Countries are defined by geographical features. Ports, mountains, deserts and plains are among the physical landmarks that highlight national identities. Paraguay is no different. However, rivers are the defining characteristic. Its fluvial network is the mainstay of the country’s economy, transportation system and demarcation lines. A sleepy backwater of South America, Paraguay was better known as a buffer state between Brazil and Argentina. The country almost disappeared 150 years ago, when Argentina and Brazil invaded it during the War of the Triple Alliance. An estimated 80% of the male population was annihilated. At the time, Paraguay was the most industrialized country of Latin America—boasting a rail network, iron industry, telegraph grid and national education system. The landlocked upstart had imperial ambitions of gaining access to the sea, when it decided to take on Brazil. Asuncion assumed Argentina would stay on the sidelines, or perhaps even help combat its traditional foe. However, Buenos Aires betrayed its Spanish-speaking neighbor and joined Brazil on a campaign of national destruction. Paraguay triumphed during the initial engagements and it even delivered a stunning defeat at the Battle of Curupayty, where 4,000 allies perished against 100 Paraguayan casualties, but the overwhelming resources of Brazil, Uruguay and Argentina was too much for a country of only 500,000 people. Nevertheless, its expert use of the river systems kept the neighboring giants at bay for more than five years. Like in the past, Paraguay is experiencing a new economic boom. However, relations with its neighbors are also starting to simmer.
The growing prosperity in China and much of the developing world brought new life to agricultural markets. The soaring demand for meat and grains put any country with an abundant water supply, such as Paraguay, in an exclusive position. As a result, Paraguayan land prices flew, the economy soared and the country experienced a level of prosperity that had not been seen for decades. Enjoying a more favorable tax regime, better transportation grid and a more educated workforce, many Brazilians began crossing into Paraguay to buy farms and businesses. The invasion became so intense that Portuguese is now the principal language along most of the northern and eastern borders. In fact, there are approximately 300,000 Brasiguayos, Brazilians who immigrated to Paraguay but retained their own identity—with most of them living in the district of San Pedro. The culture clash between the Paraguayans and Brazilians reached explosive proportions. A landless Paraguayan movement began invading Brazilian-owned farms—often under the very eyes of government officials. The situation reached such proportions that the Brazilian government was forced to mobilize its army along the Paraguayan border. Although Brasilia dismissed the mobilization as a routine military exercise, most Paraguayans took it as a show of force to protect the economic interests of its citizens.
Unfortunately, the recent election of President Fernando Lugo could only make matters worse. Although the former Catholic bishop hails from the radical left, suggesting an ideological affinity with Lula, his Liberation Theological background advocates a militant demeanor with regards to economic policies. This is one of the reasons why Asuncion turned a blind eye to many of the land invasions. (Coincidently, President Lugo is the former Bishop for the Dioceses of San Pedro, which is the epicenter of the land invasions.) Furthermore, Lugo is proposing large rate increases for the electricity it sells to Brazil. The Itapúa hydroelectric dam over the Parana River is a major source of electricity for Southwestern Brazil. The two countries split the electricity generated by the dam, but Paraguay sells most of its output to Brazil. The fees generated by Itapúa provide the bulk of the country’s fiscal revenues, and Lugo wants to increase the rates in order to spend more on health, education and infrastructure. Not surprisingly, Brasilia’s reaction was cold, which this is another reason why relations between the two countries deteriorated. As was the case, 150 years ago, Paraguay’s natural rival is Brazil, but it always takes on the role of the aggressor. However, don’t expect Paraguay’s other neighbors to come to its aid. Bolivia is still resentful of the land it lost to Paraguay during the Chaco War of 1932, and Argentina would enjoy nothing more than to gain access to the fertile farmland that lie adjacent the Parana and Paraguay rivers. Therefore, we could see the country return to the diplomatic headlines in a not too distant future.