Paraguay’s Presidential Election to Spotlight China, Corruption: What to Watch

Ken Parks
·4 min read
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(Bloomberg) -- Paraguayan voters head to the polls on Sunday in general elections that will serve as fresh litmus tests for China’s growing influence in Latin America and an anti-incumbent wave sweeping the region.

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Opposition leader and presidential candidate Efrain Alegre has said Paraguay is missing opportunities by maintaining its relationship with Taiwan. His main rival, Santiago Pena, a former finance minister from the ruling Colorado Party, vows to preserve Taipei’s last South American alliance, which dates from 1957.

The backdrop to this is that Paraguay — a landlocked nation about the size of California in the heart of South America — is a major food and renewable energy exporter. Still, its economic growth has averaged about 1.2% in the last five years, and about a quarter of its 7.5 million people live in poverty.

Read more: Why Paraguay Vote Matters to US-China Rivalry: Balance of Power

Public opinion surveys show a tight race between Alegre and Pena, both of whom enjoy hefty leads over a field of about 10 other contenders.

Diana Alvarez hopes an opposition victory would lead to more spending on public health care and policing.

“I want people to remember when they vote what happened under Mario,” she said in reference to incumbent President Mario Abdo Benitez, whose administration saw widespread protests over its management of the Covid-19 pandemic and a shortage of drugs and vaccines.“People died because they didn’t have access to health care,” she said.

Corruption and health care are hot button issues for Lorena Lesme, a 36-year-old dentist, who thinks Pena is the best qualified to run the country.

“His background and experience convince me more,” she said after casting her ballot in the bedroom city of Lambare south of the capital.

Here are more details on the main issues:

Taiwan

Paraguay can’t directly sell its soy and beef exports to China, as it’s one of Taiwan’s few remaining diplomatic allies. That relationship is now in play as a coalition of conservatives and leftists tries to unseat the scandal-plagued Colorado Party that has lost presidential elections only once since the end of the Alfredo Stroessner dictatorship in 1989.

“The loss of Paraguay would be symbolic and could also set off a chain reaction where Taiwan’s remaining partners in the region cut ties,” said Benjamin Gedan, director of the Wilson Center’s Latin America program.

The eventual election winner will probably face pressure from business groups to, at the very least, negotiate better terms of trade and investment with Taiwan, said Paraguay foreign policy analyst Julieta Heduvan.

“There is discontent across the entire political spectrum with what Taiwan offers Paraguay,” she said.

Corruption

Corruption is a key election issue after the US government sanctioned two Colorado Party leaders, Vice President Hugo Velazquez and ex-President Horacio Cartes, for alleged graft and ties to terrorism.

Alegre describes his coalition as an agent of change in a country he says is losing $2 billion a year to graft. The 60-year-old career politician has pledged to clean up a judiciary widely viewed as corrupt and win Paraguay investment-grade status, thus unleashing billions of dollars in new projects, he says.

The US sanctions and a spat with outgoing President Mario Abdo Benitez have blunted efforts by Pena, 44, to convince voters to back a third consecutive Colorado government. However, the party’s broad voter base and entrenched presence make it a force to be reckoned with.

Economy and Taxes

Alegre and Pena pledge to protect economic stability and spend more on social services like education and health care without touching low tax rates.

Alegre vows to slash wasteful spending and claw back money lost to graft to fund his programs. Pena wants to collect more taxes by boosting growth.

“Despite still high uncertainty on the election outcomes, we see no major economic policy discontinuity risks in a scenario in which either Pena or Alegre take office, and maintain a constructive outlook on the country,” JPMorgan Chase & Co analysts wrote in a report.

Low taxes and expensive campaign promises could pressure the next president to win concessions from Brazil early on when both countries renegotiate power distribution and tariffs at the massive Itaipu hydroelectric dam.

“An agreement is massively important for Paraguay’s budget and its capacity to invest in critical infrastructure and fight poverty,” Gedan said.

(Updates with comments from voters in paragraphs 5 to 7)

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