Duarte admits that he is taking over a country that is bankrupt: morally as well as economically. He argued that the position is not utterly hopeless, though he did admit that in large tracts of the country the law of the jungle now prevails as the government has failed. He admitted that it was often unclear whether the courts existed to punish criminals or were in league with the criminals.
The new president's economic priority is to restart the public works programme, even though the government is bust. His solution is to generate funds by rushing through an emergency fiscal reform. He wants to extend value-added tax, cut income taxes and close tax loopholes.
The government's financial position is desperate. It takes office with an inheritance of defaulted debts of US$34m. The position could have been worse. The outgoing government was able to cobble together the US$5.8m it needed to pay interest on a loan from Taiwan by issuing short-term government bonds to the state electricity company, which had some cash. If this payment had not been made, the Taiwanese government would have been entitled to swipe US$400m (the value of the original loan) from the country's foreign currency reserves of US$780m.
The main sources of cash in the economy are the two so-called binational hydroelectricity companies, Itaipú and Yacyretá, which export electricity to Brazil and Argentina, respectively. The government's next major financial challenge is to scrape together the US$2.7m it owes the World Bank in interest. The finance ministry says that it will use the last cash reserves of Itaipú (US$3m) to make this payment. Worryingly, another US$203m in debt payments fall due before the end of the year, though, luckily for the government, the peak month for payments is not until December.
Duarte is fashionably critical of neoliberalism. He argued that his predecessors increased the country's foreign debt by 40%, to US$2.8bn, but allowed the money to be squandered in financial speculation. He claimed that nothing was done for the 250,000 small (ie, working fewer than 20 hectares) farmers. These farmers, he says, will be his government's priority.
Duarte, technically a Colorado, has picked a mostly technocratic cabinet, although members of the Colorado party, which has ruled the country in one way or another since 1946, hold the key positions. Dionisio Borda is the most prominent non-Colorado, as the finance minister. Another non-Colorado is Ernst Borgen, an agribusiness specialist and a Mennonite, (proverbially the most successful of the migrants to Paraguay): he is trade and industry minister. He is famous for having started as a cleaner at Record Electric and ending up as managing director.
Colorados, however, hold the two key ministries. Roberto González is interior minister and José Alberto Alderete gets the public works portfolio.
Duarte's big problem is that his government does not command a majority in congress. The Colorados have 37 of the 80 seats in the lower chamber and depend on supporters of a former coupster, Lino Oviedo (whose party has three seats), and a defector from the Partido Liberal Radical Auténtico, for a majority. Duarte has antagonised some Colorados by appointing a businessman, Gustavo Volpe, to shake up the customs service, one of the most corrupt agencies in the country.
* Paraguay's exports grew 38% year-on-year in the first half of 2003, to US$660m. Soya and cotton fibre prices were 24% and 39% higher in the first half of this year than in the same period of 2002. Soya exports doubled in value to US$385m.The first half export performance would have been even stronger were it not for another outbreak of foot-and-mouth disease at the beginning of the year. This cut the value of Paraguay's meat exports - the third-biggest source of income - by half.
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