increase during the same period--a trend that observers believed continued into the 1980s. Settlement along the country's eastern border increased significantly with improvements in transportation and the construction of hydroelectric projects in the region.

Since the 1950s, the ratio of males to females had increased steadily--an unexpected trend. As a population's general level of living, basic nutrition, and sanitation improve, the proportion of women to men typically tends to rise as degenerative diseases take a greater toll on the male population and women's longevity begins to have a discernible statistical impact. Observers suggested that a partial explanation of Paraguay's unusual pattern might be the decreasing effect of the male emigration that occurred during the decade following the civil war of 1947. The ratio of males to each 100 females was highest in rural areas (107) and lowest in cities (94), reflecting a greater tendency of women to migrate to urban areas.

The 1982 census also revealed a slightly aging population. In 1982 nearly 5 percent of Paraguayans were over sixty-five years old, in contrast to 4 percent for this age-group a decade earlier. Meanwhile, the percentage under age fifteen had dropped 3 percent, to 41.8 percent.

The average age at which Paraguayan women entered their first marriage or consensual union began to rise in the 1950s. By the late 1970s, women in Asunci�n averaged 19.7 years of age at their first marriage; those in other cities were about 8 months younger and those in rural areas were a year younger. The Ministry of Public Health and Social Welfare cooperated in the family-planning efforts of a number of international agencies active in the country and managed several family- planning clinics in Asunci�n and other parts of the country. Between 1959 and 1978, the total fertility rate--an estimate of the average number of children a woman will bear during her reproductive years--declined by nearly one-third, to 4.97. Estimates put the rate at 4.6 in the mid-1980s, with 3.4 projected by the turn of the century.

Paraguay

Paraguay - SOCIAL RELATIONS

Colonial Paraguay (basically, what is now Eastern Paraguay) lacked productive mines, strategic seaports, or lucrative plantation agriculture. Through most of the colonial era, it languished as a backwater of the Spanish Empire in the Americas, a region of small estates with a minimal number of Spanish settlers. The Guaran�-speaking Indians of the region were drawn into colonial society principally through high rates of intermarriage and concubinage with Spanish settlers, a process that created a mestizo society within a few generations. In the resulting cultural synthesis, the dominant language remained Guaran�, whereas the rest of the dominant social institutions and culture remained Hispanic.

The few remaining Hispanic overlords were largely eliminated in the upheaval of the War of the Triple Alliance, leaving a homogeneous population of mestizo farmers. Despite far-reaching changes from the 1960s to the 1980s, Paraguay remained a country of peasants engaged in subsistence farming. The basic social dichotomy was between small farmers and a narrow stratum of elite families whose diverse resources included links to industry, commerce, government, the military, and commercial agriculture. The upper class was centered in the capital and was interlinked by ties of kinship and marriage. Many, if not most, members of the elite knew each other from childhood, having grown up in the same neighborhoods and attended the same schools.

Guaran�--which, unlike many indigenous New World languages, included a written form after the Jesuits developed an orthography in the mid-sixteenth century--remained a vital element of Paraguayan national identity. Guaran� had always been one of the principal ways Paraguayans distinguished themselves from the rest of Latin America, and the 1967 Constitution recognizes Guaran� as a national language. Guaran� theater, in which both Paraguayan works and translations of European classics were performed, was popular with all levels of society. Paraguayan songs were internationally popular; lyrics in Spanish and Guaran� were a hallmark of Paraguayan culture.

Sociolinguist Joan Rubin characterized Paraguay as ". . . a Guaran�-speaking nation with a heavy incidence of Spanish-Guaran� bilingualism in which each language tends to fulfill distinct functions." Spanish had been the official language since the sixteenth century, and in the late twentieth century it remained the language of government, education, and religion. Nevertheless, Paraguayans of all classes spoke Guaran� much of the time. Language use varied by social context, however. Guaran� was appropriate in more intimate contexts. Spanish was used in more formal situations; it implied respect toward one of higher status. In families, for example, parents might use Guaran� in speaking to one another and require that their children speak to them in Spanish. The upper echelons were distinguished by their relative fluency and ease in using Spanish. By contrast, most rural Paraguayans were monolingual Guaran� speakers until as late as the 1960s.

<> Family and Kin
<> Ritual Kinship

Paraguay

Paraguay - Family and Kin

For Paraguayans of all social strata and backgrounds, family and kin were the primary focus of an individual's loyalties and identity. In varying degrees of closeness, depending on individual circumstances and social class, the family included godchildren, godparents, and many members of the extended family. Paraguayans felt some reserve toward anyone not able to claim relationship through kinship or marriage. Family and kin--not the community-- were the center of the social universe. An individual could expect assistance from extended kin on an ad hoc basis in times of need. Poorer Paraguayans relied particularly on their mother's relatives; the more prosperous were more even-handed in their dealings with extended kin. The country's elite buttressed its economic advantages through a web of far-reaching kinship ties. The truly elite family counted among its kindred large landholders, merchants, intellectuals, and military officers. Political allegiances also reflected family loyalties; all available kin were marshalled in support of the individual's political efforts.

Nonetheless, most people lived in nuclear families consisting of spouses and their unmarried offspring. Most families consisted of a couple and their pre-adult children or a single mother and her children. Individual adults living alone were rare. If a marriage broke up, the mother typically kept the children and home, whereas the father either formed another union or moved in with relatives until he did so. The most typical extension of the nuclear family was a form of "semi-adoption" in which well-to-do townspeople took in a child of poorer rural relatives or adopted (on a more permanent basis) the illegitimate offspring of a female relative. There were few intergenerational households. Adoption conformed to cultural norms favoring assistance to relatives, but intergenerational families were viewed as a source of conflict. This characterization also usually prevented a daughter and her children from moving back home following a divorce or separation.

The nuclear family prevailed, in part, because of the limited economic opportunities available to most families. Few of the traditional enterprises by which most Paraguayans earned a living could support more than the immediate family members.

Surveys in the late 1970s and early 1980s found that nearly 20 percent of all households were headed by a single parent--usually the mother. The incidence was highest in cities outside of Greater Asunci�n and lowest in rural areas. Households headed by a female generally were poor. Children's fathers might or might not acknowledge their offspring; in either event, admitting paternity did not obligate men to do much in the way of continued support for their children. Most single mothers worked in poorly paying jobs or a variety of cottage industries. In almost all cases, they were consigned to a sector of the economy where competition was intense and earnings low.

Within two-parent families, the male was the formal head of the household. Fathers were treated with respect, but typically had little to do with the daily management of the home. Their contact with children, especially younger ones, was limited. Women maintained ties with extended kin, ran the home, and dealt with finances; they often contributed as well to the family's income. Men spent a good deal of time socializing outside the home.

There were three kinds of marriage: church, civil, and consensual unions. Almost all adults married. Although stable unions were socially esteemed, men's extramarital affairs drew little criticism as long as they did not impinge on the family's subsistence and continued well-being. By contrast, women's sexual behavior reflected on their families and affected family stability; women were expected to be faithful as long as they were involved in a reasonably permanent union. A church wedding represented a major expense for the families involved. The common view held that a fiesta was an essential part of the ceremony and required that it be as large and costly as the two families could possibly afford. The celebrations attendant on a civil marriage or the formation of a consensual union were considerably less elaborate. Typically, the couple's families met for a small party and barbecue. Church weddings were rare among peasants--the expenses were simply beyond the reach of the average farm family. Even a civil marriage was a mark of status among peasants.

So-called illegitimacy was neither a stigma nor a particular disadvantage if the child came from a stable consensual union and could assume the father's name. But children of upper-class males and lower-class women suffered because, although their fathers recognized them as offspring, they could not use the paternal family name, nor did they have a claim to the father's inheritance. Children whose fathers were not known or would not acknowledge them lost the most status. They were typically the offspring of single mothers who themselves were very poor.

Reality was often at odds with the Paraguayan ideal of extended kinship ties. Because the poor migrated frequently and often had unstable marital unions, relatives typically were well-known only for a generation preceding and following a given individual. The wealthy were more adept at tracing lines of descent through several generations. This was a function of their greater marital stability and their vested interest in maintaining the links that tied them to potential inheritance. Relatives in prosperous families often were not as close as their less affluent counterparts, however, because the well-to-do relied less on relatives for mutual aid and were potential competitors for inheritance.

Paraguay

Paraguay - Ritual Kinship

Ritual kinship in the form of godparenthood (compadrazgo) played an important role in strengthening and extending the ties of kinship, as it did in much of Latin America. Parents selected godparents for a child at his or her baptism, confirmation, and marriage. The godparents were then tied to the parents as coparents . Those chosen for the child's baptism were considered the most important, and great care was exercised in their selection.

Ideally co-parents should be a married couple; they were preferred because their unions were typically more stable and they were more likely to be able to provide a home for the child should the need arise. In most communities, however, there were not enough couples to serve as godparents for all children, so single women of good reputation were frequently chosen. It was important that the person asked should be of proper character and good standing in the community.

Often parents asked a close, important relative to serve as godparent. The tie between co-parents reinforced that of kinship. The same godparents could serve for the couple's successive children, a practice that further strengthened the ties between the families involved.

A godparent was expected to see to his or her godchild's upbringing, should the parents be unable to do so. In many ways the social link between co-parents was more significant than that between godparents and godchildren. Co-parents were required to treat each other with respect and assist one another in times of need. Marriage or sexual relations between co-parents were considered incestuous; an insult to a co-parent was a grave matter, condemned by the community at large. In the countryside, ties to godparents had daily social significance; children visited their godparents often and were expected to treat them with particular respect. Not even quarrels or the death of the godchildren should break the ties between co-parents.

Compadrazgo served different purposes in rural and urban areas and among different social classes. In cities and among the more prosperous, the institution principally fulfilled the requirements for a Roman Catholic baptism. Godparents assumed the cost of the baptism and were expected to give gifts on a godchild's birthday and other significant occasions. Rarely did they have to assume the responsibility of raising a godchild; if they did, the financial wherewithal was provided through inheritance. In the countryside and among the poor, the responsibility to care for the godchild was taken more literally. If the parents were unable to care for their offspring, a godparent was expected to do so or find someone who could. Godparents should not only give gifts to the godchild on special occasions, but also assist with his or her schooling. Co-parents should come to one another's aid in times of social or economic distress.

The choice of a godparent also varied by social class. The urban and rural upper class and the urban middle class selected friends or relatives. In both groups co-parents were usually social equals. The institution had less practical significance than it had among the poor. For those of limited means, the emphasis was less on the feeling of friendship the co-parents shared and more on the potential economic benefits that the child might enjoy. Among peasants or the urban poor the choice could be either a relative or an influential benefactor (patr�n). When a patr�n agreed to serve as a godparent, the lower-class individual was entitled to more extensive dealings with the higher-status person. He or she could, for example, visit the patr�n's house and expect to be received hospitably. The patr�n expected in return absolute and unquestioning loyalty. In essence, this system satisfied the poor person's need to look above his or her class for protection, while satisfying the desire of the wealthy for a more loyal following. Where the expectations were met on both sides, compadrazgo could blunt the obvious economic disparities in small towns and the countryside. It also had important political implications. It was through such traditional kinlike ties that landholders from the ruling National Republican Association-Colorado Party (Asociaci�n Nacional Republicana--Partido Colorado) could mobilize support among the peasantry.

Paraguay

Paraguay - RURAL SOCIETY

Rural life, like much else in Paraguay, was defined by a series of dichotomies: commercial versus subsistence agriculture, large landholdings as opposed to small farms, and landowners in contrast to squatters. Land ownership was highly concentrated, and large- scale enterprises dominated the production of lucrative commercial crops. Most farms were smaller than ten hectares. In the densely settled central region (comprising the departments of Paraguar�, Cordillera, Guair�, and Caazap�), these small landholdings constituted as much as 80 percent of all landholdings.

Although inequality underlay the system as a whole, the extensive land reserves and low population density that characterized Paraguay until the 1950s softened the impact of the disparities recorded in agricultural surveys and censuses. The largest holdings were vast ranches in the Chaco or along the country's eastern border, regions of low population density. Large estates were typically worked extensively, but custom permitted squatters to occupy the fringes with little interference. The landowner would be either unaware of their presence or undisturbed by it. Even where there were terms of rent for land, they might be as minimal as occasional labor for the landlord or gifts of produce at harvest or on the landlord's birthday. Although surveys showed that few Paraguayans owned land, fewer still paid much for the privilege of using it. Historically, squatters were useful to a landowner in a variety of informal ways. They were a pool of reserve labor, semi-obligated to work for below-average wages during labor shortages. The presence of squatters also was insurance against more serious incursions on one's lands in an environment where clear land titles were not easy to come by. Patterns of land use were deeply ingrained in any event, and they often limited a landowner's options in dealing with tenants.

The relationship between the landowner and squatters was usually transitory, but in some instances it persisted for generations as a patr�n-pe�n arrangement. The patr�n served as an advocate for his peones; they were to him the elements of a loyal following. In essence, the connection was that of client to powerful protector. It implied unquestioning loyalty and respect on the part of the pe�n.

The patr�n-pe�n relationship served as a metaphor and model for proper social relations for rural society; indeed, the terms effectively delineated social boundaries. Peasants used patr�n as a general term of respectful address in speaking to any urban person of obviously higher status. Townspeople generalized pe�n to refer to any lower-class person-- although not in direct address, because to call a person pe�n to his face would be a breach of etiquette. The relationship also colored economic relations between patr�n and pe�n; anthropologists Elman and Helen Service described contracting wage labor between the two: ". . . a patr�n hires a person as though he were asking a personal favor, and the pe�n responds as though he were obliged to grant it." Economic relations as a whole were ideally enmeshed in social ties like that of patr�n to pe�n. Storekeepers each had their loyal followings, and it was considered disloyal to shop at another shop merely to take advantage of better prices. In return, customers expected preferential treatment, small favors, and some credit when they needed it.

Peasant farming was characterized by "agricultural nomadism"; the search for a better plot or improved circumstances was perennial. Cultivation was slash-and-burn followed by a fallow period of several years. Farmers preferred land on the fringe of primary or dense secondary strands of tropical forests. Agricultural income among small farmers was not particularly tied to land tenure. A successful peasant might own, rent, or simply use the lands he farmed.

Population growth eventually increased pressure on farmland and forest reserves. The pressure was most acute in the arc stretching roughly 100 kilometers north and east of Asunci�n, where approximately half the farms and half the squatters in the country were found. By the late 1950s, squatters and landowners faced increasingly bitter confrontations over communal grazing rights and land boundaries. Large landholders called for programs to "decongest" the central area and move the squatters to less populated regions along the northern and eastern borders.

These calls led to the formation in 1963 of an agrarian reform agency--the Rural Welfare Institute (Instituto de Bienestar Rural-- IBR)--charged with the task of resettling peasants in the eastern border region, especially the departments of Alto Paran�, Canendiy�, Amambay, and Caaguaz�. Although the program resettled many families in the 1960s and 1970s, critics noted that efforts to improve the farmers' standard of living were hampered by a lack of credit, technical assistance, and infrastructure.

The eastern region enjoyed an economic boom during the building of the Itaip� hydroelectric power plant. As construction was completed, however, thousands of laborers were lost their jobs. In the meantime, the land tenure situation in the region had changed dramatically. Many large landowners sold their properties to Brazilian and other foreign agribusinesses. These new owners, more committed than their predecessors to modern farming techniques, strongly objected to the presence of peasants on their properties. In addition, thousands of Brazilian farmers entered the area to claim properties significantly cheaper than comparable lands in their own country. As a result, the erstwhile Itaip� laborers were unable to resume the practice of occupying plots as squatters. Clashes occurred between squatters and authorities throughout the mid-1980s. During the same period, the demand for farm laborers declined as the large-scale timber and soybean enterprises in the area became more mechanized.

Despite these dramatic changes in land tenure, many other aspects of rural society remained unchanged into the late 1980s. Most farming was subsistence-oriented. Given a holding of some ten hectares, a family might keep four to six hectares under actual cultivation at any given time. The traditional tool kit and technological repertoire reflected the limited economic opportunities the countryside afforded most farmers.

The family was the chief source of farm labor. Men usually cleared the land and prepared the soil; women and children planted, weeded, and harvested the crops. Men were frequently absent in search of wage labor and women were accustomed to manage the farm in their absence. Farms permanently headed by women were rare, however; a woman widowed or deserted by her spouse typically moved to a nearby town.

Neighbors frequently exchanged labor for various agricultural tasks; recipients were obliged to return the assistance when the neighbor needed help, although this arrangement was not formalized. The rate of labor exchange was greater when, as was often the case, neighbors were also relatives. Most crops had a lengthy planting and harvesting season, which spread out the periods of peak labor demand and facilitated the exchange of labor among households.

Wage labor was important to the family's subsistence. In some regions men supplemented agricultural production by gathering the yerba mat� bush--the leaves of which produced a bitter tea consumed by Paraguayans--or by hunting game. If the homestead was along a major road, women sold handicrafts. Raising livestock often was a subsidiary source of income.

The numerous small towns dotting the eastern half of the country every ten to twenty kilometers were the loci of commercial relations and all effective political and religious authority. A town's inhabitants normally included a few large commercial ranchers, wholesalers and retailers of all kinds and degrees of prosperity, small manufacturers, government officials, and a few professionals such as teachers and pharmacists. There were numerous poor people who eked out a living as servants or laborers. The occupational specialists common to rural Paraguay -- barbers, curers, and craftsmen--were typically town dwellers. Most households headed by females were urban; the women earned their livelihood as storekeepers, servants, seamstresses, laundresses, curers, midwives, or cigar-makers.

Peasants attended town functions primarily as observers. Rural families might visit a nearby town during its saint's fiesta, but church would be too far away for regular attendance. The lay functionaries who attended to many church affairs in the community were urban and prosperous. Civic events and fiestas themselves reflected enduring social distinctions based on wealth and breeding: that between la gente (the common people) and la sociedad (society, those with wealth and the required social graces). Fiestas traditionally included separate dances for the two groups that might be held on different nights or in different locations. There was little doubt about who should attend which function. The only role for la gente at the formal dance for the upper crust was as observers.

Paraguay

Paraguay - MIGRATION AND URBANIZATION

Historically, Paraguay had been an overwhelmingly rural country. The 1950 census found only about one-third of the population to be city dwellers. The human landscape for most of the country east of the R�o Paraguay -- where nearly all Paraguayans lived--was one of scattered homesteads interspersed with small towns of fewer than 1,000 inhabitants.

Most Paraguayan communities existed in varying degrees of isolation. In the late 1980s, only 20 percent of the country's roads were paved. For most people, travel was on foot or on horseback. The two-wheeled ox cart was the most common means of transport for agricultural produce.

The isolation of the countryside masked extensive migration, however. Despite rudimentary transportation facilities, the rural populace was mobile. Slash-and-burn agriculture required a lengthy fallow period, and farmers typically moved as yields declined on their plots. Rural-rural migration was the typical pattern, but the typical move was not over a long distance. According to the 1950 census, in most departments at least 70 percent of all Paraguayans were living in the department of their birth. In the densely settled departments of the central region, the proportion was 90 percent.

There were, however, several migration paths of longer distance and duration. In the first half of the twentieth century, for example, many peasants contracted to work on the yerba mat� plantations along the eastern border. Working conditions were so wretched that few workers would willingly stay on past their contracted time. Others worked on the riverboats or in timber or logging operations.

There also was a long history of Paraguayan emigration to Argentina; the 1869 Argentine census enumerated several thousand Paraguayan emigr�s. The numbers recorded rose steadily throughout the twentieth century. Estimates of Paraguayans resident in Argentina in the early 1970s ranged from 470,000 to 600,000, or 20 to 25 percent of Paraguay's total population at that time. Between 1950 and 1970, anywhere from 160,000 to 400,000 Paraguayans left their homeland for Argentina. Males predominated slightly, and male migrants tended to be younger than their female counterparts--there were few male Paraguayans over age thirty leaving for Argentina. Even low estimates suggested that approximately 55,000 women between 20 and 29 years of age emigrated between 1950 and 1972. The emigation was sufficient to have a significant impact on Paraguay's natural rate of population increase.

The majority of emigrants came from the central region--an indication of widespread underemployment in agriculture and artisanal industry in that area. Most men went to northeastern Argentina to seek better opportunities on that region's plantations as well as in the textile, tobacco, and lumber industries. The migrants generally were successful--at least they tended to find salaried employment rather than eke out an existence in selfemployment . Women, following a pattern typical of Latin American rural-urban migration for females, migrated to Buenos Aires more frequently and found employment in domestic service. Men who migrated to Buenos Aires gravitated to the construction trades.

The path to Argentina was sufficiently travelled to make the way easier for later migrants. Some Argentine companies recruited in Paraguay. Experienced emigrant workers brought friends and relatives with them when returning from visits home, thus sparing the new migrants a lengthy search for housing and employment.

From the early 1960s through the early 1980s, the departments along the country's eastern border also were a favored destination for longer-distance rural-rural migrants. Most came from the central region--an area that, as a result of out-migrations, grew in population at only half the rate for the nation as a whole during the 1972-82 intercensal period. In 1950 the central region accounted for half of Paraguay's total population, but by 1982 the proportion had declined to about 38 percent. Between 1967 and 1972, an estimated 40,000 peasants left the departments of Cordillera, Paraguar�, and Caazap� in search of better living and working conditions. These departments' share of total population declined from more than 21 percent in 1972 to less than 17 percent in 1982. During the same intercensal period, the population of the three departments grew at a scant 0.1 percent in contrast to the 2.7- percent growth rate for Paraguay as a whole.

By contrast, the eastern departments gained population dramatically during the 1972-82 period. The population of the eastern region as a whole grew at a rate more than 2.5 times the national average. The populations of both Alto Paran� and Caaguaz� grew at a rate of roughly 10 percent annually. Between 1960 and 1973, the IBR resettled an estimated 250,000 rural Paraguayans in agricultural colonies in underpopulated regions with some potential for increased agricultural production.

Despite Paraguay's essentially rural character, Asunci�n already had a well-defined role by the end of the colonial era as the hub of government, commerce and industry. Goods flowed from the capital to the individual towns of the countryside--the towns themselves exchanged little with each other. Agricultural products were routed to Asunci�n; in return, manufactured goods went out to rural areas. Asunci�n's preeminence over other cities was made sharply evident by the 1950 census. That census enumerated 7 cities with more than 5,000 inhabitants, but only 1, Asunci�n (which had a population slightly more than 200,000) with more than 20,000 residents.

Yet even Asunci�n, political scientist Paul Lewis observed, had the air of a "sleepy tropical outpost." Until the 1960s, automobiles and telephones were rare; perhaps half of the capital's homes had electricity. The city was without a piped water supply and sewage disposal system. Most families bought drinking water from peddlers who sold it door-to-door by mule.

From the 1960s through the early 1980s, however, migrants flocked to the region surrounding and including Asunci�n. The capital experienced its fastest growth in the 1960s, when its population grew roughly 3 percent annually. Although Asunci�n itself lagged during the 1970s, growing at a mere 1.6 percent per year, the metropolitan region grew at rates well above the national average.

Most migrants to Asunci�n found employment in the service sector or in small artisanal enterprises calling primarily for unskilled laborers. Despite the low wages they offered, these jobs exerted a pull for potential migrants because they were marginally better than what was available in the countryside. The Asunci�n area had long attracted rural-urban migrants, which meant that many rural dwellers considering a move could find assistance from kin who had made the move earlier. The construction boom in the 1970s also drew substantially greater numbers from rural Paraguay to Asunci�n.

Urbanization in the 1970s and early 1980s also was fueled by economic expansion along the eastern border. Spurred by the Itaip� hydroelectric project, the urban population of Alto Paran� grew 20 percent annually during the intercensal period from 1972 to 1982. The population of Puerto Presidente Stroessner, the city nearest the project, expanded nearly sixfold during the 1970s, as did the population of nearby Hernandarias. Cities in Amambay also grew during the 1970s, although at a more modest annual rate of 6 percent.

As a result of growth along the eastern border, by 1982 Paraguay had more than 30 cities with at least 5,000 inhabitants. This eastern expansion helped balance the dramatic growth occurring in Asunci�n and spared Paraguay the "hyper-urbanization" characteristic of many Latin American capitals. In 1950 the metropolitan area had accounted for about 20 percent of total population; by the early 1980s, this proportion had increased modestly to 25 percent.

Paraguay

Paraguay - RELIGION

In the 1980s an estimated 92 to 97 percent of all Paraguayans were Roman Catholics. The remainder were Mennonites or members of various Protestant groups. The 1967 Constitution guarantees freedom of religion, but recognizes the unique role that Catholicism plays in national life. The president must be a Roman Catholic, but clergy are enjoined from serving as deputies or senators and discouraged from partisan political activity. Relations between church and state traditionally were close, if not always cordial.

A papal decree created the Bishopric of Asunci�n in 1547, and the first bishop arrived in the diocese in 1556. In 1588 three Jesuits came with the intent of pacifying and converting the Indians. After the arrival of additional Jesuits and Franciscans, the priests began working in the southeastern area of modern Paraguay and on the shores of the R�o Paran� in parts of what is now Argentina and Brazil.

The Jesuits soon realized that they had to protect the Indians from enslavement by the growing numbers of Spanish and Portuguese if they were going to convert them. They accomplished this by settling the Indians in reducciones (townships) under Jesuit direction. At one point about 100,000 Indians lived in the reducciones; the system lasted a century and a half until the Jesuits' expulsion (1767). Following the end of the Jesuit regime, the reducci�n Indians were gradually absorbed into mestizo society or returned to their indigenous way of life.

For much of the nineteenth century, church-state relations ranged from indifferent to hostile. The new state assumed the prerogatives of royal patronage that the Vatican had accorded to the Spanish crown and sought to control bishops and the clergy. Jos� Gaspar Rodr�guez de Francia (1814-40) was committed to a secular state. He suppressed monastic orders, eliminated the tithe, instituted civil marriage, and cut off communication with the Vatican. Francisco Solano L�pez (1862-70) used the church as a branch of government, enlisting priests as agents to report on the population's disaffection and signs of subversion.

Church-state relations reached their nadir with the execution of the bishop of Asunci�n, Manuel Antonio Palacio, during the War of the Triple Alliance (1865-70). By the war's end, there were only fifty-five priests left in the country,and the church was left leaderless for eleven years.

The modern Paraguayan church was established largely under the direction of Juan Sinforiano Bogar�n (archbishop of Asunci�n, 1930- 49) and An�bal Mena Porta (archbishop of Asunci�n, 1949-69). Both envisioned a church whose role in the country's endemic political struggles was that of a strictly neutral mediator among the rival factions.

Starting in the late 1950s, the clergy and bishops were frequently at odds with the government. Confrontations began with individual priests giving sermons calling for political freedom and social justice. The activities of the clergy and various lay groups like Catholic Action (Acci�n Cat�lica) pushed the church hierarchy to make increasingly critical statements about the regime of Alfredo Stroessner Mattiauda (president since 1954).

In the 1960s the Catholic University of Our Lady of Asunci�n became a center of antiregime sentiment. Students and faculty began cooperation with workers and peasants, forming workers' organizations as an alternative to the government-sponsored union. They organized Christian Agrarian Leagues (also known as peasant leagues) among small farmers. The organizations sponsored literacy programs, welfare activities, and various types of cooperatives. In addition, Catholics operated a news magazine and radio station-- both critical of the government.

Throughout the 1970s and 1980s, there were sporadic student demonstrations and government crackdowns. The church criticized the lack of political freedom and the government's human rights record. The government's principal countermeasures included expelling foreign-born clergy and periodically closing the university, news magazine, and radio station. In response, the archbishop of Asunci�n excommunicated various prominent government officials and suspended Catholic participation at major civic and religious celebrations.

On a popular level, Catholicism was an essential component of social life. Even the poorest of homes contained pictures of the saints and a family shrine. Catholic ritual marked the important transitions in life: baptism, confirmation, marriage, and burial. Participation in the rites of the church reflected class and gender expectations. The poor curtailed or delayed rituals because of the costs involved.

Sex roles also affected religious participation. Devotion fell into the female sphere of activities. Men were not expected to show much concern about religion. If they attended mass, it was infrequently, and normally men stood in the rear of the church ready to make a quick exit. Women were supposed to be more devout. Regular participation in church services was seen as a virtue on their part. They were more likely to seek the church's blessing at critical points in the family's existence.

Religion served as perhaps the only institution in society that transcended kinship relations. Both politics and economic activities were enmeshed in the relations of kin; they reflected the family feuds and the accumulated loyalties of generations past. It was in popular religion, however, especially in the communal religious fiestas, that Paraguayans of every social stratum participated and the concerns of family and kin were, to a degree, muted. Fiestas were community and national celebrations; they served as exercises in civic pride and Paraguayan identity. Church holidays were public holidays as much as religious occasions.

The populace enjoyed the celebrations associated with fiestas, but actual belief and practice were typically uninformed by orthodox Catholic dogma. Especially in rural Paraguay, the saints associated with popular devotion were often no more than revered local figures.

Religious societies played an important role, planning and organizing local fiestas and undertaking welfare activities. Various lay brotherhoods assumed responsibility for assisting widows and children, among other duties associated with the care of the poor.

Paraguay

Paraguay - MINORITY GROUPS

Although the vast majority of Paraguayans were mestizos and the population was largely homogeneous, minorities became an increasingly significant force during the 1970s and 1980s. Paraguay's population historically had included small numbers of immigrants from Europe, the Middle East, Asia, and Latin America. During the 1970s, however, thousands of Brazilian settlers crossed the border into Paraguay's eastern departments, dramatically affecting life there. During the same period, thousands of Koreans and ethnic Chinese settled in urban Paraguay. Finally, there were the remnants of the country's original Indian population who continued to follow an indigenous way of life.

Immigrants

A trickle of European and Middle Eastern immigrants began making their way to Paraguay in the decades following the War of the Triple Alliance. The government pursued a pro-immigration policy in an effort to increase population. Government records indicated that approximately 12,000 immigrants entered the port of Asunci�n between 1882 and 1907, of that total, almost 9,000 came from the Italy, Germany, France, and Spain. Migrants also arrived from neighboring Latin American countries, especially Argentina.

Most migrants--even many who began their lives in Paraguay's agricultural settlements--typically found their way into urban trades and commerce and became the backbone of the country's small middle class. Middle Easterners tended to remain culturally and socially distinct even after several generations. European and Latin American immigrants were more readily assimilated. Nonetheless, in small towns non-Paraguayan family origins were noted for generations after the original migrant's arrival.

Although most minority groups tended to prefer urban life, Japanese immigrants founded and remained in agricultural colonies. Until the twentieth century, Japanese immigration was limited by Paraguay's unwillingness to accept Asian colonists; Japanese themselves preferred the more lucrative opportunities offered by the expanding Brazilian economy. When Brazil set quotas on Asian immigration in the 1930s, however, a Japanese land company set up an agricultural settlement southeast of Asunci�n. Two more colonies near Encarnaci�n followed in the 1950s. A 1959 bilateral agreement between the Japanese and Paraguayan governments encouraged further immigration. By the 1980s there were about 8,000 Japanese settlers in agricultural colonies. The colonists made a concerted effort to preserve Japanese language and culture with varying degrees of success. Until the end of World War II, the earliest settlement supported a parallel educational system with subjects taught entirely in Japanese; the colonists eventually limited this to supplemental Japanese language classes. By the late 1960s, many Japanese children could speak in Japanese, Guaran�, and Spanish. But there was strong bias against Japanese-Paraguayan intermarriage.

Like the Japanese, most German--speaking Mennonite immigrants remained in agricultural colonies. The bulk of the Mennonite population came between the 1920s and the 1940s and established three colonies in the central Chaco. In 1926 approximately 2,000 persons left Canada after the passage of legislation requiring English to be the language of instruction in Mennonite schools. The Paraguayan government, eager to develop the Chaco, readily allowed Mennonites to conduct their own schools in German and exempted the immigrants from military service.

The original Menno Colony was followed by the establishment of the Fernheim Colony in 1930 and the Neuland Colony in 1947. These latter two groups of colonists, also German--speaking, fled religious persecution in the Soviet Union. The Fernheimers, who had higher levels of education and more exposure to urban life than did the Mennos, also founded the town of Filadelfia, which eventually became an important agricultural supply center for the central Chaco. Some Fernheimers and Neulands left the Chaco to establish small colonies in Eastern Paraguay. In the early 1980s, there were approximately 15,000 Mennonites in Paraguay; two-thirds lived in the Chaco, with the remainder in Caaguaz�, San Pedro, and Itap�a departments and in Asunci�n.

Until the 1970s, the Brazilian presence in Paraguay was relatively minor and was confined primarily to privately organized agricultural colonies along the easter border. In 1943 there were fewer than 500 Brazilian farmers in all of Paraguay; throughout the 1950s and 1960s the proportion of Brazilians in the eastern border region held constant at between 3 and 4 percent of the total population of the area.

In the early 1970s, however, Brazilian immigrants, persuaded by a variety of factors, began streaming into the region from the neighboring Brazilian state of Paran�. In 1967 the Paraguayan government repealed a statute that had prohibited foreigners from purchasing land within 150 kilometers of the country's borders. During the same era, increased mechanization of soybean production in Paran� generated a growing concentration of landholdings in that area. Brazilian farmers whose holdings were too small to support increased production costs sold their land in Brazil and bought cheap land in Paraguay. In the late 1970s, land along Paraguay's eastern frontier was seven to eight times cheaper than comparable land in Brazil. The disparity in prices drew large investors who cleared the land of saleable timber, then subdivided it and sold it to Brazilian immigrants.

Official records gave only an imprecise sense of the number of Brazilians who had come to the country. According to the 1982 census, there were 99,000 Brazilians residing in Paraguay. Most analysts discounted this figure, however, and contended that between 300,000 and 350,000 Brazilians lived in the eastern border region. Along the border, the Brazilian cruzeiro was more commonly used than the guaran�, and Portuguese was heard more often than Spanish or Guaran�. Many Paraguayan peasants and Indians were evicted from lands purchased by immigrants. The pace of land sales increased to such a point that undercapitalized Paraguayan farmers who had settled in the region as part of IBR's colonization programs were selling their lands to Brazilian farmers and financial groups.

Analysts also rejected government figures on the number of immigrants from the Republic of Korea (South Korea), Hong Kong, and Taiwan. The 1982 census reported that there were 2,700 Koreans in Paraguay, along with another 1,100 non-Korean or non-Japanese Asian immigrants. The actual number of Koreans and ethnic Chinese, however, was believed to be between 30,000 and 50,000. Virtually all Koreans and ethnic Chinese lived in Puerto Presidente Stroessner or Asunci�n and played a major role in the importation and sale of electronic goods manufactured in Asia.

<> Indians

Paraguay

Paraguay - Indians

Sixteenth-century Iberian explorers in South America found the Atlantic Coast of modern-day Brazil in the control of Guaran� Indians; the groups on the southern Brazilian coast, known as the Tupinamb�, had extended their territory inland to the R�o Paraguay, R�o Paran�, and R�o Uruguay. Various migrations eventually brought these and other closely related groups to the eastern flanks of the Andes.

The Spanish rapidly subjugated and assimilated the Guaran� they encountered in what later became Eastern Paraguay. High rates of intermarriage or concubinage between Spanish settlers and Guaran� women created a society that was overwhelmingly mestizo. In the resulting synthesis, the dominant social institutions and culture were Hispanic; the commonly spoken language, however, was Indian in origin.

As many as 100,000 Indians lived in Jesuit-run reducciones during the seventeenth and eighteenth centuries. After the expulsion of the Jesuits from Paraguay in 1767, the reducciones were taken over by civil authorities; subsequent mismanagement caused their population to decline. The survivors either were assimilated into the rural mestizo population or fled to the hinterland.

Over the next two centuries, relations between vestigial groups of Indians and the dominant rural Paraguayans were infrequent. When interaction occurred at all, it was often violent. Nevertheless, the War of the Triple Alliance reduced the Paraguayan population sufficiently to reduce pressure on forest lands and thus buffered the remaining tribes.

The Indians' situation remained relatively stable until the mid-twentieth century. Although much land along the eastern border was held by foreign investors, these vast estates were not worked intensively. Hunters and gatherers therefore had sufficient reserves of land, as did the more sedentary populations. Although Indians might occasionally serve as laborers, they were not pressured by other rural settlers or missionaries. In the Chaco most tribes adopted sheep and goat herding; the inhospitable nature of the region provided a natural barrier to mestizo settlement and protected many groups from outside interference until the Chaco War of 1932-35.

In the early 1980s, the Paraguayan Indian Institute (Instituto Paraguayo del Ind�gena--Indi) estimated the country's Indian population at nearly 40,000. Indi's efforts to count the Indians met with significant resistance from some indigenous leaders. Various anthropologists placed the count higher, at 50,000 to 100,000, or 1.5 to 3 percent of the total population. But all the numbers represented only the roughest of approximations.

Paraguay's indigenous peoples were divided into seventeen tribal groups representing six language families. Even in the ethnographic literature, there was confusion about the precise distinctions among tribes and the linguistic relationships involved.

In general, observers relied upon a person's self-identification and that of those in contact with him or her in categorizing the individual as an Indian. Those who viewed themselves as tribal members--separate and distinct from the national culture--and who were seen by others as indios or ind�genas, were classified as Indians. Language was a less certain cultural marker, but in general Indians spoke as their primary language neither Spanish nor the variety of Guaran� used by most Paraguayans.

Despite pride in their Guaran� heritage and language, many Paraguayans had negative feelings toward the country's remaining Indians and viewed nomadic tribes as subhuman. A survey of attitudes toward Indians in the 1970s found that 77 percent of respondents thought: "They are like animals because they are unbaptized." Indianness was a stigma; even Indians who became sedentary and Christian faced continued discrimination in employment and wages. According to estimates in the 1980s, the 3 percent of the population considered Indians accounted for roughly 10 percent of the poorest segment of Paraguayan society.

The R�o Paraguay split the country's Indians: the four groups in Eastern Paraguay all spoke varieties of Guaran�, whereas the approximately thirteen tribes of the Chaco represented five language families. In the 1970s and 1980s, the situation of specific tribes varied according to a number of circumstances. The principal factor affecting a tribe's well-being was the extent and kind of pressure brought to bear on Indians and their traditional territories by outsiders.

The Guaran� speakers of Eastern Paraguay were scattered throughout the (formerly) remote regions to the northeast, along the country's border with Brazil. Although much land occupied by Indians had been legally owned by large estates, the tribes traditionally had been able to practice slash-and-burn agriculture and hunting and gathering largely undisturbed. Members of some tribes occasionally worked as wage laborers on the immense yerba mat� plantations, whereas others had no peaceful relations with the larger society. Beginning in the 1960s, however, the tribes' customary ways of life were eroded by the IBR-sponsored settlements, the influx of Brazilian migrants, the purchase and more efficient operation of many estates by multinational firms, and the initiation of large-scale hydroelectric projects. As a result of increasing intrusions into traditional Indian lands, almost all Indians in Eastern Paraguay were involved in wage labor to some degree by the late 1970s.

For the past century, the largest tribe in Eastern Paraguay, the Pai�-Tavytera�, subsisted through a combination of slash-and-burn farming, fishing and hunting, and periodic wage labor. For them the far-reaching changes of the 1960s and 1970s meant loss of land, the depletion of hunting and fishing resources, and increased dependence on wage labor. By the early 1970s, anthropologists found malnutrition widespread and tuberculosis endemic among tribal members. Estimates of mortality during the first two years of life were as high as 50 percent. The Av�-Chirip�, to the south of the Pai� territory, had been subject to even more outside pressure: they were well on the way to being dispossessed of their traditional lands and becoming dependent on wage labor.

Contact between the Ach� tribe and the larger society had never been peaceful. During the 1960s and 1970s, a variety of rural Paraguayans raided and enslaved some of the Ach�, who continued to follow a seminomadic existence in Eastern Paraguay's forests. By the late 1970s, the Ach� survived only in a few communities run by missionaries and on a few ranches in Eastern Paraguay. Because of the Ach�'s more secure position on missions and ranches, organized raiding was largely eliminated by the early 1980s. Nonetheless, small groups of Ach� on return trips to the forest to forage and hunt were often the targets of rural Paraguayans, and reports persisted in the mid-1980s of Indians being held involuntarily by Paraguayan families.

The Chaco Indians had a more varied history of contact with outsiders. They tenaciously resisted colonial efforts at pacification and conversion. Indeed, the warlike Indians, in combination with the inhospitable Chaco terrain and climate, presented an effective barrier to Spanish expansion west of the R�o Paraguay. The Chaco Indians subsisted in a traditional manner by hunting and gathering and raising livestock. The sale of animal skins and periodic wage labor in tanning factories along the R�o Paraguay or on sugar plantations in Argentina provided a source of cash income.

The tribes lived without undue interference until the Chaco War (and the subsequent expansion of ranching in the region) and Mennonite colonization in the central Chaco. Almost all Chaco tribes became more sedentary after the war. The Mascoi-Toba speakers of the central and southeastern Chaco were especially affected, and by the 1980s many spoke only or primarily Guaran�. Some tribes that provided scouts for the army during the war later found occasional employment with military garrisons. The increase in ranching meant less land and game available to hunters and gatherers and a concomitant rise in the need for wage labor. After the government banned the sale of skins in an effort to preserve the declining animal population, the Indians became increasingly dependent on the region's cattle ranches for wage labor. Dependence also increased following the closing of most of the tanning factories. Demand for labor in ranching, however, declined precipitously as lands were cleared and fenced. In addition, the opening of the Trans-Chaco Highway meant that Indians had to compete with migrants, usually single males, from elsewhere in the country. Ranchers often preferred employing these transients to assuming responsibility for allowing Indians with families to settle and work on their ranches.

Language use among the Chaco tribes reflected the various ways that groups adapted to the presence of outsiders and the changing economy. Migration and wage labor brought with them a significant amount of intertribal marriage. Guaran� or (less frequently) Spanish came to serve as a lingua franca. In groups that had a history of several generations of labor in the tanning factories, husbands and wives from different tribes often spoke Guaran� in their home. Their children were monolingual in that tongue until they learned Spanish at school. By the 1980s, it appeared that a number of languages--Angait�, Guan�, and Mascoi-Toba among them-- might die out within the next generation. By contrast, a group of Mac'� who settled on the west bank of the R�o Paraguay under the patronage of General Juan Belaieff, whom they had assisted in the Chaco War, remained almost entirely monolingual in Mac'� except when engaged in commerce.

In the late 1970s, researchers estimated that more than half of all Indians lived on settlements under the auspices of various missionary organizations. This was particularly true of those groups whose first intensive contacts with Paraguayan society dated from the 1960s and 1970s. In the Chaco almost all Indians who were not scattered on individual ranches lived under the patronage of the missions.

Historically, official government policy had often left Indians to the care of religious groups. Until the 1960s, the government's only defined Indian policy was in the form of a 1909 law that enjoined Paraguay "to take measures leading to the conversion of the Indians to Christianity and civilization . . . ." Because the legislation permitted missionaries to acquire land for Indian settlements, some tribes were able to obtain land. At the same time, however, the law increased the tribes' dependence on missionaries as advocates in dealing with the larger society.

The missionaries offered the Indians under their care a measure of protection from the worst predations of rural Paraguayans. In some cases, mission educational programs taught in Indian languages offered the only hope that these tongues would be preserved at all. The impact of Christian proselytizing on indigenous belief and social institutions was less positive, however. Fundamentalist groups were particularly unrelenting in their efforts to eliminate indigenous beliefs. Anthropologists David Maybury-Lewis and James Howe noted that efforts to "crush witch doctors" drove a wedge between Christian and traditional believers within the same tribe. Critics charged that fundamentalist groups' aggressive proselytization destroyed Indian culture in the process of conversion.

Roman Catholics had the longest history of missionary activity. Their efforts were focused on protecting Indians from the worst effects of outside incursions, in particular forced removals from tribal lands. The philosophy of the Second Vatican Council (1962- 65) called for a process of gradual conversion that included respect for indigenous beliefs.

Anglicans had been active in the southeast Chaco since the turn of the century. By the late 1970s, the Lengua converts at the Anglican mission were generally in charge of running the settlement. The most serious problems came from overcrowding as more and more Indians displaced from elsewhere in the Chaco sought refuge at the mission.

Mennonites used Indians as a ready source of labor when they first settled in the central Chaco. As Mennonite-Indian relations became more complex, the Mennonites formed the Association of Indian-Mennonite Cooperative Services (Asociaci�n de los Servicios de Cooperaci�n Ind�gena-Mennonita--ASCIM) to proselytize and assist the Indians. As was the case with other mission settlements, the problems ASCIM faced grew as Indians forced off their lands elsewhere in the Chaco flocked to the Mennonite settlements. Although ASCIM had resettled about 5,000 Indians on their own land by the late 1970s, large numbers of landless people remained around Filadelfia, hoping for employment on Mennonite farms.

A number of secular and official organizations attempted to assist Indians over the years. Inspired by the indigenist movement that flourished in Latin America in the early twentieth century, middle- and upper-class Paraguayans founded the Indigenist Association of Paraguay (Asociaci�n Indigenista del Paraguay -- AIP) in the early 1940s. Over the years AIP campaigned for Indian rights and publicized the problems Indians faced. In the late 1970s and early 1980s, the association was active in sponsoring legal defense and regional development projects for the tribes of Eastern Paraguay and in drafting legislation that established Indi. Indi's mandate was to help Indians improve their legal status, especially in matters pertaining to employment and landholding. The efforts of Indi and other advocates for Indian rights resulted in enactment of legislation in 1981 that formally recognized the Indians' right to pursue their culture and way of life, stated that landholding was integral to the continued survival of Paraguay's Indians, and expanded the means through which communities could obtain formal legal status and title to their lands.

Paraguay

Paraguay - EDUCATION

Education in the colonial era was largely limited to the upper class. The wealthy either hired tutors or sent their children abroad. Although there were a few private schools in operation following the declaration of independence in 1811, they languished throughout most of the nineteenth century. The only secondary school closed in 1822. By the end of the War of the Triple Alliance, perhaps as little as 14 percent of the populace was literate.

Starting with the inauguration of the public secondary school system in 1877, public education grew steadily in the decades following the war. In 1889 the National University of Asunci�n was founded, and in 1896 the first teacher-training school began operation. By the eve of the Chaco War, there were several teachers' colleges, a number of secondary schools, and a few technical schools. The decades following the Chaco War were marked by widespread expansion of the educational system. Between the end of that war and the beginning of World War II, enrollments nearly doubled. They continued to expand in subsequent decades. Enrollments grew even faster at universities and secondary schools than at the elementary level.

Paraguay had two universities: the National University and the Catholic University. Both had branches in several interior cities. In the mid-1980s, about 20,000 students were enrolled in the National University and some 8,000 in the Catholic University. The number of applicants for university admission grew because of the growing numbers of students completing secondary school. In the mid-1970s, both universities began offering a variety of short-term degree programs in an effort to meet the increased demand for admission. The programs were designed to reduce pressure on traditional professional courses of study such as engineering, law, and medicine.

Formal education was under the direction of the Ministry of Education and Worship. The six-year cycle of primary school was free and compulsory for children from ages seven to fourteen. Secondary education consisted of two three-year programs, each leading to a baccalaureate degree. The diversified program emphasized training in the humanities and was preparatory to study at a university or teacher- training institute. The technical program was designed for students entering any of a number of postsecondary schools offering training in commerce, industry, or agriculture.

Schools were financed by the government and a variety of user sources. The Ministry of Education and Worship's budget represented slightly less than 15 percent of the government budget in the early 1980s. Virtually all of the costs of rural primary schools and nearly 90 percent of the costs of urban primary schools were covered by government funds. Public secondary schools received from half to three-quarters of their budget for current expenditures from the national government.

There was a perennial shortage of adequately trained teachers; this was especially true of rural teachers, who were often uncertified. Primary school teachers were required to complete a two-year postsecondary school training program. Secondary teachers were supposed to have an additional two years of specialized training. Curricula changes demanded extensive upgrading of teachers' skills. There were retraining programs available through the Higher Institute of Education and several regional centers.

Reforms in the 1980s attempted to make the educational system more responsive to the needs of the population. Rural Paraguayans had long faced a lack of educational facilities, materials, and teachers. The reforms attempted to meet some of these needs through multigrade programs designed to achieve a more efficient allocation of scarce resources. By the early 1980s, there were about 2,000 multigrade programs reaching more than 55,000 students.

Student enrollments increased at all levels during the 1970s and early 1980s. Overall enrollment grew nearly 6 percent per year in the late 1970s. The number of students enrolled in the basic cycle of secondary school grew from 49,000 in 1975 to 76,000 in 1980. The number of students attending primary school increased by roughly one-quarter during this period; rural school children, who historically had had very limited access to education, represented most of the increase. The number of rural children attending primary school increased by more than one-third between 1972 and 1981.

Despite the growth of school enrollments, the proportion of school-age children enrolled in classes actually remained constant or declined between 1965 and 1985. Only in higher education did enrollments grow faster than the school-age population.

In the mid-1980s, the official literacy rate was above 80 percent. More males than females were able to read and write, although literacy was increasing faster among females. About 90 percent of city dwellers could read; rural Paraguayans lagged behind their urban counterparts by about 10 percent.

Critics charged that the official literacy figures greatly overestimated the numbers who could actually read and write. They argued that the government counted as literate anyone who attended primary school--a dubious assumption given the large number of monolingual Guaran� speakers who entered but failed to complete elementary school. Such speakers represented an estimated 90 percent of the children entering rural primary schools. Many men who entered the armed forces as conscripts first learned to read during their military service.

In the early 1970s, less than 5 percent of those entering rural elementary schools finished this course of study, as compared to 30 percent of urban youngsters. Only 1 percent of rural children finished secondary school; the figure for city children was 10 percent. Rural schools also were plagued with high rates of student absenteeism and grade repetition. A 1980 survey showed a substantial improvement in the percentage of children completing the elementary school cycle. The figure for who completed their course of privacy school studies had risen to 38 percent. Although the completion rate for rural students climbed to 25 percent, this figure was substantially below that for urban youngsters.

In the late 1970s, the Ministry of Education and Worship attempted to deal with the crisis in rural education by developing a bilingual program for monolingual Guaran�. The program was designed to develop basic oral skills in Guaran� and oral and written skills in Spanish. Guaran� literature also was available at the secondary and university levels.

Paraguay

Paraguay - HEALTH AND WELFARE

The Ministry of Public Health and Social Welfare was responsible for approving and coordinating all public and private activities and programs dealing with health. Other agencies involved in the health sector included the Social Insurance Institute, the Military Health Service, and the Clinical Hospital of the National University. Health services were organized through a system of four hierarchical levels, each of increasing complexity and sophistication. Health services at the first level aimed at providing basic care for the community. Intermediate levels offered services of greater complexity to towns and cities, whereas the fourth level provided specialized services to the entire nation.

Paraguay recorded impressive gains in health-care delivery in the 1970s and early 1980s. Following the government's launching of a massive immunization campaign in the late 1970s, the percentage of infants vaccinated against diphtheria, pertussis, tetanus, and measles went from 5 percent in 1977 to over 60 percent in 1984. From 1973 to 1983, the proportion of infants receivings medical care rose from 51 percent to nearly 75 percent, and prenatal care from 53 percent to nearly 70 percent. The supply of nurses relative to the population more than doubled between 1965 and 1981. By the early 1980s, surveys indicated that 60 to 70 percent of the populace had easy access to health care.

Despite these achievements, the health-care system was beset by a number of problems. First of all, the proportion of the national budget allocated to health decreased as a result of the economic downturn of the early 1980s. In addition, international health agencies noted a lack of coordination among the agencies and institutes whose work affected health. Mechanisms for gathering information about the delivery of health services were inadequate; even the reporting of vital events and infectious diseases was limited. Government health services also lacked many necessary supplies. Finally, the heavy concentration of doctors and other health providers in urban areas resulted in a shortage of personnel for rural residents.

In response to these problems, the government designed a broadly based program to augment community health organization and increase community participation. The program's objectives included upgrading the training of lay midwives, expanding health education, training traditional health practitioners and other volunteers, increasing the number of health centers in rural areas, and integrating health-care services with existing community organizations. Other priorities included lowering the morbidity and mortality rates among mothers and young children, controlling infectious diseases and diseases that could be checked through vaccination, and improving child nutrition.

The Sanitary Works Corporation (Corporaci�n de Obras Sanitarias- -Corposana) provided drinking water and sewage disposal services for towns of more than 4,000 inhabitants. The National Service for Environmental Sanitation (Servicio Nacional de Sanitaria Ambiental- -Senasa) provided the same services for smaller communities and also dealt with issues relating to national environmental health. By the mid-1980s, however, only 25 percent of the population had easy access to potable water. Like other health-related services, potable water was far more available in urban areas. About half the urban population had drinking water, whereas only 10 percent of rural residents did. Approximately half the population had access to sewage disposal services.

Sanitary conditions were not adequate to ensure proper food storage and processing. The main sources of contamination were unpasteurized milk and meat products processed in poorly refrigerated slaughterhouses.

Housing was rudimentary in much of the country; some 80 percent of Paraguayan homes were owner-built. Flooding along the country's major rivers (R�o Paraguay, R�o Paran�, and R�o Pilcomayo) and their tributaries in 1982 and 1983 destroyed much housing around Asunci�n and other river cities. Many residents continued to live in ramshackle huts years after the floods. Provision of services in such settlements was typically inadequate. The presence of rodents and insects represented a significant health risk.

In the late 1980s, life expectancy at birth was sixty-nine years for females and sixty-five for males--an increase of two years for each sex from 1965 to 1986. General mortality was 6.6 per 1,000 inhabitants in the mid-1980s. Experts projected the death rate to continue its decline to a low of approximately 5.2 per 1,000 inhabitants by the turn of the century. Heart and cerebrovascular diseases, diarrhea, cancer, and acute respiratory infections were the main causes of mortality among the population. The main infectious and parasitic diseases were malaria, Chagas' disease, diarrhea, and acute respiratory infections. Rabies was the most damaging of diseases transmitted by animals. In late 1987 Paraguay reported a total of seven known cases of acquired immune deficiency syndrome (AIDS), which had resulted in four deaths.

Although Paraguay recorded notable declines in its infant mortality rate (IMR) and postneonatal mortality rate in the early 1980s, significant regional disparities occurred. From 1981 to 1984, the IMR in Asunci�n declined by more than 25 percent; in contrast, the drop was less than 15 percent in the rest of the country. The picture for postneonatal mortality was similar: the rate in the capital declined by nearly 30 percent, whereas the rate for the rest of Paraguay fell only about 10 percent.

Through the mid-1980s, diarrhea, pneumonia, and malnutrition remained the principal threats to the health of infants and children. Among infants the death rate from malnutrition was 1.6 per 1,000; nearly 10 percent of early childhood deaths were caused by nutritional deficiencies.

In the late 1980s, Paraguay had a social security system that had been established and modified by laws in 1943, 1950, 1965, and 1973. The system, administered by the Social Insurance Institute, offered old-age pensions, invalidity pensions, survivor settlements, sickness and maternity benefits, and work-injury benefits for temporary or permanent disabilities to employed persons and to self-employed workers who elected voluntary coverage. Railroad, banking, and public employees had special systems. Both employers and employees contributed a percentage of salaries to fund the program. Employees generally contributed 9.5 percent of earnings (except, for example, pensioners who contributed only 5 percent, and teachers and professors, who contributed only 5.5 percent), employers 16.5 percent, and the government, 1.5 percent. The Social Insurance Institute operated its own clinics and hospitals to provide medical and maternal care.

Paraguay

Paraguay - The Economy

PARAGUAY IS A MIDDLE-INCOME COUNTRY that changed rapidly in the 1970s and 1980s as a result of hydroelectric development, agricultural colonization, construction, and cash crop exports. Nevertheless, the country's gross domestic product (GDP) in 1986 was approximately US$3.4 billion, or roughly US$1,000 per capita, ranking Paraguay only ahead of Bolivia among the Spanish-speaking countries of South America. Paraguay was the most agricultural economy of South America, and that sector influenced the performance of virtually every other sector of the economy.

Traditionally isolated and underpopulated, Paraguay was one of the last countries in Latin America to enjoy the region's rapid growth in the post-World War II period. Paraguay entered a phase of sustained economic growth in the late 1950s. Its economy grew at the fastest pace of all the Latin American countries during most of the 1970s as the Paraguayan-Brazilian project, Itaip�, the world's largest hydroelectric plant, was constructed. During that decade, cotton and soybeans came to dominate agriculture, mostly as a result of high export prices and agricultural colonization. Paraguay's economy also was characterized by a large underground sector, in which smuggling and contraband had become normal features by the 1970s.

The Paraguayan economic miracle of the 1970s came to a halt in 1982 because of the completion of construction at Itaip�, lower commodity prices for cotton and soybeans, and world recession. The economy recovered in 1984 and 1985, stagnated in 1986, and continued to expand in 1987 and 1988. Despite its rapid growth, the Paraguayan economy became increasingly dependent on soybeans and cotton for exports and overall economic dynamism. These two crops, however, remained subject to external price fluctuations and local weather conditions, both of which varied considerably.

Economic growth in the post-World War II period occurred in the context of political stability characterized by authoritarian rule and patronage politics. Government economic policies deviated little from 1954 to the late 1980s, consistently favoring a strong private-enterprise economy with a large role for foreign investment. Unlike most Latin American economies, in Paraguay import tariffs were generally low, fiscal deficits manageable, and exchange rates not overvalued. These trends faltered in the 1980s as the government took a more active part in industry, deficits rose, and the national currency was generally overvalued and devalued numerous times. Throughout the post-World War II era, Paraguay had no personal income tax, and government revenues as a percentage of GDP were among the lowest in the world.

Despite the sustained economic growth that marked the postwar period, the distribution of economic benefits was highly inequitable. Although GDP expanded rapidly in the 1970s, most economists estimated that income distribution worsened during the decade. Government spending on social services was particularly lacking. Paraguay's poverty was mostly a rural phenomenon, which increasingly involved competition for land in the eastern region near the Brazilian border, especially in the departments (administrative divisions) of Alto Paran�, Canendiy�, and Caaguaz�. Nonetheless, land tenure was not generally the acute social problem it was in many developing countries.

Although Paraguay faced significant obstacles to future economic development, it displayed extraordinary potential. Paraguay contained little oil and no precious metals or sea coasts, but the country was self-sufficient in many areas and was endowed with fertile land, dense forests, and swift rivers. The process of opening up the eastern border region to economic activity and continued agricultural expansion was expected to effect rapid changes in once-isolated Paraguay. Likewise, the development of a series of hydroelectric plants along the R�o Paran� linked Paraguay to its neighbors and provided it access to cherished energy resources and badly needed export revenues. Finally, road construction united different departments of Paraguay and provided the country its first access to the Atlantic Ocean via Brazil. These processes of infrastructure development, hydroelectric expansion, agricultural colonization, and a cash crop explosion allowed Paraguay by the late 1980s to begin to tap its potential.

<> GROWTH AND STRUCTURE OF THE ECONOMY
<> ECONOMIC POLICY
<> LABOR
<> AGRICULTURE
<> ENERGY
<> INDUSTRY

Paraguay

Paraguay - GROWTH AND STRUCTURE OF THE ECONOMY

Until the Spanish established Asunci�n in 1537, economic activity in Paraguay was limited to the subsistence agriculture of the Guaran� Indians. The Spanish, however, found little of economic interest in their colony, which had no precious metals and no sea coasts. The typical feudal Spanish economic system did not dominate colonial Paraguay, although the encomienda. System was established. Economic relations were distinguished by the reducciones (reductions or townships) that were established by Jesuit missionaries from the early seventeenth century until the 1760s. The incorporation of Indians into these Jesuit agricultural communes laid the foundation for an agriculture-based economy that survived in the late twentieth century.

Three years after Paraguay overthrew Spanish authority and gained its independence, the country's economy was controlled by the autarchic policies of Jos� Gaspar Rodr�guez de Francia (1814- 40), who closed the young nation's borders to virtually all international trade. Landlocked, isolated, and underpopulated, Paraguay structured its economy around a centrally administered agricultural sector, extensive cattle grazing, and inefficient shipbuilding and textile industries. After the demise of Francia, government policies focused on expanding international trade and stimulating economic development. The government built several roads and authorized British construction of a railroad.

The War of the Triple Alliance (1865-70) fundamentally changed the Paraguayan economy. Economic resources were employed in and destroyed by the war effort. Paraguay was occupied by its enemies in 1870; the countryside was in virtual ruin, the labor force was decimated, peasants were pushed into the environs of Asunci�n from the east and south, and the modernization of the preceding three decades was undone. Sleepy, self-sufficient Paraguay, whose advances in agriculture and quality of life had been the envy of many in the Southern Cone, became the most backward nation in that subregion.

To pay its substantial war debt, Paraguay sold large tracts of land to foreigners, mostly Argentines. These large land sales established the base of the present-day land tenure system, which is characterized by a skewed distribution of land. Unlike most of its neighbors, however, Paraguay's economy was controlled not by a traditional, landed elite, but by foreign companies. Many Paraguayans grew crops and worked as wage laborers on latifundios (large landholdings) typically owned by foreigners.

The late 1800s and the early 1900s saw a slow rebuilding of ports, roads, the railroad, farms, cattle stock, and the labor force. The country was slowly being repopulated by former Brazilian soldiers who had fought in the War of the Triple Alliance, and Paraguay's government encouraged European immigration. Although few in number, British, German, Italian, and Spanish investors and farmers helped modernize the country. Argentine, Brazilian, and British companies in the late 1800s purchased some of Paraguay's best land and started the first large-scale production of agricultural goods for export. One Argentine company, whose owner had purchased 15 percent of the immense Chaco region, processed massive quantities of tannin, which were extracted from the bark of the Chaco's ubiquitous quebracho (break-axe) hardwood. Large quantities of the extract were used by the region's thriving hide industry. Another focus of large-scale agro- processing was the yerba mat� bush, whose leaves produced the potent tea that is the national beverage. Tobacco farming also flourished. Beginning in 1904, foreign investment increased as a succession of Liberal Party (Partido Liberal) administrations in Paraguay maintained a staunch laissez-faire policy.

The period of steady economic recovery came to an abrupt halt in 1932 as the country entered another devastating war. This time Paraguay fought Bolivia over possession of the Chaco and rumors of oil deposits. The war ended in 1935 after extensive human losses on both sides, and war veterans led the push for general social reform. During the 1930s and 1940s, the state passed labor laws, implemented agrarian reform, and assumed a role in modernization, influenced in part by the leadership of Juan Domingo Per�n in Argentina and Get�lio Dornelles Vargas in Brazil. The 1940 constitution, for example, rejected the laissez-faire approach of previous Liberal governments. Reformist policies, however, did not enjoy a consensus, and by 1947 the country had entered into a civil war, which in turn initiated a period of economic chaos that lasted until the mid-1950s. During this period, Paraguay experienced the worst inflation in all of Latin America, averaging over 100 percent annually in the 1950s.

After centuries of isolation, two devastating regional wars, and a civil war, in 1954 Paraguay entered a period of prolonged political and economic stability under the authoritarian rule of Alfredo Stroessner Mattiauda. Stroessner's economic policies took a middle course between social reform, desarrollismo, and laissez-faire, all in the context of patronage politics. Relative to previous governments, Stroessner took a fairly active role in the economy but reserved productive activities for the local and foreign private sectors. The new government's primary economic task was to arrest the country's rampant and spiraling price instability. In 1955 Stroessner fired the country's finance minister, who was unwilling to implement reforms, and in 1956 accepted an International Monetary Fund ( IMF) stabilization plan that abolished export duties, lowered import tariffs, restricted credit, devalued the currency, and implemented strict austerity measures. Although the sacrifice was high, the plan helped bring economic stability to Paraguay. Labor unions retaliated with a major strike in 1958, but the new government, now firmly established, quelled the uprising and forced many labor leaders into exile; most of them remained there in the late 1980s.

By the 1960s, the economy was on a path of modest but steady economic growth. Real GDP growth during the 1960s averaged 4.2 percent a year, under the Latin American average of 5.7 percent but well ahead of the chaotic economy of the two previous decades. As part of the United States-sponsored Alliance for Progress, the government was encouraged to expand its planning apparatus for economic development. With assistance from the Organization of American States (OAS), the Inter-American Development Bank (IDB), and the United Nations Economic Commission for Latin America (ECLA), in 1962 Paraguay established the Technical Planning Secretariat (Secretar�a T�cnica de Planificaci�n--STP), the major economic planning arm of the government. By 1965 the country had its first National Economic Plan, a two-year plan for 1965-66. This was followed by another two-year plan (1967-68) and then a series of five-year plans. Five-year plans--only general policy statements--were not typically adhered to or achieved and played a minimal role in Paraguay's economic growth and development. Compared with most Latin American countries, Paraguay had a small public sector. Free enterprise dominated the economy, export promotion was favored over import substitution, agriculture continued to dominate industry, and the economy remained generally open to international trade and market mechanisms.

In an economic sense, the 1970s constituted Paraguay's miracle decade. Real GDP grew at over 8 percent a year and exceeded 10 percent from 1976 to 1981--a faster growth rate than in any other economy in Latin America. Four coinciding developments accounted for Paraguay's rapid growth in the 1970s. The first was the completion of the road from Asunci�n to Puerto Presidente Stroessner and to Brazilian seaports on the Atlantic, ending traditional dependence on access through Argentina and opening the east to many for the first time. The second was the signing of the Treaty of Itaip� with Brazil in 1973. Beyond the obvious economic benefits of such a massive project, Itaip� helped to create a new mood of optimism in Paraguay about what a small, isolated country could attain. The third event was land colonization, which resulted from the availability of land, the existence of economic opportunity, the increased price of crops, and the newly gained accessibility of the eastern border region. Finally, the skyrocketing price of soybeans and cotton led farmers to quadruple the number of hectares planted with these two crops. As the 1970s progressed, soybeans and cotton came to dominate the country's employment, production, and exports.

These developments shared responsibility for establishing thriving economic relations between Paraguay and the world's sixth largest economy, Brazil. Contraband trade became the dominant economic force on the border between the two countries, with Puerto Presidente Stroessner serving as the hub of such smuggling activities. Oblservers contended that contraband was accepted by many Paraguayan government officials, some of whom were reputed to have benefited handsomely. Many urban dwellers' shelves were stocked with contraband luxury items.

The Paraguayan government's emphasis on industrial activity increased noticeably in the 1970s. One of the most important components of the new industrial push was Law 550, also referred to as Law 550/75 or the Investment Promotion Law for Social and Economic Development. Law 550 opened Paraguay's doors even further to foreign investors by providing income-tax breaks, duty-free capital imports, and additional incentives for companies that invested in priority areas, especially the Chaco. Law 550 was successful. Investments by companies in the United States, Europe, and Japan comprised, according to some estimates, roughly a quarter of new investment. Industrial policies also encouraged the planning of more state-owned enterprises, including ones involved in producing ethanol, cement, and steel.

Much of Paraguay's rural population, however, missed out on the economic development. Back roads remained inadequate, preventing peasants from bringing produce to markets. Social services, such as schools and clinics, were severely lacking. Few people in the countryside had access to potable water, electricity, bank credit, or public transportation. As in other economies that underwent rapid growth, income distribution was believed to have worsened in Paraguay during the 1970s in both relative and absolute terms. By far the greatest problem that the rural population faced, however, was competition for land. Multinational agribusinesses, Brazilian settlers, and waves of Paraguayan colonists rapidly increased the competition for land in the eastern border region. Those peasants who lacked proper titles to the lands they occupied were pushed to more marginal areas; as a result, an increasing number of rural clashes occurred, including some with the government.

In the beginning of the 1980s, the completion of the most important parts of the Itaip� project and the drop in commodity prices ended Paraguay's rapid economic growth. Real GDP declined by 2 percent in 1982 and by 3 percent in 1983. Paraguay's economic performance was also set back by world recession, poor weather conditions, and growing political and economic instability in Brazil and Argentina. Inflation and unemployment increased. Weather conditions improved in 1984, and the economy enjoyed a modest recovery, growing by 3 percent in 1984 and by 4 percent in 1985. But in 1986 one of the century's worst droughts stagnated the economy, permitting no real growth. The economy recovered once again in 1987 and 1988, growing between 3 and 4 percent annually. Despite the economy's general expansion after 1983, however, inflation threatened its modest gains, as did serious fiscal and balance-of-payments deficits and the growing debt.

Paraguay

Paraguay - ECONOMIC POLICY

Fiscal Policy

In the 1970s, the government pursued cautious fiscal policies and achieved large surpluses on the national accounts, mainly as a result of the vibrant growth in the second half of the decade. By the early 1980s, there were growing demands for increased government expenditure for social programs. By 1983, the first fiscal year of increased government spending and the first full year of a recession, the government had entered into a significant fiscal crisis as the budget deficit reached nearly 5 percent of GDP (the deficit had been only 1 percent of GDP in 1980). In 1984 the government imposed austere measures to remedy national accounts. Cuts in current expenditures curtailed already meager social and economic programs. In addition, from 1983 to 1986, real wages of government employees were allowed to drop by 37 percent. Capital expenditures were cut back more seriously. Capital expenditures as a percentage of total expenditure dropped from 31 percent in 1984 to 10 percent by 1986. Austerity measures were successful in economic terms, and by 1986 budget deficits were under 1 percent of GDP. In 1986 the government announced a highprofile Adjustment Plan, which continued previous policies of expenditure cutbacks but also proposed more structural changes in fiscal and monetary policies. The most prominent of these was a proposal for the country's first personal income tax. Many observers characterized the plan as mainly rhetorical, however, citing the government's lack of political will to implement many of its proposals.

Despite the government's ability to control budgetary matters, fiscal policy faced two new and growing problems in the 1980s. The first was the poor financial performance of state-owned enterprises. The overall public-sector deficit, which reached 7 percent of GDP in 1986, had swelled in part because of the high operating costs of parastatals (state-owned enterprises), which accounted for 44 percent of the overall deficit in 1986. Rather than continually increasing the price of utilities and the services of parastatals, the government accepted the loss to avoid the inflationary pressures of increasing costs to consumers. This policy, however, was seen by critics as only a stopgap measure, short of more painful structural solutions, such as examining the financial viability of certain parastatals. The second growing fiscal problem in the 1980s directly involved the country's complex exchange-rate system. Created in July 1982, the multitiered system allowed a preferential exchange rate for the imports of certain government-owned companies. It was the Central Bank, however, that forfeited the losses involved in these exchange transactions, which were recorded as part of the overall public-sector deficit. In 1986 Central Bank losses of this kind accounted for nearly half of all the public sector's deficit. Again to avoid inflation, the government chose to maintain the multitiered system, at least in the short run.

Monetary Policy

In 1943 the guaran� replaced the gold peso (which had been pegged to the Argentine peso) as the national currency, laying the foundation for the country's contemporary monetary system. Guaran�es are issued exclusively by the Central Bank (Banco Central) in notes of 1, 10, 100, 500, 1,000, 5,000 and 10,000 and as coins of 1, 5, 10, and 50 guaran�es. One guaran� is worth 100 c�ntimos.

Changes in banking laws in the 1940s set the stage for the creation of the county's new Central Bank, which was established in 1952, replacing the Bank of Paraguay and the earlier Bank of the Republic. As the center of the financial system, the Central Bank was charged with regulating credit, promoting economic activity, controlling inflation, and issuing currency. As a result of the growth in the financial system, a new general banking law was introduced in 1973, authorizing greater Central Bank regulation of commercial banks, mortgage banks, investment banks, savings and loans, finance companies, and development finance institutions, among others. In 1979 the Central Bank also began to regulate the nations' growing capital markets.

The Central Bank also controlled monetary policy. One of the major aims of monetary policy in the 1980s was price stability. After experiencing extreme price instability--a familiar threat to the economies of the Southern Cone--in the 1940s and 1950s, Paraguay entered into two decades of price stability, credit expansion, economic growth, and a stable exchange rate. Inflation was only 38 percent in the 1960s, a dramatic turnaround from the 1,387-percent figure recorded during the previous decade. Although the rate climbed to 240 percent in the 1970s, it remained far below the postwar level. The pace of inflation accelerated in the 1980s, however, after the economic downturn in 1982. Inflation, as measured by Paraguay's consumer price index, reached an annual rate of 27 percent in 1986 and climbed to well over 30 percent in 1987. Government authorities wrestled with how to control inflation without implementing policies that could unleash even greater inflation and popular discontent. Although influenced by many factors, inflation in the 1980s was exacerbated by fiscal deficits, exchange-rate losses of the Central Bank, the exchange-rate system in general, the country's declining terms of trade, and the inflation of neighboring trading partners, Brazil and Argentina.

The Central Bank regulated the allocation of credit, the supply of credit, and the country's interest rate in an attempt to promote economic growth and restrain inflation. The Central Bank held considerable control over the national banking system, but many regulations were loosely enforced.

Exchange-Rate Policy

From 1960 to 1982, Paraguay enjoyed extraordinary exchange-rate stability as the guaran� remained pegged to the United States dollar at g126=US$1. After the virtual financial chaos of 1947-54, this stability was especially welcome in Paraguay. Although the country's exchange rate was overvalued in the 1970s, it was not until the 1982 recession that the government devalued the guaran�.

Exchange-rate policy in the 1980s came to be characterized by numerous devaluations and almost annual changes in the number of exchange rates employed. In early 1988 five exchange rates were in use, making exchange-rate policy very complicated. The first rate of g240=US$1 was used for the imports of certain state-owned enterprises and for external debt service payments. The second rate of g320=US$1 was applied to petroleum imports and petroleum derivatives. The third rate of g400=US$1 was reserved for disbursements of loans to the public sector. The fourth rate of g550=US$1 was used for agricultural inputs and most exports. The fifth rate, the only one not set by the Central Bank, was a freemarket rate set by the commercial banks. The free-market rate, which was applied to most of the private sector's nonoil imports, exceeded g900=US$1 by 1988. Exchange-rate adjustments were expected to continue in the late 1980s.

One of the most distinctive and complex features of the nation's exchange-rate policy was a system of official minimum export prices for selected agricultural commodities. The system, called Aforo, was essentially a way of guaranteeing foreign-exchange earnings to the Central Bank. Aforo values, assessed by the government immediately before a harvest or slaughter, designated the minimum prices exporters should receive for the goods and determined what percentage of foreign-exchange earnings must be turned over to the Central Bank. The difference between the Aforo price and the actual price was traded in the free-exchange market. In 1987 the official export rate for Aforos was g550=US$1, whereas the free-market rate was upwards of g900=US$1. Lower Aforos generally made Paraguayan exporters more competitive but guaranteed less revenue to the Central Bank. Aforos were one of several government policies that fueled contraband trading.

As the manipulation of Aforos demonstrated, exchange-rate policy was an important economic policy tool of the Paraguayan government and directly affected most sectors of the economy. Although the government ostensibly intended to reduce the gaps among the various tiers of the exchange rate, it was reluctant to reunify the rates in fear of greatly speeding inflation. Paradoxically, however, the multitiered exchange-rate system increased inflationary pressures in numerous indirect ways. One of its most important effects was the fall in Central Bank reserves associated with the exchange-rate subsidies for parastatals, a policy that created a growing publicsector deficit. Likewise, Central Bank losses encouraged a more expansionary monetary policy, most notably through rediscounting rates. An overvalued exchange rate also hampered export growth in general, which in turn aggravated Paraguay's balance-of-payments deficits and potentially its external debt.

Paraguay

Paraguay - LABOR

Paraguay's labor force surpassed 1.4 million in 1986, or approximately 37 percent of the country's estimated population. Government statistics recorded an unemployment rate of 14 percent in 1986, but that figure dropped to 8 percent in 1987. Estimates of unemployment varied widely outside Paraguayan government circles. For example, the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) estimated unemployment as high as 18 percent in 1986 with as much as 50 percent underemployment in urban areas. Males dominated the official labor force, accounting for 79 percent of registered workers. Women were visibly a much higher percentage of the work force than official statistics reflected. But, unlike in most Latin American countries, Paraguay's female labor force was not growing faster than the male labor force; males were expected to continue to constitute a disproportionate share of the labor force for some time to come.

Statistics on the distribution of labor by economic sector in 1987 showed 48 percent of workers in agriculture, 31 percent in services, and 21 percent in industry. Males dominated agricultural labor, whereas women were most prominent in the services sector. The country maintained the highest percentage of labor in agriculture in all of South America and one of the lowest services percentages on the continent. Nevertheless, according to data from the IDB, a large portion of the labor force in Asunci�n was in the informal sector, generally in services. In fact, Asunci�n ranked second among Latin American cities in the percentage of labor force in the informal sector.

Unlike most Latin American countries, the distribution of Paraguay's labor force had changed little in thirty-five years. In 1950 agriculture comprised 55 percent of the labor force, services 25 percent, and industry 20 percent. The greatest fluctuations within economic sectors during the 1980s occurred in the construction industry, which was directly affected by hydroelectric development. After the end of Itaip�'s construction phase in the early 1980s, observers estimated that the number of construction workers dropped from 100,000 to 25,000, but they expected that the start-up of construction at the Yacyret� hydroelectric project would restore many of those jobs.

Comprehensive labor laws had been passed since 1961, but they were not universally enforced. Laws theoretically regulated maximum hours to be worked per week, child labor, union activities, female labor, maternity leave, holidays, and social security and established a minimum wage. Minimum wages, in effect since 1974, were set by the Labor Authority according to geographic location and task performed. Minimum wages in the 1970s and 1980s did not keep pace with inflation, and the real minimum wage was eroding. The real wages of the work force at large, however, eroded even more quickly than minimum wages over the same period. Employees typically worked from 6:00 A.M. to 8:00 P.M. with an almost universal midday siesta.

Organized labor provided the best example of the loose enforcement of labor laws. Although the country's labor laws permitted free association by labor unions, most labor movements had been thwarted by the government since 1958, the year of a major strike by the Paraguayan Confederation of Workers (Confederaci�n Paraguaya de Trabajadores--CPT). There was a growing independent workers' movement developing in the 1980s, which was fueled mostly by dissatisfaction with the declining real wage of the Paraguayan worker. Nonetheless, unionized labor remained dominated by the CPT, which was generally more progovernment than prolabor and rarely challenged government policy.

Paraguay

Paraguay - AGRICULTURE

Throughout Paraguay's history, agriculture has been the mainstay of the economy. This trend continued unabated in the late 1980s as the agricultural sector generally accounted for 48 percent of the nation's employment, 23 percent of GDP, and 98 percent of export earnings. The sector comprised a strong food and cash crop base, a large livestock subsector, and a vibrant timber industry.

Growth in agriculture was very rapid from the early 1970s to the early 1980s, a period when cotton and soybean prices soared and cropland under cultivation expanded as a result of agricultural colonization. Growth in agriculture slowed from an average of 7.5 percent annual growth in the 1970s to approximately 3.5 percent in the mid- to late 1980s. Agricultural output was routinely affected by weather conditions. Flooding in 1982 and 1983 and severe droughts in 1986 hurt not only agriculture, but, because of the key role of the sector, virtually every other sector of the economy as well.

In the aggregate, however, the advances experienced by the sector during the 1970s and 1980s did not reach many of the small farmers, who continued to use traditional farming methods and lived at a subsistence level. Despite the abundance of land, the distribution of the country's farmlands remained highly skewed, favoring large farms. Epitomizing the country's economic activity in general, the agricultural sector was consolidating its quick expansion over the two previous decades and only beginning to tap its potential in the late 1980s.

<> Land Tenure
<> Land Reform and Land Policy
<> Land Use
<> Crops
<> Livestock
<> Forestry and Fishing

Paraguay

Paraguay - Land Tenure

The history of land tenure in Paraguay is distinct from that in most Latin American countries. Although there had been a system of land grants to conquistadors, Paraguay was distinguished by Jesuit reducciones that dominated rural life for over a century. After the expulsion of the Jesuits in 1767 and later the Spanish, the state had become the owner of 60 percent of the country's land by the mid-1800s. Large tracts of land were sold, mostly to Argentines to pay the country's war debt from the War of the Triple Alliance. This was the beginning of the concentration of land in Paraguay not in the hands of the Spanish or of a local elite but rather of foreign investors. Land policy remained controversial until the 1930s, when there was a broader consensus for the titling of land to users of the land and mediating between latifundio and minifundio (small landholding). After 1954 multinational agribusinesses, mostly Brazilian and American, played an increasing role in the economy, often purchasing enormous tracts of land devoted to raising cattle, cotton, soybeans, and timber.

The most recent data on land tenure was the agricultural census of 1981, which followed earlier major agricultural censuses of 1956 and 1961. The most striking change from 1956 to 1981 was the kind of ownership of the farms. In the 1956 census, 49 percent of all farmers squatted on their land compared with only 30 percent in the 1981 census. This data suggested an increasing interest on the part of small farmers in obtaining title to their land in the face of growing land pressures. The 1981 census also indicated that 58 percent of all farms were owned outright and 15 percent were sharecropper farms; the 1956 census showed that 39 percent of farms belonged to farmers and 12 percent were worked by sharecroppers.

Another striking element of the 1981 agricultural census was the great disparity between small and large landholdings. According to the census, 1 percent of the nation's more than 273,000 farms covered 79 percent of the nation's farmland in use. These large farms had an average landholding of almost 7,300 hectares. Many of the largest holdings were cattle farms in the Chaco region. By contrast, the smallest farms, which made up 35 percent of all farms, covered only 1 percent of the land, making the average size of a minifundio 1.7 hectares, or less than was necessary for one family's subsistence. Still, the 1981 census figures were somewhat more encouraging than those in the 1956 census, which showed that 1 percent of farms covered 87 percent of the land, and 46 percent of farms covered only 1 percent of the farmland. Another encouraging trend that the census quantified was the declining number of farms under 5 hectares in size and the growth of small to medium-size farms (5 to 99.9 hectares).

Despite these positive trends, the 1981 census pointed to an increasing problem of landlessness. Census figures indicated that roughly 14 percent of all peasants were landless. Landlessness historically had been mitigated by the undeveloped nature of the eastern border region. Because the owners of estates in the region used only a portion of their holdings, peasants could squat on the properties without retribution. Land pressures also were alleviated by the vast tracts of untitled land in the east. Beginning in the 1960s, however, competition for land in the area increased dramatically. Many estate owners sold their lands to agribusinesses; the new proprietors, who were committed to an efficient and extensive use of their holdings, sometimes called upon the government to remove squatters from the lands.

Squatters also came into competition with Paraguayan colonists and Brazilian immigrants. Thousands of colonists were resettled in the eastern region under the government's agrarian reform program. The Brazilian immigration occurred as a result of a dramatic increase in land prices in the 1970s in the neighboring Brazilian state of Paran�. Many farmers sold their properties and crossed into Paraguay, where land was much cheaper. By the late 1980s, at least half of the population in the departments of Canendiy� and Alto Paran� was Brazilian.

Paraguay

Paraguay - Land Reform and Land Policy

After decades of public controversy over government land policy, two important agrarian laws were enacted in 1963 that guided land policy through the late 1980s. The Agrarian Statute, as the laws were called, limited the maximum size of a single landholding to 10,000 hectares in Eastern Paraguay and 20,000 hectares in the Chaco, with landholdings in excess of this size subject to taxes or possible purchase. This law, however, like many of the laws involved in economic policy, was enforced only loosely or not at all. A more fundamental component of the Agrarian Statute was the creation of the Rural Welfare Institute (Instituto de Bienestar Rural--IBR). The IBR, which superceded the Agrarian Reform Institute, became the central government agency mandated to plan colonization programs, issue land titles to farmers, and provide new colonies with support services such as credit, markets, roads, technical assistance, and other social services as available. From 1963 to the late 1980s, the IBR titled millions of hectares of land and created hundreds of colonies, directly affecting the circumstances of roughly one-quarter of the population. In the late 1980s, the IBR remained the key government agency, along with the Ministry of Agriculture and Livestock, in serving the land needs of small farmers.

Although the IBR played an important role in stimulating the celebrated "March to the East," the exodus from Paraguay's central zone to the eastern border region that began in the 1960s was a spontaneous process. The task of the IBR was so enormous and its resources so limited that many of the country's farmers bypassed the institute in order to participate in the eastward land grab. Thousands of Paraguayans took it upon themselves to trek eastward to the abundant, fertile, but forested land of Alto Paran�, Itap�a, and other eastern departments. Many of the colonists were pioneers in the truest sense, clearing densely forested areas for farming mostly by axe. Few farmers had access to institutional credit, and these newly colonized areas generally lacked schools, roads, and other amenities.

Paraguay

Paraguay - Land Use

Paraguay comprises a total of 40.6 million hectares of land. But based on soil surveys, analysts have estimated that only one-fifth of that area is appropriate for normal crop production. According to the 1981 agricultural census, 7 percent of the land was dedicated to crop production, 20 percent to forestry, 26 percent to livestock, and 47 percent to other purposes. These figures indicated the great agricultural potential that remained in Paraguay in the late 1980s. One of the most important trends in Paraguayan agriculture was the increase in the percentage of land under cultivation, which had been only 2 percent in 1956. Livestock activity fluctuated greatly during the 1970s and 1980s but generally had increased, rising above the 22-percent land use reported in 1956. The improved utilization of agricultural resources resulted from increased colonization, favorable price movements for cash crops, further mechanization, and infrastructural improvements connecting produce with markets.

For agricultural purposes, the country can be divided into three regions: the Chaco, the central region, and the eastern region. The semiarid Chaco contained extensive grazing land that supported 40 percent of the country's livestock. Although the Chaco region covered 60 percent of the country's land mass, it contained only 3 percent of the population and accounted for less than 2 percent of crop production. With the exception of the Mennonite colonies in the central Chaco, there was little crop activity. A more suitable location for crops was the central region in the vicinity of Asunci�n, where traditional crop production had dominated since peasants were pushed toward the capital at the end of the War of the Triple Alliance. But government policies since the 1960s had favored breaking up minifundios in the central region and establishing larger, more efficient farms in the fertile eastern border region, which is endowed with rich, varied soils, well distributed annual rainfalls, and millions of hectares of hardwood forests. Together these regions cover some 16 million hectares, 40 percent of the country's land and approximately 98 percent of the country's crop land. Agricultural surveys in the east, the new focus of agricultural activity, have determined that 30 percent of the region is suitable for intensive agriculture, 40 percent for livestock, 20 percent for moderate agriculture or livestock use, and 10 percent for forestry.

The country's land use changed rapidly in the 1970s and 1980s as foreign investment, Paraguayan and Brazilian colonists, the construction of Itaip�, favorable commodity prices, and new infrastructure all contributed to the penetration of the dense eastern region. Increased prices for soybeans and cotton beginning in the early 1970s changed the Paraguayan landscape more drastically than any other factor. By the late 1980s, cotton and soybeans accounted for over 1.1 million hectares, or over 40 percent of all land in crops and contributed over 60 percent of exports. Although government policies favored export crops, the rapid expansion of cash crops was largely a direct response that Paraguay's free-market economy made to the rise in the international demand for these products.

Paraguay

Paraguay - Crops

Export Crops

Soybeans had replaced cotton as the country's most important crop by the 1980s. A relatively new crop for Paraguay, soybeans were not produced in any quantity until 1967, when they were introduced as the summer rotation crop in a national plan for selfsufficiency in wheat. After soybean prices nearly tripled in 1973, however, much of the land slated for wheat was sown with soybeans instead. As the lucrative nature of soybean cultivation and processing became apparent, several large agribusinesses from Brazil, the United States, and Italy engaged in large-scale, commercial production of soybeans and soybean oil. It is difficult to exaggerate the drastic growth soybeans enjoyed in Paraguay. In 1970 soybeans covered only 54,600 hectares and had an annual production of over 75,000 tons. By 1987 soybeans covered some 718,800 hectares, more than any other crop, with an annual output of 1 million tons and export revenues of approximately US$150 million. The soybean crop grew primarily in the newly colonized departments of Itap�a, Alto Paran�, Canendiy�, and Amambay. Soybeans were produced principally for the world market anf sold both as a raw bean and as a processed oil, which was also consumed locally. Soybean prices generally rose beginning in 1970s but experienced significant fluctuations in the early to mid-1980s before recovering in the late 1980s. The major constraint on growth in soybean output, besides price fluctuations, was the lack of storage, drying facilities, and local processing capacity.

Cotton was one of Paraguay's oldest crops, grown since the time of the Jesuit missions. The government encouraged cotton production after the crop was nearly wiped out by the War of the Triple Alliance. Cotton was especially suited to the Paraguayan climate and soils and was grown primarily by small farmers in the central region. Cotton farming also experienced extremely rapid growth in the 1970s and 1980s. In 1970 only 46,900 hectares were sown with cotton, producing a volume of over 37,000 tons. By 1985, however, 385,900 hectares were covered with cotton, yielding almost 159,000 tons. Those figures had dropped to 275,000 hectares and 84,000 tons during the drought of 1986. Foreign-owned, large-scale, commercial production in the eastern border region was surpassing central region production in the late 1980s. Despite the advances in cotton production, cotton cultivation in the 1980s was still characterized by low yields and a low technological level. Even more so than soybeans, cotton suffered wide price fluctuations, and many small farmers who came to rely on cotton revenues in the 1970s became vulnerable to external price fluctuations in the following decade. Some cotton fiber was used domestically, but about 80 percent of the country's crop was processed into cotton lint at more than ten textile-processing factories. Cotton exports in 1987 earned about US$100 million, with most exports going to Uruguay, Britain, France, the Federal Republic of Germany (West Germany), and Japan.

Another key export crop was tobacco. Used domestically for centuries, cigarettes and cigars also earned foreign exchange. During parts of the early 1900s, tobacco was Paraguay's principal agricultural export to Western Europe. Tobacco production slowed in the 1970s with the advent of massive soybean and cotton production. Another reason for the tobacco crop's decline was the inability of the domestic cigarette factories to improve quality control and compete with smuggled brands. Wide price fluctuations of tobacco also explained dwindling production. Despite these difficulties, tobacco made a slight recovery in the 1980s. The area cultivated rose from 7,600 hectares in 1980 to over 8,000 hectares in 1987. Output increased from 11,500 to 12,000 tons. Tobacco was grown throughout Paraguay, mostly by small farmers. Cigarettes and cigars were exported to Argentina, France, and Spain. Tobacco exports were valued at approximately US$9 million in 1987.

Coffee was another export crop but of much less importance. Cultivated since the times of the Jesuits, coffee was grown in the central and eastern border regions for local and export markets. Most modern coffee production methods derived from the practices of German colonists in the eastern region. Coffee production boomed in the late 1970s but waned in the early 1980s. In the late 1980s, coffee output rose again, following a pattern of fluctuating production based on price movements. In 1987 approximately 9.2 million hectares of coffee yielded 18.4 million tons of exports with an estimated value of US$44.7 million.

Sugarcane remained an important cash crop for small farmers in the late 1980s. Unlike many countries in the Western Hemisphere, Paraguay saw sugarcane as a crop of the future, not because of its use for refined sugar and molasses, but as an input to ethanol, an increasingly popular energy alternative for the country. Sugarcane was planted in Paraguay as early as 1549 with seedlings from Peru, and sugar had been exported since 1556. After the devastation of Paraguay's two major wars, however, local output did not meet domestic demand until the mid-1900s, after which exports were revived. Since then, sugar production has fluctuated with price changes but generally has increased. Paraguay's climate is appropriate for sugarcane cultivation, but traditional methods and inefficient small-scale production limited harvests. Besides low yields, the industry suffered from outdated milling facilities and high production costs. Sugar production, however, was expected to be modernized and increasingly commercialized as a result of its high government priority as an input to an alternative energy source. Some 65,000 hectares of sugarcane produced 3.2 million tons of sugar in 1987, including 7,500 tons of sugar exports valued at US$2.3 million. These figures were highs for the decade.

Numerous crops were grown partially or entirely for their value as exported processed oils. Oilseeds represented one of Paraguay's largest agro-industries. One of Latin America's largest oilseed exporters, Paraguay processed cottonseed, soybean, peanut, coconut, palm, castor bean, flaxseed, and sunflower-seed oils. Industrial countries in particular consumed oilseeds as a lower-priced substitute for more traditional oils, which also were higher in cholesterol. Some oil was used locally as well. Paraguay also produced a number of nonvegetable oils, such as tung oil and petitgrain oil. Tung oil, derived from tung nuts, was used as a drying agent in paints. Petit-grain oil, derived from Paraguay's bitter oranges, was used in cosmetics, soaps, perfumes, and flavorings. In the 1980s Paraguay remained one of the world's leading exporters of petit-grain oil.

Food Crops

Manioc (cassava), maize, beans, and peanuts, the four basic crops of the Guaran� Indians, were still the country's major food crops in the 1980s. Manioc, the staple of the Paraguayan diet, had been cultivated in nearly every area of the country for centuries. Called mandioca in Paraguay, the root crop was the main starch of the diet. Manioc did not experience the rapid explosion of cultivation that cotton, soybean, and maize did. Nevertheless, manioc yields ranked as some of the best in Latin America. In 1986 about 220,000 hectares produced 3.4 million tons of manioc. These figures compared favorably with 1976 data, which recorded 106,500 hectares producing 1.6 million tons.

Maize, or was Paraguay's most rapidly growing food crop. From the early 1960s to the late 1980s, corn output multiplied rapidly, covering more hectares than any crop except soybeans. After the doubling of both hectares cultivated and total output in the 1970s, corn production accelerated even further in the 1980s, mostly because of continued agricultural colonization. In 1980 approximately 376,600 hectares yielded 584,700 tons of corn, compared with an unprecedented 547,000 hectares of corn in 1987, which harvested 917,00 tons. Like manioc, maize was grown throughout the country, but the departments of Itap�a, Paraguar�, Caaguaz�, and Alto Paran� were responsible for most of the harvest. White corn was the traditional corn of Paraguay, but yellow, highyield hybrids were increasingly common, especially on larger farms. Most corn went to domestic human consumption; roughly a third of domestic corn consumption took place in the form of feed grain for the livestock sector. In addition, some surplus corn was exported to Brazil and Argentina, depending on weather conditions and annual output.

Other principal food crops included beans, peanuts, sorghum, sweet potatoes, and rice. Many types of beans were grown in Paraguay, including lima beans, french beans, and peas. Since the 1970s, however, bean production had been declining because of the profitability of other crops. Peanuts, a traditional though marginal crop, expanded in the 1970s and 1980s and often were intercropped with cotton. Peanuts also were processed as an oilseed. Sorghum, a drought-resistant crop, was grown primarily as feed for livestock and was considered a potential crop for the arid Alto Chaco. Sweet potatoes, another main staple crop, like many other food crops, did not expand significantly in the 1970s, and harvests contracted measurably in the 1980s. Rice production, by contrast, expanded after high-yield varieties were introduced in the 1960s. Rice is not a dietary staple in Paraguay as it is in many Latin American countries, but it is popular and consumed in ever-greater quantities. Self-sufficient in rice, Paraguay showed potential as a regional exporter because of its rich soils and irrigation potential along the R�o Paran�.

After attempting for twenty years to become self-sufficient in wheat production, Paraguay reached wheat self-sufficiency in 1986. For two decades, the government's national wheat program had encountered numerous obstacles: seeds inappropriate for Paraguay's climate, skyrocketing prices for alternative crops, poor weather, blight infection, and a lack of proper farming practices. From 1976 to 1986, however, the number of hectares covered with wheat multiplied some sixfold, from 24,200 to over 140,000. Wheat output reached 233,000 tons in 1986, 33,000 tons above national consumption. In 1987 approximately 175,000 hectares of wheat fields yielded 270,000 tons, a record high. Over half of all wheat was grown in Itap�a, where most soil testing, tractors, and fertilizers were used. Despite the rapid expansion, wheat production in the 1980s was hurt by floods, droughts, and cheap contraband, all of which caused flour mills to operate at about half of capacity. Smuggled Brazilian flour sometimes was half the price of Paraguayan flour. Future growth in the wheat industry was constrained by a lack of adequate grain-cleaning and storage facilities.

Paraguayans cultivated numerous other fruits, vegetables, and spices for both domestic consumption and export. Most common were citrus fruits, which were ideal for Paraguay's subtropical and tropical climate. Paraguay also produced pineapples, which according to some sources originated in Paraguay, and peaches, which were farmed commercially by fruit companies from the United States. Bananas, plums, strawberries, pears, avocados, guavas, papayas, mangoes, grapes, apples, watermelon, and other melons were cultivated to varying degrees as well. Vegetable production included gourds, squash, tomatoes, and carrots. Onions and garlic were widely grown and commonly used in cooking.

A uniquely Paraguayan crop was the yerba mat� plant. Yerba mat� was grown throughout the country--especially Eastern Paraguay -- for both domestic and regional markets. Large-scale production was traditionally dominated by Argentine and British interests. Despite its popularity, yerba mat� output fell significantly in the 1970s and 1980s, as farmers switched to more lucrative crops.

Paraguay was also believed to be an expanding producer of marijuana in the 1980s. One United States Congressional report in the 1980s estimated annual production at 3,000 tons.

Paraguay

Paraguay - Livestock

Raising and marketing livestock, a traditional source of livelihood in Paraguay, remained a major segment of agriculture and the economy at large during the 1980s. Livestock output accounted for roughly 30 percent of agricultural production and about 20 percent of the sector's exports. The raising of livestock represented more than a quarter of total land use and 80 percent of all capital investment in agriculture. Paraguay's vigorous livestock sector also was responsible for the country's high per capita production and consumption of meat and dairy goods. It was estimated that 40 percent of the country's land was especially suited for livestock and some 20 percent generally suitable. Endowed with plentiful grazing lands, Paraguay had vast potential for livestock development.

After the importation of 7 cows and a bull by the Spanish in the mid-1550s, the country's cattle herds swelled to some 3 million head by the time of the War of Triple Alliance, the largest herds in the Southern Cone. As with every other sector of the Paraguayan economy, the war devastated the country's livestock sector, leaving only 15,000 head. It was not until World War I that domestic demand was met locally and significant exports left the country. By the end of World War II, beef exports had become a major foreignexchange earner. Beef production and exports fluctuated considerably in the postwar period because of international price movements, weather conditions, government pricing policies, and other factors. In 1987 the country's cattle herd stood at about 8 million head with an annual slaughter rate of 1 million head. In that same year, 75 percent of the slaughter went to the domestic market and the remaining 25 percent to the export market.

Cattle, mostly beef cattle, were found throughout the countryside. The Chaco region was best known for its contribution to cattle raising because of its lack of crops and its sprawling ranches. Nevertheless, the cattle population density of Eastern Paraguay, 0.6 head per hectare, was actually higher than that of the Chaco region, 0.3 head per hectare.

The country's breeding stock was primarily Spanish criollo, although over the years considerable crossbreeding with English breeds and zebu cattle from Brazil had taken place. Although cattle were numerous in Paraguay, the country lacked a sufficient number of pure-bred breeding cattle. The livestock sector also suffered from a low calving percentage, a high mortality rate, and a long fattening period for steers. Artificial insemination was increasingly common. To a certain extent, cattle raising reflected the disparities in agriculture in general. There were numerous farmers who owned only a few head of relatively unproductive cattle that were slaughtered for the local market under relatively poor sanitary conditions. By contrast, extremely large cattle ranches typically were owned by expatriates and butchered more productive animals for both national and international markets.

Seventy slaughterhouses for the domestic market and eight for the export market operated in the 1980s. Local slaughterhouses often could not pass sanitary inspections, but government inspection efforts were focused on improving quality control of exports to meet the stringent regulations of foreign beef markets. The country's beef exports expanded until 1974, when Paraguay lost access to European Economic Community (EEC) markets and lower world prices further stagnated output. Beef exports responded strongly but erratically in the 1980s as the government's minimum export price system and contraband activity undercut greater export efforts. For example, beef exports were a mere 3,100 tons in 1985, 48,000 tons in 1986, and 18,000 tons in 1987, the last being the more typical figure. The 1986 boom in beef exports was the direct result of beef shortages in Brazil caused by price controls under its "Cruzado Plan." Paraguay's principal export markets were Brazil, Peru, Chile, the EEC (specialty items only), Colombia, Uruguay, and Saudi Arabia. Missing from official 1987 data, however, was the unregistered sale of an estimated 300,000 head of cattle along the Brazilian border.

Official government policy favored strong cattle development and exports, a view articulated in national livestock programs since the early 1960s. A major policy tool to promote livestock growth was the FG. The FG was not only the major lender to the industry, but it also provided certain veterinary equipment and medicine, encouraged quality control in meat and dairy products, and operated a model farm in the Chaco.

Dairy cattle represented only a small fraction of the total herd. Most milk production occurred at an estimated 400 dairy farms in Asunci�n, Puerto Presidente Stroessner, Encarnaci�n, and Filadelfia. The best yields came from holstein-friesian dairy cattle followed by crossbreeds and criollo. High feed costs and the general inefficiency of small dairy farmers slowed the growth of the industry. The country produced approximately 180 million liters of milk a year in the late 1980s.

Other livestock activity including poultry farming and the swine industry. Some of the most productive poultry farming took place in the Mennonite colonies, in Japanese colonies in the eastern border region, and in the greater Asunci�n area. Observers estimated that there were over 14 million chickens, 400,000 ducks, 55,000 turkeys, and several other types of fowl. Egg production stood at 600 million per year in the late 1980s and was growing at about 4 percent a year. Pig farming was a relatively minor activity, engaged in mostly by small farmers. The pork industry's greatest structural problems were the high cost of feed and consumer preferences for beef. Government policy emphasized self-sufficiency in feed grown on small pig farms. Paraguay's swine population amounted to roughly 1.3 million in the late 1980s and had grown at a rate of 6 percent a year in the first half of the decade.

Paraguay

Paraguay - Forestry and Fishing

Forestlands constituted approximately one-third of Paraguay's total area. Utilized for fuelwoods, timber exports, and extracts, the country's wooded areas constituted a key economic resource. Approximately half of all woodlands contained commercially valuable timber. In the 1980s about 4 million hectares were being lumbered commercially. Forestry data was only a broad estimate, however, as a full third of timber production was believed to be exported illegally to Brazil. Registered forestry exports accounted for about 8 percent of total exports during most of the 1980s. Forests have played an important role in the economy since the 1800s with the processing of yerba mat� and the resilient quebracho. Because of a general decline in tannin exports, however, the quebracho played a correspondingly less important role in forestry.

Officially, Paraguay produced over 1 million cubic meters of lumber a year in the 1980s. Trees were processed at over 150 small, mostly outdated sawmills that produced wood products for the paper, cardboard, construction, and furniture industries and for export. Trees also fueled the country's railroad and largest steel mill. The country's woodlands contained over forty-five species of wood suitable for export, but fewer than ten species were exported in quantity. Paraguay was recognized as an exporter of fine timber, and its wood exports were internationally competitive. In 1987 lumber exports to Argentina, Brazil, and Mexico earned US$50 million in foreign exchange.

Despite the abundance of premium forests, deforestation was progressing at an alarming rate, about 150,000 to 200,000 hectares per year. The rapid depletion of Paraguay's woods was caused by the clearing of virgin forests associated with agricultural colonization, the farming practice of land-clearing and treeburning , and the felling of trees for charcoal and the other fuelwoods that accounted for 80 percent of household energy consumption.

Although the country contained enormous installed energy capacity, fuelwood remained the most important domestic source of energy in the 1980s. In fact, Paraguay's per capita consumption of fuelwood was the highest in all of Latin America and the Caribbean and nearly three times the level of other South American countries. The deforestation question was complicated by the distribution of forestlands and population. Southeast Paraguay was being deforested the most rapidly. From the mid-1970s to the mid-1980s, that region's forestland decreased from just under 45 percent of all land to 30 percent. The Chaco maintained a large number of forestlands and shrubs, but they could not be economically exploited.

Government policy was slow to respond to deforestation because of the traditional abundance of forests as well as the generally laissez-faire dynamics of the land colonization process. In 1973 the government established a National Forestry Service under the Ministry of Agriculture and Livestock to protect, conserve, and expand the country's forests. The service, however, was hindered by a lack of resources, staff, serious government initiatives, and public education on the problem of deforestation. The planting of fast-growing trees and modernization of the lumber industry were recommended by the government, but only about 7,000 hectares of new forests were seeded annually in the mid-1980s. Given these levels of deforestation and reforestation, analysts estimated that few commercial lumbering lands would be available by the year 2020.

For landlocked Paraguay, fishing was only a minor industry. It focused on more than 230 freshwater fish species in the country's rivers and streams. Only fifty or so species of fish were eaten, dorado and pac� being the most popular. Some fishing companies, mostly family operations, maintained boats, refrigeration facilities, and marketing outlets.

Paraguay

Paraguay - ENERGY

Massive capital investments in hydroelectric projects along Paraguay's river borders with Brazil and Argentina in the 1970s and 1980s were the most salient characteristic of the country's energy sector and the economy at large. Although not a traditionally significant part of the national economy, the energy sector became an important contributor to the country's balance of payments as Paraguay prepared to become the world's largest exporter of electricity in the 1990s. The rapid growth in energy investment in the 1970s rippled throughout the nation's economy, stimulating the explosive growth of the eastern border region. The construction industry derived the greatest benefits from the hydropower projects, but the manufacturing, agricultural, and transportation sectors also gained from the sudden growth in the east. Paraguay was expected to surpass the United States in the mid-1990s as the world's leader in per capita installed electricity.

Commercial energy represented only one-third of total energy consumption, mostly imported petroleum for the transportation sector. Paraguay was 100 percent dependent on foreign oil. Oil exploration had taken place sporadically since the 1940s, but no significant petroleum deposits had been found by 1988. Paraguay, however, was the most unexplored country in South America in terms of petroleum. Paraguay was increasingly experimenting with renewable alternatives to fossil fuels, such as sugar-based ethanol, an octane enhancer. Mining accounted for only 0.4 percent of GDP in 1986.

<> Itaip�, Yacyret�, and Corpus
<>Oil

Paraguay

Paraguay - Itaip�, Yacyret�, and Corpus

Only superlatives adequately describe the grandeur of the Itaip� hydroelectric power plant. Itaip� was the world's largest hydroelectric power plant, located on one of the world's five largest river systems. Itaip�'s cost was estimated at US$19 billion, but no exact figure was calculated. The plant's dam, small compared to those at some hydroelectric plants, nonetheless required the diversion of the entire R�o Paran�, including the permanent flooding of the spectacular Guair� Falls and of some 235,000 hectares of land. Over a 5-year period, the concrete poured each day would have been sufficient to construct a 350-story building. More importantly, the project created an "Itaip� euphoria" that brought jobs to 100,000 Paraguayans, instilled a renewed pride in the country, and strengthened the nations's image vis-�-vis its giant neighbor and largest economic partner, Brazil.

The Itaip� project began with the signing of the Treaty of Itaip� between Paraguay and Brazil on April 26, 1973. The treaty created a binational authority--Itaip� Binacional--to see that the two countries shared equally in the plant's operation. Itaip� provided Paraguay unprecedented employment opportunities and capital investment, but inadequate planning on the part of the government and the private sector hindered the country's ability to reap the project's full potential. Approximately 80 percent of the plant's construction was performed by local Paraguayan-Brazilian industry. Because the Paraguayan parliament demanded early on that Paraguay receive a fair share of the project's work, Paraguay was officially earmarked for 50 percent of all major contracts. In reality, Paraguay's small industrial sector was no match for Brazil's more technologically advanced industries. Observers believed that Brazilian companies actually rendered 75 percent of the total workload and provided almost all the key inputs such as steel, cement, machinery, and special technical expertise. Even housing materials for Paraguayan construction workers were smuggled in from Brazil.

After five years of labor, the R�o Paran� was diverted, and from 1978 to 1982 key construction was completed on the plant, dam, and spillways. Brazil's serious economic problems in 1983 and 1984 slowed the completion of the dam, but overall delays were reasonable by regional standards. Electricity was first generated on October 25, 1984, more than a decade after the signing of the treaty.

Electrical operations were slowly developing at Itaip� in the late 1980s, and full capacity was not expected to be reached until 1992. Because of delays in Brazil's sixty-cycles-per-second system, the plant's fifty-cycle units were the first to produce commercially, and this electricity went to Paraguay. Itaip� was so colossal, however, that ANDE could process only about 30 percent of the output of 1 of Itaip�'s 18 generators at peak output. As stipulated in the treaty, Brazil and Paraguay bought their electricity from the binational power facility at predetermined rates. Because Paraguay was expected to use only a tiny fraction of its power for the foreseeable future, it sold most of its share back to Brazil, also at a predetermined rate, including normal compensation and royalties.

The major debate over Itaip� in the late 1980s revolved around the low prices that Paraguay had negotiated in the original treaty. What Brazil paid Paraguay for electricity was one-ninth what Paraguay was scheduled to receive from Argentina under the Treaty of Yacyret�, signed just seven months after Itaip�. After twelve years of indecision about how to adjust the Treaty of Itaip�, on January 25, 1985, Paraguay and Brazil signed five revisions to cover matters of financial compensation. Paraguay gained significantly from the 1985 revisions, but most analysts believed Paraguay deserved still greater compensation for its electricity. Further revisions were likely before the end of the century.

The Yacyret� project, although generally overshadowed by the colossal Itaip� project, was one of Latin America's major publicsector projects in the 1980s. Established hastily by Argentina's Peronist government on December 13, 1973, the Yacyret� project was stalled for years as a consequence of regional maneuvering, lobbying by the Argentine nuclear and oil industries, and political instability in Argentina. After ten years of delays, the first major engineering contract finally was awarded in June 1983. As with Itaip�, Yacyret� was hindered by the general lack of physical infrastructure at the dam site. Also as with Itaip�, Paraguayan firms did not receive equal work, despite stipulations in the initial agreement. Construction of the dam and the hydroelectric plant continued throughout the 1980s, but the major construction phase did not begin until the late 1980s, and numerous delays-- mostly political--persisted. Yacyret� was not expected to become fully operational until the mid-1990s, more than twenty years after the treaty's signing and at a cost of as much as US$10 billion, five times the original calculation.

An early point of contention between Paraguay and Argentina was the percentage of each country's land that would be flooded for the project's dam; more than 1,690 square kilometers would be needed--a larger area than was flooded for Itaip�. It esd sgreed that flooding was to be just about equally divided. Another disagreement involved Paraguay's exchange-rate policies. Exchange rates determined the final price Argentina would pay for the plant's electricity. This issue continued to be negotiated in the late 1980s.

When completed, Yacyret� would be roughly one-quarter of the size of Itaip�, with an initial installed capacity of 2,700 megawatts and an annual generation capacity in excess of 17,500 gigawatt hours. Yacyret�'s electricity per unit would be more expensive to generate than Itaip�'s, and the unit price Paraguay would eventually receive was expected to be much greater. None of the electricity produced by Yacyret� was intended for use by Paraguayans; it was to be sold back to a binational body that would manage the plant. But the gearing up of key construction activity at Yacyret� in the late 1980s was expected to give a boost to the Paraguayan economy, which was suffering from what one observer termed the "post-Itaip� blues." Observers believed that the Argentine-Paraguayan project would provide renewed construction jobs, large capital inflows, and eventually badly needed foreignexchange revenues. The binational project also would provide seriously needed bridges, highways, improved river transport at the port of Encarnaci�n, and even increased irrigation potential for nearby rice fields.

Located midway between Itaip� and Yacyret� on the R�o Paran� was the proposed site of the Corpus hydroelectric power plant. After years of preparations, Corpus remained in the planning stage in the late 1980s because of the slow progress at Yacyret�. Hydrologically linked with Itaip� and Yacyret�, the Corpus plant was designed to make optimal use of the falls at Itaip� and the currents of tributary rivers. In order to integrate and maximize the various projects along the R�o Paran�, in October 1979 Paraguay, Argentina, and Brazil signed the Itaip�-Corpus Accord, which set specific regulations for the projects and improved communication among the countries. Although planning was still not final in 1988, Corpus was expected to be comparable in size to Yacyret�. When operable, Corpus would raise Paraguay's electricity output to an estimated 300 times its domestic demand. Beyond Corpus, Argentina and Paraguay also planned several smaller hydroelectric power plants downstream from Yacyret�, including Itat�-It�-Cor� and others. Future hydroelectric development along the river would continue to be coordinated by the Combined Technical Commission for the Development of the R�o Paran�.

Paraguay

Paraguay - Oil

Paraguay imported 100 percent of its oil in the late 1980s. Oil was imported primarily from Algeria because Paraguay's only petroleum refinery was designed for "Saharan blend" oil. The refinery, located at Villa Elisa, had a 7,500-barrels-per- day capacity, very small by Latin American standards. Paraguay's refinery capability was limited in terms of products, causing the country to import high-priced derivatives such as aviation fuel, premium gasoline, and asphalt. The price of oil was high because of the complex transportation required through Argentina on the R�o Paran� and R�o Paraguay. Paraguayan Petroleum (Petr�leos Paraguayos--Petropar)--owned 60 percent by the government and 40 percent by the private firm Paraguayan Refinery (Refiner�a Paraguaya)--imported all of the country's petroleum. Petropar was generally viewed as a profitable and well-managed enterprise. Esso Standard (Exxon), Paraguay Shell, and the Paraguayan company Copetrol marketed all petroleum products to the public with the exception of diesel and fuel oil, which were sold by Petropar.

Paraguay became increasingly concerned with its oil dependence following the quadrupling of world oil prices in the autumn of 1973. Although there was enough growth in other sectors of the economy to offset the negative consequences, the crisis nonetheless rekindled the interest of policy makers in oil exploration. As a result, the legislature passed sweeping new regulations to promote oil exploration by multinational companies. Despite having some of the most liberal petroleum legislation in the world, Paraguay's limited prospects and severe lack of infrastructure in the Chaco dissuaded most companies from drilling, however. Indeed, from 1944 to 1986 only forty-three wells had been drilled in Paraguay.

Foreign firms conducted petroleum exploration under the supervision of the Ministry of Public Works and Communications. Most oil exploration in the 1980s took place in Carandayty Basin on Paraguay's western border with Bolivia and in the Curupaity, Pirity, and Pilcomayo basins bordering Argentina. Active exploration in Bolivia near its border with Paraguay and oil discoveries in Argentina only fifteen kilometers from Paraguay's border heightened expectations of oil discoveries in Paraguay. Because of Paraguay's complicated geology, however, oil exploration was more difficult than originally anticipated and required sophisticated Brazilian technology. With or without oil discoveries, the government was contemplating the construction of an oil pipeline to Brazilian ports to import oil, or, in the case of a large oil discovery, to transport oil exports.

Paraguay

Paraguay - INDUSTRY

Industry, especially the manufacturing sector, historically was linked to agricultural processing until the 1970s, when the construction of hydroelectric plants and new industrial incentives began to broaden the industrial base. Industry was composed principally of manufacturing and construction. Paraguay had no real mining sector, but the manufacture of construction materials included limited mining activity. Manufacturing and construction in the economy in the late 1980s remained dependent on developments in other sectors, such as agriculture and energy, for their growth. Although industry was becoming more visible in Paraguay in the 1980s, industry's share of GDP actually declined in the 1970s and 1980s because of more rapid growth in agriculture.

Manufacturing

Manufacturing accounted for 16.3 percent of GDP in 1986 and employed roughly 13 percent of the labor force, making Paraguay one of the least industrialized nations in Latin America. Manufactured exports, by most definitions, accounted for less than 5 percent of total exports; when semiprocessed agricultural products were included, however, that figure reached 77 percent. The growth of the country's manufacturing industries was hampered by numerous structural obstacles. These included a small internal market, limited physical infrastructure, costly access to seaports, a historical lack of energy production, and the openness of Paraguay's economy to the more industrialized economies of Brazil and Argentina. Another significant factor was the ubiquity and profitability of smuggling operations, which encouraged importing and reexporting rather than production.

Paraguay's earliest manufacturing industries processed hides and leather from its abundant cattle and tannin from quebracho trees. Small-scale manufacturing, especially textiles, flourished under the Francia dictatorship, when the nation's borders were closed. The War of the Triple Alliance, however, devastated what little industry and infrastructure the country had, causing Paraguay to enter the twentieth century as an almost completely agricultural society. Land sales to foreigners stimulated increased agricultural processing in the early twentieth century, including meat packing and the processing of flour, oilseeds, sugar, beer, and pectin extract. After the early 1900s, small-scale manufacturing in all subsectors grew at a slow, but steady pace, with some of the fastest growth occurring because of the shortages during World War II.

The government's role in promoting industry increased in the postwar era, and in 1955 the Stroessner government undertook the country's first industrial census. Over the next twenty years, the government enacted a number of industrial incentive measures, the most important of which was Law 550. Law 550 promoted exportoriented industries or those that would save foreign exchange. It also provided liberal fiscal incentives for companies to develop specific areas of the country, especially the departments of Alto Paraguay, Nueva Asunci�n, Chaco, and Boquer�n. Incentives for business were related mostly to import-duty exemptions, but they included a variety of tax breaks and placed no restrictions on foreign ownership. Approximately one-fourth of all new manufacturing investment from 1975 to 1985 was registered under Law 550. Most foreign investments originated from Brazil, West Germany, the United States, Portugal, and Argentina in that order of importance. The dynamic processes of agricultural colonization and hydroelectric development, combined with such attractive industrial incentives, caused manufacturing to grow at an unprecedented rate in the late 1970s and early 1980s.

Unlike many other Latin American governments, which followed an import-substitution industrial policy, the Paraguayan government had played a minimalist role in the economy through most of the postwar era, curtailing import tariffs and maintaining a realistic exchange rate. In the 1980s, however, Paraguay's exchange rate became overvalued and several state-owned heavy industry plants became operational.

In the late 1980s, the major subsectors of manufacturing were food, beverages, and tobacco; textiles, clothing, leather, and shoes; wood and related products; and chemicals, petroleum, and plastics. Despite some increases in heavy industry in the economy during the 1970s and 1980s, Paraguayan industry was generally small-scale. Manufacturing production remained focused on consumer goods, and capital goods comprised under 5 percent of industrial output. In fact, in the 1980s Paraguay did not contain even one of Latin America's 1,000 largest companies, at least some of which were found in most other countries in the region. Virtually every subsector of Paraguay's manufacturing was characterized by numerous small- to medium-sized firms and a few large firms, which often were foreign owned. Most companies operated well below their capacity.

The food, beverages, and tobacco subsector has been the core manufacturing activity throughout Paraguay's history. In the late 1980s, this subsector continued to dominate, accounting for about 45 percent of industrial activity, depending on agricultural output in a given year. Agro-processing involved a large number of small, inefficient, and often family-run firms as well as a small number of large, efficient, and usually foreign-owned firms. The larger firms produced only the most lucrative items, such as oilseeds, meats, and various beverages, often for export. Some of the most common small-scale producers manufactured milled items, baked goods, sugar and molasses, dairy products, candy, manioc flour, vinegar, coffee, and tobacco. Along with raw agricultural produce, processed and semiprocessed food generated nearly all of the country's exports in the late 1980s. But, as with other manufacturing subsectors, the profitability of the food subsector often was impaired by contraband items from Brazil and Argentina, such as flour, meat, or dairy products. Paraguayan goods crossed borders unofficially, as well, thus lowering official exports.

The second most important manufacturing activity also relied on agricultural inputs for its base. Utilizing Paraguay's rich endowment of hardwood trees, the wood subsector represented about 15 percent of all industrial activity and contributed over 8 percent of exports in the 1980s. The most voluminous wood export was lumber, which was produced by hundreds of small sawmills throughout the central and eastern border regions. In addition to saw wood, mills also produced a variety of milled wood, plywood, chipboard, and parquet flooring. Although the country cut and processed only a fraction of its hundreds of species, Paraguayan wood was known for its quality. The country also contained several small paper companies and one large paper and cardboard factory located at Villeta.

Textiles, clothing, leather, and shoes comprised the third largest manufacturing subsector. These industries were traditional, grounded in the nation's abundance of inputs like cotton fibers, cattle hides, and tannin extract. The subsector accounted for about 10 percent of all manufacturing. The textile industry performed spinning, weaving, and dyeing operations and produced finished fabrics that amounted to over 100 million tons in 1986. Most fabrics were derived from cotton fibers, but a growing number of synthetic and wool fibers also were produced. Textile production provided inputs to approximately sixty clothing firms that operated under capacity and were generally inefficient. As with so many other manufacturers, clothing companies met stiff competition from widespread unregistered imports, which often originated in Asia and typically entered across the Brazilian border. The leather industry was characterized by 200 or so small tanneries dotting the Paraguayan countryside. In addition, many medium and two large tanneries fashioned leather goods. The leather industry operated at only about 40 percent of capacity, however. The shoe industry comprised a few hundred small workshops and a dozen or so mediumsized firms, which produced some 5 million pairs of leather and synthetic shoes a year.

The processing of petroleum, chemicals, and plastics repreated an increasing activity. In the late 1980s, this subsector represented less than 5 percent of industrial activity, but its share of manufacturing output was expanding because of the growth of heavy industry in Paraguay, especially industry related to the energy sector. The country also produced fertilizers, industrial gases, tanning chemicals, varnishes, and detergents. In 1987 a group of Japanese investors was considering the construction of a new fertilizer plant with a 70,000-ton capacity per year. Since the early 1980s, ethanol was being produced in large quantities, and the government was considering producing methanol. Also processed were paints, soaps, candles, perfumes, and pharmaceuticals. One of Paraguay's fastest growing industries was the new, relatively modern plastics subsector, which supplied a wide variety of goods to the local market.

Paraguay