Agricultural Impact of Upcoming April 2018 Election
Primary Analyst: Jesse Waugh, Maddie Douglas
Team Leader: Julie Flesch
The people of Paraguay will be going to the polls on April 22, 2018 to elect a new President and the outcome of this election will significantly impact investors in the agriculture sector.
Political Overview
Paraguay has two major political parties: the National Republican Association/Colorado Party and the Authentic Radical Liberal Party. The Colorado Party is the longest running political party in Paraguay and occupies the center-right space of Paraguay’s political spectrum. Finance Minister Santiago Peña will be replacing current President Horacio Cartes as leader of the Colorado Party following the 2018 election. Peña has indicated in recent interviews that his policies would likely be similar to those of Cartes - keeping a lid on taxes, controlling the deficit and widening the country’s social programs. The Authentic Radical Liberal Party (PLRA) is currently the official opposition and the more left-leaning national party, driven by socially liberal policies. The PLRA was last elected to power in 2008 following 61 years of government by the Colorado Party. This election cemented the PLRA as a major national party and created a liberal counterweight to the traditionally conservative leadership that previously dominated Paraguay’s political scene.
Paraguay also contains smaller political parties that will be looking to achieve representation following the upcoming 2018 election. Parties such as Avanza Pais, Guasu Front, and National Union of Ethical Citizens (UNACE) are smaller parties which were each unable to rally more than 6% of the popular vote in the 2013 election. These smaller parties will often seek to form alliances in order to rally enough support to achieve opposition status. The country's relatively passive opposition parties lack defining ideologies, vision, leadership, unity, and agendas for change. This has made it difficult for small parties to garner any significant popular support and thus rendering them unable to mount a serious threat to the Colorado Party and the PLRA.
Despite the lack of a consistently unified opposition, recent actions made by the Colorado Party have created major instability within Paraguay’s political environment. The Paraguayan Senate recently voted to amend the constitution to allow presidents to seek re-election for a second term. Determined not to relive the decades of dictatorship that had only just come to an end in 1989, protestors saw the move as an attempt by President Carter to weaken the country’s democratic institutions. Taking to the streets in Asuncion, protestors set fire to the Congress building and clashed with riot police. Following the protests, which ultimately ended in the death of a young PLRA leader, President Carter revoked the policy and announced he would no longer seek re-election. This conflict has weakened the political standing of the Colorado Party and has mobilized the Liberal base within the country. The PLRA is continuing to use the death of Rodrigo Quintana, the 25 year-old PLRA leader who was killed during the protests, as a rallying cry for change in the upcoming election.
Agricultural Impact
Recent policy proposals have also created uncertainty in Paraguay’s agricultural sector. President Cartes recently vowed to veto a Senate-approved 15% export tax on soy, corn, and wheat commodities. The tax increase was first introduced by the leftist coalition called the Guasu Front, but was initially backed by the Colorado party as part of a political pact allowing Colorado to take back control of Congress. This new tax demonstrates the Colorado Party’s tendency to switch its standpoint on issues and has caused some supporters to doubt whether the party will stand by its commitment to keep taxes low in order to attract foreign investment and facilitate growth. Recent conflict over agricultural policy has led to mass protests by members of the agricultural community and large agriculture businesses, such as Colonias Unidas cooperative, have denounced the government’s actions.
Members of the agricultural community believe this tax proposal would severely affect the incomes of farming populations, contributing to the growing poverty epidemic that has long troubled Paraguay’s populations. Many businesses also believe that this proposal could push Paraguay’s agricultural boom into jeopardy. Colonias Unidas Cooperative’s president, Agustin Konrad, spoke out against the proposed tax hike saying it would “kill Paraguayan agriculture”. The President vetoed another bill in August, after previously promising to support the initiative. The Guasu Front introduced and passed the bill which would funded and refinanced the debts of small and medium farmers. Thousands of campesinos have marched to pressure lawmakers to address the impossible debts they’ve incurred as a result of climate change and lack of government support. Around 17,000 people are said to be affected and the total debt is believed to equal US $34 million. The workers have indicated that they will not stop protesting until the legislation has been approved and signed by President Cartes.
Leading into the upcoming election, the political climate in Paraguay is volatile and there is growing distaste for the Colorado Party. As the competing political parties begin to solidify their platform points, the proposed policies will be of particular interest to investors in the agricultural sector. Significant issues such as taxation and growing debt pose unique threats to the future growth of the sector and to Paraguay’s economy at large.
