PARAGUAY: POLITICAL TURMOIL CONTINUES.

In mid-July, Paraguay was hit with another wave of protests against the policies of President Luis Gonzalez Macchi. The protests, the worst in three years, left two dead and scores wounded. In response, the president declared a state of emergency, but vowed he would not step down.

The protests to demand that Gonzalez Macchi resign began July 15 in several cities throughout the country. Police used rubber bullets, tear gas, and water cannons to break up the protests in the capital of Asuncion, in Encarnacion, and in Ciudad del Este, where two people died. More than 300 people were detained in the violent anti-government protests.

On July 16, Gonzalez Macchi declared a state of emergency in an effort to restore order. The presidential decree suspended some civil rights, allowing the government to ban demonstrations and the military to suppress them by force.

Some Paraguayans questioned the justification for the measures. Jose Ayala, a constitutional expert, said the emergency decree was excessive because "there's no imminent danger to constitutional rule."

On July 17, Gonzalez Macchi lifted the state of emergency, saying order had been restored. He also ordered 297 people released from jail.

"Nothing good can come from violence," the president said, calling the protests a frustrated coup attempt.

The president defiantly rejected calls that he step down. "Let it be understood once and for all that I will only hand over power to whoever wins democratic elections in 2003," the president said in the televised address. "I will never allow seditious groups who try to change the democratic process through violence to take power."

Government accuses ex-army chief of instigating riots

The government blamed the protests on former army chief Lino Oviedo, who is accused of planning the assassination of Vice President Luis Maria Argana in March 1999 (see NotiSur, 1999-04-09). He has been in exile in Brazil since 2000.

On July 13, leaders of Oviedo's Union Nacional de Ciudadanos Eticos (UNACE) rejected the accusation that it was involved in destabilization plans against the government.

"UNACE is dedicated to legal endeavors related to [obtaining] recognition [as a party], like the massive membership drive," said Deputy Luis Villamayor, a UNACE coordinator.

UNACE is trying to form a separate party. It has been a faction of the governing Asociacion Nacional Republicana (ANR, Partido Colorado), in power since 1947. Oviedo has said he will return from exile to run for president in 2003.

On July 16, the Brazilian news agency Estado reported that the Brazilian government was studying how to encourage Oviedo to leave the country to avoid problems with Paraguay.

That night, Justice Minister Paulo de Tarso Ribeiro and Foreign Relations Minister Celso Lafer met to evaluate the complaints about Oviedo sent to Brazil by the Paraguayan government.

Oviedo's exile status in Brazil prohibits him from engaging in any political acts that could incite demonstrations or violence under the threat of being expelled from the country, the Justice Ministry said.

Paraguay's Ambassador to Brazil Luis Gonzalez Arias said his government could use Oviedo's actions to again request his extradition (see NotiSur, 2001-12-07). He said the government had tapes of phone conversations in which Oviedo talked about promoting the protests against the Gonzalez Macchi government.

Video tapes obtained by Brazil's Globo media group show Oviedo hosting a rally for some 2,000 Paraguayans in June in a Brazilian town just inside the border with Paraguay during which he denounced the government of Gonzalez Macchi.

Vice president accused of cooperating with Oviedo

During this latest round of protests, Vice President Julio Cesar Franco, leader of the opposition Partido Liberal Radical Autentico (PLRA) and widely believed to be an ally of Oviedo, joined calls by top politicians and protesters for Gonzalez Macchi to step down.

"What is clear is that Franco is nothing more than a servant of a fugitive from the law who wants to use a sector of the PLRA and other groups to satisfy his personal ambition," said Partido Colorado leader Nicanor Duarte.

Various analysts have been pointing out the convergence of Oviedista objectives with those of the PLRA opposition to force Gonzalez Macchi to leave office. The association between those groups is a key factor in understanding the proliferation of protests throughout the country.

While the motives may include a concern for the deteriorating conditions of the Paraguayan people, all political factions in Paraguay see the state apparatus as a sure way to access the cash cow that state enterprises have always represented.

Scandals reduce president's already slim support

The president has been besieged with serious social and economic problems, which have been exacerbated by corruption scandals. Opposition to neoliberal economic policies, which have failed to raise the standard of living and have seemed to only increase the level of poverty, forced Gonzalez Macchi to scrap a privatization drive, which in turn complicated talks for a standby loan from the International Monetary Fund (IMF) to offset growing regional turmoil (see NotiSur, 2002-06-14).

On June 19, the government admitted it was having difficulty paying government employees their salaries and paying pensioners. Government officials were trying to obtain a US$24 million advance on royalties from the binational Itaipu dam, on the border with Brazil, part of which would be applied to the foreign debt service.

On June 24, presidential spokesperson Jaime Bestard said the president is convinced that all sectors must join forces to overcome the nation's problems. He said the situation in Paraguay is complicated, "more so given that no one expected the prolongation of the Argentine crisis or the problems now hitting Brazil, which have had repercussions in Uruguay."

Gonzalez Macchi's approval ratings have plummeted as the economic crisis has continued. Adding to the crisis, the value of the Paraguayan currency, the guarani, has weakened sharply against the US dollar amid concerns that the country's banking system is on the verge of collapse.

On June 24, the Banco Central de Paraguay (BCP) ordered the intervention of Banco Aleman, which is part of the Uruguayan-Argentine Grupo Velox. A few days later, government officials said they were investigating the possibility that directors of Banco Aleman had transferred between US$15 million and US$22 million to branches outside the country.

In late June, the Paraguayan Congress passed a law authorizing the use of state funds to return deposits to clients of Banco Aleman. The law guarantees, among other things, the return of the equivalent of 75 minimum salaries (about US$10,000) rather than the 50 salaries stipulated in the present law.

The government said on July 11 that it would ask the US to cooperate in investigating the irregularities in Banco Aleman. "We need more information about the operations made with funds from Banco Aleman in banks in New York," said BCP president Raul Vera Bogado.

Meanwhile, a judge in Asuncion ordered the arrest of two Banco Aleman directors, Juan and Jose Peirano, who are Uruguayan citizens. Other directors accused the two of having transferred at least US$20 million to other banks controlled by Grupo Velox. The Peirano brothers have fled Paraguay.

Public anger has increased as new corruption scandals have involved the president. Recently, authorities discovered what appears to be an illegal diversion of thousands of dollars to accounts in the Cayman Islands belonging to Gonzalez Macchi's wife and others close to the president including the family of slain vice president Argana.

The Contraloria General de la Republica is investigating allegations of the misuse of funds from Itaipu dam and the Argentine-Paraguayan hydroelectric dam Yacyreta.

Gonzalez Macchi has been able to maintain a fictitious majority in Congress because his supporters used procedural tactics to prevent elected officials from other factions of the Partido Colorado, including those aligned with Oviedo, from taking their seats in the legislature.

Thus a "majority" has blocked attempts to impeach Gonzalez Macchi on various corruption charges, including the diversion of US$16 million from the Banco Central to an account in Citibank in New York and the purchase of an armored BMW, bought with government funds for the president, which turned out to be stolen (see NotiSur, 2001-05-11).

"We are in a state of economic, political, and social collapse," said PLRA Sen. Benitez Florentin.

Political observers see further violence as likely in the efforts to pressure Gonzalez Macchi to leave office.

"In Paraguay we have endemic political violence that is chronic and will keep repeating itself," said Bernardino Cano Radil, a political analyst. "The violence stifles the economy, which makes the violence worse. It's like the chicken and the egg and we can't get out of it." [Sources: Clarin (Argentina), Inter Press Service, La Opinion (Los Angeles), 07/16/02; Associated Press, 07/15-17/02; Reuters, 07/15/02, 07/17/02; BBC News, 07/16/02, 07/18/02; Notimex, 06/19/02, 06/24/02, 06/27/02, 07/23/02; Spanish news service EFE, 06/28/02, 06/29/02, 07/11/02, 07/15/02, 07/16/02, 07/23/02]