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Brazil and Paraguay: Powerful Neighbors, Complicated Relationships

June 29, 2012

by Lucy Jordan

Today’s Mercosur presidential meeting, in Mendoza, Argentina, is getting rather more international attention than it likely anticipated.  Previously expected to be little more than tussling over tariffs and a perfunctory discussion of fiscal woes in Europe, the focus now will be Fernando Lugo’s sudden removal from the Paraguayan presidency last Friday.

Although Paraguay claimed to adhere to due legislative process, Lugo’s vice president Federico Franco was sworn in mere hours later, causing international observers to ask if the swift removal had, in fact, been a bloodless coup. In Brazil, use of the neologism “golpeachment”—a combination of the Portuguese words for impeachment and coup—quickly began to spread through social networking sites.

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Condemnation came swiftly from Paraguay’s neighbors, leery of regional democratic instability following a series of bloody coups in the 1970s and 1980s. The Mercosur alliance—founding members being Argentina, Brazil, Paraguay, and Uruguay—suspended Paraguay from this week’s meetings.

Here in Brazil, the Foreign Ministry refused to confirm circulating reports that President Dilma Rousseff had drawn up “a menu of sanctions” against Franco’s government, and as the week wore on it looked increasingly likely that Brazil’s response would remain diplomatic. As Colin Snider, a professor of Latin American history, pointed out in an interview, Brazil’s ambassador to Paraguay was recalled “for consultations,” but not withdrawn permanently, “an important marker on the more moderate, ‘wait-and-see’ approach from Brazil.”

Mercosur member nations officially decided today not to impose economic sanctions on Paraguay; Argentine President Cristina Fernández de Kirchner (CFK) said that Mercosur doesn’t believe in sanctions because “they never hurt governments; they always hurt the people.” Brazilian Foreign Minister Antonio Patriota gave hints yesterday that he would advise against economic sanctions. 

Brazil’s stance at the Mercosur summit, as the largest economy in the trading bloc, was undoubtedly crucial in determining how things played out. As Michael Shifter, President of the Inter-American Dialogue said in an email earlier this week, “[Brazil] will necessarily shape the regional response.”

It seems likely that Brazil was the driving force behind a more moderate response. After all, Venezuela, although not a full member of the bloc, already imposed unilateral sanctions of its own, cutting off oil supplies to Paraguay, while CFK was among the first to condemn the ouster as a coup. Brazil, meanwhile, may wield the most power over Paraguay, but it also has the most at stake.

Not only is Brazil Paraguay’s largest trading partner, but it also controls the small, landlocked nation’s access to goods brought by sea and river. Brazil allows Paraguay access to its Paranaguá port and to the river through which Paraguay, with only a tiny manufacturing base, must import many consumer goods.

Of even greater significance is Brazil and Paraguay’s shared ownership of the huge Itaipú dam, straddling their border on the Paraná River.

At present Paraguay uses 10 percent of its 50-percent share of the power generated by the dam. It sells the rest back to Brazil, and this deal provides the Paraguayan government with some $360 million annually. In 1996, Brazil and Argentina averted a Paraguayan coup when Brazil threatened to stop these payments and close off transport conduits.

Brazil is also in the process of building a transmission line that will improve Paraguay’s capacity and allow it to access more electricity from the dam, which is needed to improve its industrial base. Halting construction, a political scientist friend told me, would be the “number-one” way Brazil could register its disapproval.

None of these potential threats will sit well with Paraguay. It is extremely thin-skinned to any hint of imperialism from Brazil or Argentina, and clearly still mindful of the bloody 19th-century Triple Alliance war that decimated up to 90 percent of Paraguay’s adult male population.

And Brazil, however powerful, is not invulnerable to Paraguayan retaliation. Trade flows both ways, and the electricity that fattens the Paraguayan coffers also supplies São Paulo state, Brazil’s industrial engine, with power. Paraguay meanwhile is an important market for Brazil. Its soy-dependent economy relies on Brazilian agribusiness imports such as diesel and fertilizer. Petrobras, Brazil’s state-owned energy company, accounts for 21 percent of fuel sales in Paraguay and supplies all of its jet fuel.

Complicating matters further are the brasiguaios, as they are known locally, or Brazilians who migrated to Paraguay in the 1960s and 1970s, bought up large tracts of cheap, fertile land and settled as coffee or soy farmers and; as venerable Brazilian journalist Janio de Freitas noted in Folha this week, brasiguaios put Brazil in a delicate situation. They have spent years locked in violent land disputes with Paraguay’s landless peasants, and say that Lugo gave them no support. The group, some 350,000 strong, has already declared their support for Franco and petitioned Dilma to recognize his presidency.

Matias Spektor, professor of international relations in Rio de Janeiro, also pointed out in Folha that Paraguay’s border provides a “route of drug trafficking, smuggling and the illegal arms trade, sectors that spread crime in Brazil.” Such illegal trade is an international concern; Brazil’s border is simply too big and too porous to manage without neighborly cooperation.

Shifter concluded that although governments would like to send a message and take a stand in support of Lugo, “It is doubtful that Brazil in particular would want to take a very tough position and apply punitive measures.”

Measures adopted at the Mercosur conference are, he added, “likely to be pretty soft and symbolic.”

It seemed probable, then, that the only concrete punitive measure applied to Franco’s new government would be its continued suspension from Mercosur until elections next year. (Gabriel Bonus, though, argues in Carta Capital that this is a more significant punishment than most commentators are giving it credit for.)

Even so, some say that Lugo’s ouster has set a worrying political precedent. Snider argues that the Paraguayan Congress did more than just remove Lugo. “In effect, Congress asserted that it was more powerful and important than the president, thereby abolishing the very principles of checks and balances that try to keep powers evenly distributed,” he said.

“Now, Paraguayans and presidents alike will have to know that Congress may try to forcefully remove presidents whose policies they disagree with.”

Lucy Jordan is a guest blogger to AQ Online. She is a freelance writer based in Brasília, Brazil, and writes mostly about politics and the environment.

Tags: Mercosur, Paraguay, Dilma Rousseff, Fernando Lugo, Federico Franco, Brazill

To speak with an expert on this topic, please contact the communications office at: communications@as-coa.org or (212) 277-8384.
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