Event

Horacio Cartes of the Colorado Party (PC) is Paraguay’s new president-elect. This means that after the 2008 elections marked the end of six decades straight of PC rule, the conservatives now return to power. Securing 45.8% of the vote on 21 April, Cartes clearly outperformed Efraín Alegre of the incumbent Authentic Radical Liberal Party (PLRA), who achieved 36.9% support. Yet despite this larger-than-expected margin, Cartes is hardly facing an easy term after he takes office on 15 August. On a national level, the polarized political situation means that the PC will struggle to push reforms aimed at tackling the high levels of corruption, (extreme) poverty and inequality (not in the least in terms of land ownership). Lack of progress in these fields could, in turn, aggravate the security situation and increase the threat of attacks by the “Ejército del Pueblo Paraguayo” (EPP) insurgent group. One facilitating factor for Cartes will be solid GDP growth, projected at 11% for 2013 (mainly driven by a good agricultural harvest). On an international level, Paraguay has been suspended from the Mercosur trade bloc and the Union of South American Nations (UNASUR) since the highly controversial impeachment in June 2012 of the previous elected president, the left-of-centre Fernando Lugo, following a deadly confrontation between police and landless farmers. It is anticipated though, that the democratic legitimacy of the president-elect will clear the path towards normalization of international relations and undoing the suspensions.

Impact on country risk

The generally accepted democratic legitimacy of the Paraguayan leadership is commendable. But reservations remain as to whether Cartes will manage to resolve the social problems at hand, especially those related to the distribution of land. Furthermore, the return to power of the PC, which is regarded as business-friendly, has no immediate impact on the financial and economic fundamentals of the country. So as for now, political uncertainty remains moderately high and there is no reason for ONDD to upgrade its risk assessment.

Analyst: Sebastian Vanderlinden, s.vanderlinden@credendogroup.com