APPROVED FDFE RELEASE OATE:
DIRECTORATE OF INTELLIGENCE
Sinco gaining independence from Spain, Paraguay has known only authoritarian rule. Transfer of power from one of the two principal parties to the other has beenonly by means of plotting and force.
The government of President Alfredo Stroes-sner, which came to powerilitary coupas given Paraguay its longest period of stability in this century. Stroes-sner has retained control by shrewdlythe traditional power bases of thethe police, and the other security forces with the political organization of the majority Colorado Party, and by ruthlessly crushing any attempts by discontented exiles to foment By maintaining political order in this forceful mannor, Stroessnar created conditions in which he couldrogram ofreconstruction and development, andgradual political liberalisation.
A decisive and disciplined politician. President Stroessnex, who will visitin mid-March, has developed into aand pragmatic national leader whoseof peace, order, and oconomic development has earnedopularity seldom achieved by an authoritarian ruler. 3 he has permitted an opposition party to play arole in the legislature, and has granted greater freedom to the press. activity is held In check by the fact that the Stroessnar regime can, If it wants, return to absolutism at any moment. The olections inowever, were tho mostin Paraguayan history. Throo opposition parties were allowed to campaign openly for tho presidency as well as for congressional
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nd-locked Paraguay ha* playedinor role in Utu> AmericanAlmost uhrgeu Cahfornu, it ranks nlnih among the Latin American republics inis one ofihc tcast2acially, culturally, and socially,probably the most homogeneous people in latin America. The Spaniards who settledinh. century Intermarried with Dm Guaxani Indians and the resultingcommute*ercent of the present population. The upper and middle classesn?wnflicts. Land" reform is not an issue. Land use.snd-most peasants have access to more land than they can culti-
vate with their primitive tools.
Tha Political Situation
President Stroessnar began his rule in4 by firaly subduing all forces of opposition. Hetate of siege mora or less permanently (renewing it everyays in compliance with provisions ofhile his policepotentially troublusoDo political opponents and suppressed student demonstrations. Those repressive measures soon forced most of his political enemies into exile. hasumber of small-scale guerrilla incursions and has foiled several attempted coups. There have been no significant attempts to overthrow him Despite some continued imprisonment of politicalthe regime has become more tolerant of opposition elements in recant years.
Autocrat though he may be, Stroessner operates withauthority. 0 confirmed theas the most powerful(actor. Ho could, for example, appoint and romovo all nonjudicial officials, docroe laws whan the Congress was not in session, andtate of siogo, during which he could place potentially subversive porsons under arrest. The slightly more liberal constitution adopted in7 in no way dlnlnishod these powers. Indeed, thoreason for its adoption was to nako it possible forwho was ineligible forunder the oldto run again8
In recent years Stroessnar has gradually loosened controls over political activity and the press. e hasthe developmentore representative political system by granting legalto three oppositionand allowing them toin national elections. During the constitutionallaBt August, the newly recognized Radical Liberal Party wau permitted to participate openly in the election ofto the convention, anddelegates were allowed to debate freely on proposedprovisions.
In last month's presidential election, for the first time, throo opposition partiesfor tho presidency as well as for congressional posts. Although there were somecomplaints from thoregarding the way in which the campaign and the elections wero regulated by the majority Colorado Party, the opposition has clearly decided that it Is preferable to co-exist with Stroessner than to remain on the side lines. All presidentialfor the Febrerista,and Radical Liberalissued statements saying tha electiontep toward democracy.
Although Stroessner hat been ruling Paraguay for almostears, there are no indications that his popularity is declining. In fact, the recent electionsthat Stroessner has gained popularity with the opposition
and couldompletely frco electionomfortable Margin. Even former exiles such as Carlos Pastore and Colonel Alfredo Ramos who not long ago wero attempting to overthrow Strocssr.er, now seem to accept the present political situation in Paraguay.
In apite of some opposition among tho military and Colorado
stalwarts to politicalthe prospects for ita continuance appoor favorable as long as Stroessner retains power. The younger members of allseem interested inthe new political atmosphere, and during the recent campaign several young Coloradosesire for completely clean elections.
to some qualified observers, events following his death will run through two phases In the first, the military would restore order and theformalities would be con-pllod with inuccessor. This man would govern for aof time depending upon his ability, but in timo would be overthrownoup. The second phase would be one of confusion contperable to the period6 This phase would probably end only when someone
of approximately General Stroea-sner'a caliber rose to the top. The contenders inower struggle would almost certainly be Colorado*, since that party has boon in power6 and its members occupy almost allofficial positions and control the army.
Foreign Affairs Under Stroessner
In spite of its isolatedParaguay is becoming more active in inter-American Traditional foreignconcentrated primarily on achieving as much freedom aafrom interference bypowerful neighbor,chiefly by playing off Argentina against Brazil, in recent years, however, Paraguay has become somewhat leason Argentina, partlyesult of the influx of foreign loans and investments, ew trade route to the Brazilian seacoast, andmall merchant fleet. Moreover, Stroessner has fostered the improvement ofrelations by ooeting with the presidents ofcountrlea.
Initially preoccupied with domestic affairs, in5 Stroessner decided to support the United States during theRepublic crisis byontingent for thePeace Force (IAPF). ills interest in foreign contacts was further stimulated by his meeting with President Johnson during last year's summit conference at Punta del Eoto, Uruguay.
Paraguay's participation in international affairs has also increased. It was elected to the UN Security Councilast year, Asuncion hostedinter-American conferences.
Within the Organization of American States araguayirm anti-Communist and anti-Castro stand. Whilerime movor or influentialin the OAS, Paraguay generally supports tho United states,on matters concerning hemispheric security, and favors the continuance of the IAPF.
Although Stroessner opposes the erection of tariff and trade barriers to Paraguayan exports by other Latin American countries, he does not appear to favor the establishmentatin Azwrican corr-cn ember of the Latin American Free Trade Association, Paraguay has obtained major tariff concessions from the wealthier members on its exports of raw materials but frequently has failed to obtain concessions for secondary or semifinished products.
Recent Economic Developments
In recent years, Paraguay hasespectable of price stability andgrowth that has been an important factor in improving social stability. troessneream from the International Monetary Fund to assist him In alleviating Paraguay's most serious economic problems. Sinceumber of drastic reforms have improved
governmental finances, increased production and exporta, andan economic expansion that has resulted in staadyin the levels of social and economic well boing.
Parnguay, however, is still one of the least devolopedin Latin America. Itagrowth rate in gross domestic product1 has beenercent but has boon accompaniedopulation increaseercent per year. During this period, prices have been rela-
tively stable, increasing at an annual rate of lessercent. The rate of exchange, satuarantee to is one of the moat stable in Latin America.
Rigorously maintainedand wage policies have virtually eliminated the once-serious inflation and have kept budget deficitsorkable level.
Major deterrents to rapid economic development, however, still remain. Economic and social progress has been retarded by geographic isolation and poorly devoloped transportation Host foreign trade must follow tho expensive route down the Paraguay-Parana-Plate river system to Buenos Aires.
The sparse population and laok of investment limitsexploitation of forests, pastures, and farm lands. to the expansion oftho virtual absonoe of known mineral resources, and tho small sizo of the domestic market have discouraged foreignand have prevented theof much Industry other than the processing of agricultural products.
The nepotism, contraband, and shortage of trained manpowor that continue to characterize the government provide less than an idealfor formulating, financing, and executing major development programs. Nevertheless,iserious effort to
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the economic and social infrastructure. Improve public finances through fiscal and tax reform, and encourage private investment. Incentive laws for foreign investment, alreadyare in tho procoss of being improved.
Although public foreign debt
has increased from only SB million
the repayment schedule ia such
that the debt service burden is
moderate. Amortization payments
averageercent of foreign
exchange earnings on current
Recently thoar-reaching program of hydroelectric development. One of tho most important sources of power will be the Aaarayiles oast of Asuncion, which will go into operation this year. Its Initial capacity0 kilowatts Is expected to doubleew years. Improved hydroelectric capacity already has permitted tho establishment of two milk pastourization plants and five rofrigeration plants for the cattle slaughterhouses. The further development ofrelated industries resulting from now powerwill provide an improved basis for sustained economic growth. arge extent,long-term economicdepend upon its ability to make its agriculturalmore efficient and toits raw material into more advanced products acceptable in world markets.
?ha Threat of Subvention
In spite of repeated efforts by Communist and non-Communist exiles, there has been noguerrilla activity in Paraguay. There does not appear to be any significant immediate threat of successful subversion against the Stroessner regime.
Probably the strongest exile group is the Popular Coloradoissident wing of the ruling Colorado Party. Its leading figure is Epifanio Kendezormer Asuncion police chief and head of the Central Bank, now living in Uruguay.Mendez Pleltas frequently claims to have infiltrated Stroos-snor's army and government, his few followers are carefully
watched by the Paraguayan security forces.
The Paraguayan Communists are of minor significance. Living mainly in exile, divided into three rival groups, and sternly repressed within Paraguay, they do noterious threat to the presont government. Bommunist front group of diverse elements callod the United Front for National Liberation attempted to unify the various exile groups toguerrilla activity, but it has collapsed. Dissidentand Pebreristas have been equally unable tonited front in exile.
It is most unlikely that Stroessnar will be overthrown in the foreseeable future. Total
security forces, tha police,0 and are loyal to the regime. The army is the most effective and could cope with major internal disturbances, stroessner serves actively as commander in chief of the armed forces.
President Stroessner has brought order, social andprogress, and somaliberalization to Paraguay. The prospects are that thewill continue to devolop along those lines as long as Stroessner remains in power*
Individual setbacks mayfrom time to time. elements within thoand the Colorado Partyto oppose the idea ofcoexistence, but some younger Colorados argue in favoress authoritarian styleolitical detente with the If opposition parties continue to act responsibly, Stroessner will probably grant them more freedom.
It appears likely that Stroessner will begin to reshape his cabinet and adminietration by placing younger, moreoriontod party men ir. key positions. This would quell the rising discontent among Colorado atudont leaders and young activists with the old guard leadership of the Colorado Party.
Barring unforeseen reversals for Paraguayan exports, limited economic growth can also beto continue. Although the primary sector, agriculture, remains relatively stagnant, hydroelectric projects along with increased foreignare contributing to the growth of infrastructure.
The chief threat tois thatin8 will begin another five-year termresident elected with broad popularbe removed from the scene by illness, accident, or assassination.
SVrs ICIOriginal document.