Brazil & Southern Cone - November 2013 (ISSN 1741-4431)

President Horacio Cartes is determined to see through his plans to boost economic development. After the laboured political victory over the new fiscal responsibility law [RBS-13-10], he wasted no time in sending congress a new Public-Private Partnership (PPP) framework bill, despite loud resistance on the streets. While the new government’s commitment to economic reform is commendable, social and political discontent so early on in its term should be reason for concern.

Just hours after the fiscal responsibility law was approved on 26 September, Cartes urged congress to approve the ‘Ley de Alianza-Público Privada (APP), a Public-Private Partnership (PPP) legal framework bill. The president argues that the initiative is necessary to encourage investment in Paraguay’s woefully underdeveloped infrastructure and improve services for the general population.

The APP will for the first time allow private firms to play a more active role in key sectors that have long been managed exclusively by the State, such as the energy and telecoms sectors. Inevitably, that led to immediate suspicion in some quarters that the initiative could pave the way for a large-scale privatisation process. Unions from several state-owned enterprises, including the large telecoms (Copaco) and electricity (Ande) companies, immediately expressed their opposition, citing fears about mass layoffs. The president’s reassurances that he had no such plans and that the APP would only be used as a tool to attract investment into new projects failed to convince. Led by the public sector workers’ union, various civil society groups demonstrated against the APP proposal as it wound its way through congress.

National protests

Despite the union-led demos, on 28 October the chamber of deputies gave final approval to the bill at the end of a five-hour extraordinary session. This ignited a string of angry protests across the country, with thousands of people taking to the streets, including in the capital Asunción and the country’s two other main cities, Ciudad del Este (CDE) and Encarnación. Demonstrators blockaded main access roads into these cities (including the ‘Puente de la Amistad’ bridge linking CDE to Foz do Iguaçu in Brazil), demanding that Cartes scrap the bill immediately. Anti-riot police were deployed to clear the protestors and there were some violent clashes.

Afterwards José Pineda, the head of the Ande workers’ union (Paraguay’s largest public sector union), said that the union’s 5,500 affiliates would continue to protest and warned President Cartes against promulgating the bill into law. However Cartes was undeterred. Celebrating the approval of the bill, he declared it would allow Paraguay to embark “on a course of progress for all”. He added that he would not be intimidated by the protests and would sanction the bill into law as soon as it landed on his desk. True to his word, he promulgated the APP into law on 4 November. Since then, the protests have died down, but the public sector unions will be very vigilant and react quickly to any move perceived a threat to their interests.

Political costs

As well as earning him a potentially formidable enemy in the form of the unions, President Cartes’ determination to push his agenda through congress has also come at other political costs. The passage of the fiscal responsibility law had already produced some friction between the executive and congress, with some members of the ruling Asociación Nacional Republicana-Partido Colorado (ANR-PC) complaining that the new law gave the executive additional powers over the national budget at the legislature’s expense. The bill was only approved in the senate after extensive negotiations between Cartes and Senator Luis Alberto Castiglioni, the ANR-PC bench leader.

Castiglioni, a former vice-president (2003-2007), has long harboured presidential ambitions and his Vanguardia Colorada ANR-PC current is a challenge to Cartes’s political leadership. Had Cartes failed to reach an agreement with Castiglioni, there might well have been a rebellion against him in congress led by the Castiglionistas. Cartes managed to avoid this by reaching a deal with Castiglioni, but tensions with some of the other ANR-PC party factions remain in the background.

Such tensions were also evident in the passage of the APP bill in the lower chamber. The bill required two lower chamber debates before final approval, after several ANR-PC deputies joined the opposition in expressing concern that the bill in its original form allowed the executive to enter into PPP contracts without the need to secure prior congressional approval. To some deputies, this looked like another attempt by the Cartes executive to give itself extraordinary powers. The bill finally was approved by the lower chamber after the ANR-PC bench leader, María Cristina Villalba (a staunch Cartista), cracked the whip and demanded that all ANR-PC deputies toe the party line.

ANR-PC split

However Villalba’s actions generated internal discontent. The ANR-PC bench deputy leader, Walter Harms, who belongs to the Frente para la Victoria faction, was very critical of Villalba’s performance. He said that rather than impose the government line on the bench, Villalba should have sought to promote dialogue with the executive in order to arrive at an agreed consensus.

The leader of the Frente para la Victoria faction is Javier Zacarías Irún, who ran against Cartes in the ANR-PC presidential primaries. Although the faction is nominally allied to Cartes within the party, Zacarías Irún (who currently acts as Cartes’s political advisor) has also sought to challenge Cartes’s leadership on more than one occasion.

The discontent within the Frente para la Victoria was such that Cartes deployed Vice-President Juan Afara to hold talks with the deputies in a bid to ease the tension. Afara’s efforts were unsuccessful.

On 30 October, Harms announced that the 12 Zacaríista deputies had decided to no longer recognise Villalba as bench leader, in effect creating a new independent bench. This split in the ANR-PC bench is significant, as it means that the Cartes administration can no longer automatically rely on the ANR-PC’s majority of 43 seats in the 80-seat lower chamber.

Future government proposals could be defeated in congress unless the executive secures the support of the dissident ANR-PC bench. This could severely complicate Cartes’s plans to introduce the final piece of his proposed economic reforms, a new investment security law, before the end of his first year in power.

Cartes’s reassurances

On 25 September President Cartes declared himself “a staunch enemy of the sale of State assets” and said that he would step down if “a single brick belonging to the State” was sold off under the APP. However, as Deputy Víctor Ríos of the main opposition Partido Liberal Radical Auténtico remarked during the APP debate in congress, questions remain as to whether the initiative will really result in benefits for the population or whether it will only provide the private sector with profit opportunities. “The bricks will belong to us, the profits will belong to others”, Ríos complained.

• Ambassador Duarte Frutos

In what looks like another attempt to appease competing ANR-PC factions, on 30 October President Cartes appointed former president Nicanor Duarte Frutos (2003-2008) as the new ambassador to Argentina. Duarte Frutos leads his own party faction and the government said it was a political appointment. The nomination encountered some resistance in the senate, where the opposition noted that, as per current law, only 50% of the country’s 43 ambassadors can be political appointees. However the majority ANR-PC bench backed Duarte Frutos’s designation. While Cartes has made at least three other political ambassadorial nominations, two career diplomats, Enrique Jara and Manuel María Cáceres, have been appointed the new ambassadors to Venezuela and Brazil.

• Acepar re-nationalised

On 7 November the government announced plans to re-nationalise the financially-troubled Aceros del Paraguay (Acepar) steelworks, privatised in 1997.