America Security News.- President Barack Obama and Mexico's President Enrique Pena Nieto, right, leave a joint news conference in Mexico City, Mexico, Thursday, May 2, 2013. Credit to AP Photo

Last week, Mr. Obama returned to capitals in Latin America with a vastly different message. Relationships with countries racked by drug violence and organized crime should focus more on economic development and less on the endless battles against drug traffickers and organized crime capos that have left few clear victors. The countries, Mexico in particular, need to set their own course on security, with the United States playing more of a backing role.READ WHOLE ARTICLE HERE

Paraguay´s new President Federico Franco

Paraguay’s newly sworn-in president Federico Franco set about forming a new government Saturday as he promised to honor foreign commitments, respect private property and reach out to Latin American leaders to minimize diplomatic fallout and keep his country from becoming a regional pariah.

In a brief appearance before international journalists, Federico Franco tried to broadcast a sense of normality a day after Senate (39 in favor, 4 against)  overwhelmingly voted to kick President Fernando Lugo out of office.

Lugo’s ouster drew swift condemnation around Latin America from leaders who called it a de facto coup, and several presidents said they would seek Paraguay’s expulsion from regional groups.

Credit Inphographics IMFdirect

“There’s no doubt that with the growth of China, we’ve seen a re-commoditization of Latin America,” said Colombia’s Mining Minister Mauricio Cárdenas, an economist and former Director of the Latin America program at the Brookings Institution in Washington DC.

In terms of economic development, Latin America did not take any advantage of the rising prices of  commodities -raw-materials-  , which prices nearly tripled from 2000 to 2010.

In that sense, Latin America’s share of global merchandise trade remained the same (5.7 %), and service exports  fell to 3.4 percent from 3.9 percent.

It is difficult to do business in Latin America.  The World Bank´s 2012 competitiveness ranked Brazil -the region’s biggest economy- as No. 126 out of 183 countries.

READ MORE HERE.

In short, the continent’s decade-long boom may be ending. According to the U.N.’s Economic Commission for Latin America and the Caribbean (ECLAC), Latin American growth, which topped 6% last year, will slow to 4.3% this year and 3.7% in 2012. Brazil’s economy, the region’s largest, actually flat-lined in the third quarter; Argentina’s scorching growth of 9% this year will be halved to 4.8% next year, and capital flight is expected to be robust. Mexico’s growth, meanwhile, will drop from 4% to 3.3%.

That’s hardly doomsday news, but it’s one reason the Montevideo summit’s main action was to raise protective import tariffs…READ MORE HERE

The IMF’s latest Regional Economic Outlook: Western Hemisphere sheds light on Latin America’s reliance on commodities from a historical perspective.  A study conducted by Gustavo Adler y Sebastián Sosa  also looks at the effect of a sharp decline in commodity prices on emerging market economies and on the policies that could shield countries from that shock. READ  MORE HERE

The protection of intellectual property rights (IPR, e.g., fighting piracy, counterfeiting, and contraband) has been a U.S. concern. The Duarte government made significant efforts to improve IPR protection, but the United States Trade Representative maintains that the country continues to have problems due to its porous border and ineffective prosecutions. In 2003, U.S. and Paraguayan officials signed a Memorandum of Understanding (MOU) to strengthen legal protection and enforcement of intellectual property rights in Paraguay. In December 2007, the MOU was revised and extended through 2009, and in November 2009 the agreement was extended again through 2011.45

U.S. Assistance

The United States provided about $13.1 million in foreign assistance to Paraguay in FY2008 and an estimated $26.1 million in FY2009.46 The increase in FY2009 was due to a one-time addition of $10 million for health and economic growth assistance resulting from the October 2008 meeting between President Lugo and former President Bush.

Under the Obama Administration’s FY2010 request, Paraguay would receive $13.9 million in assistance, with $2.1 million to support Global Health and Child Survival, $5.8 million in Development Assistance, $425,000 in International Military Education and Training, $750,000 for Foreign Military Financing, $500,000 in International Narcotics Control and Law Enforcement assistance, and $4.3 million for the continuation of a Peace Corps program in the country, with approximately 200 volunteers.

In 2009, the Department of Defense also provided Paraguay one-time security and stabilization assistance authorized under Section 1207 of the National Defense Authorization Act (NDAA). In FY2009, Paraguay received a total of $6.69 million in “Section 1207” funding divided between counternarcotics and development accounts to support democratic consolidation and reduce violence in eastern Paraguay during the country’s transition from one-party rule to multi-party democracy.47

In addition to regular foreign assistance funding, Paraguay signed a $34.65 million Threshold Program agreement with the Millennium Challenge Corporation (MCC) in May 2006. Those funds, which are administered by the U.S. Agency for International Development (USAID), are targeted to strengthen the rule of law and build a transparent business environment.48 The program has been credited with reducing the time it takes to start a business in Paraguay by half, among other accomplishments. In May 2009, the USAID-administered program was renewed with the signing of a second two-year MCC Threshold program for $30.3 million.49 The program supports anti-corruption efforts by Paraguay’s government in law enforcement, customs, health care, and judicial sectors. The MCC program also aims to increase public support for anti-corruption efforts.50 Paraguay also signed an agreement with the United States in 2006 under the Tropical Forest Conservation Act that provided Paraguay with $7.4 million in debt relief in exchange for the Paraguayan government’s commitment to conserve and restore tropical forests in the southeastern region.

Counternarcotics Cooperation

Paraguay is a major transit country for illegal drugs destined primarily for neighboring South American states and Europe. It produces over half of the marijuana grown in South America. The Chaco region in the northwestern part of the country adjacent to Bolivia is a major transshipment point for illegal drugs, along with the tri-border area (TBA) with neighboring Argentina and Brazil. A 1987 U.S.-Paraguay bilateral counternarcotics agreement was extended in 2006.

U.S. counternarcotics efforts in Paraguay have focused on providing training, equipment and technical assistance to strengthen the country’s National Anti-Drug Secretariat (SENAD), and to combat money laundering and corruption. The United States assisted in the completion of a helicopter pad and support facilities for SENAD. According to the State Department’s February 2009 International Narcotics Control Strategy Report, SENAD continued to make progress against illegal narcotics trafficking in 2008 with record seizures of marijuana, although cocaine seizures were markedly down. The report notes that President Lugo has said he wants to reverse Paraguay’s status as a “major drug transit country.” Currently, SENAD agents are civil servants and they are not issued weapons. The Paraguayan Senate rejected a bill that would have made the SENAD an autonomous institution with the power to regulate its agents as law enforcement agents who can carry and use weapons. The bill had passed the Chamber of Deputies. This defeat is considered by some to be a major setback. Finally, INCSR notes that SENAD’s work is limited by budget constraints, weak laws and pervasive corruption. After President Evo Morales of Bolivia kicked out the U.S. Drug Enforcement Administration (DEA) in late 2008, 10 of the 56 agents working in that country were redeployed to Paraguay in early 2009.51

In April 2009, bills entitled the “U.S.-Paraguay Partnership Act of 2009” were introduced in the House (H.R. 1837) and Senate (S. 780). On September 14, 2009, the ATPDEA Expansion and Extension Act of 2009 (S. 1665) was introduced in the Senate.52 Each of these bills would amend the Andean Trade Promotion and Drug Eradication Act (Title XXXI of the Trade Act of 2002, P.L. 107-210) to extend trade preferences to Paraguay. Currently, Colombia, Ecuador, and Peru benefit from the ATPDEA in exchange for cooperation under anti-narcotics agreements.53 Bolivia lost its eligibility for the program in 2008 when the Bush Administration determined that Bolivia no longer met the anti-narcotics cooperation requirements.

Tri-Border Area and Terrorism

The United States is particularly concerned about illicit activities in the tri-border area (TBA) of Paraguay, Argentina, and Brazil, where money laundering, drug trafficking, arms smuggling, and trade in counterfeit and contraband goods are prevalent. The tri-border region is loosely controlled due to porous borders, a lack of surveillance, weak law enforcement and pervasive local corruption, especially in the Paraguayan border city of Ciudad del Este. The United States has worked closely with the governments of the TBA countries on counterterrorism issues through the “3+1” regional cooperation mechanism, which serves as a forum for discussions, and the United States has provided anti-terrorism and anti-money-laundering support to Paraguay.

U.S. Immigration and Customs Enforcement (ICE) sent a team of specialists to the tri-border region to investigate trade-based money laundering in 2006, and has assisted the Paraguayan government in developing a Trade Transparency Unit to examine discrepancies in trade data in order to detect customs fraud, trade-based money laundering or the financing of terrorism.54

U.S. Treasury officials have held workshops in the region to encourage more banking sector involvement in efforts against money laundering. The U.S. embassy’s legal adviser in Asunción held training courses for local investigators and prosecutors to combat possible terrorism links.55

The United States has been concerned for a number of years that the radical Lebanon-based Hezbollah and the Sunni Muslim Palestinian group Hamas have used the TBA to raise funds from the region’s sizable Muslim communities by participating in illicit activities and soliciting donations. Nevertheless, according to the State Department’s annual terrorism report for 2008 (issued in April 2009), there is no corroborated information that these or other Islamic extremist groups have an operational presence in the TBA.

The State Department’s 2008 terrorism report stated although Paraguay was generally cooperative on counterterrorism efforts, its judicial system is weak and politicized, the police force is widely viewed as ineffective and corrupt, and the country lacks strong anti-money laundering and terrorist financing legislation. In June 2008, Paraguay’s Congress improved money laundering legislation as part of a major overhaul of the penal code. However, according to the terrorism report, a bill to enact important criminal procedure reform to prosecute money laundering and terrorism was delayed for a year by the Congress’s Legal Reform Commission. Effective terrorist financing legislation will be critical to keep Paraguay current with its international obligations.

The terrorism report also maintained that Paraguay did not exercise effective immigration or customs control on its borders. Efforts to address illicit activity in the TBA were uneven because of a lack of resources, and corruption within customs, police, and the judiciary. With U.S. support, the government’s Secretariat for the Prevention of Money Laundering reportedly made progress against money laundering, including December 2008 raids on illegal exchange houses.

Under the MCC Threshold Program, the United States provided assistance with the training of judges, prosecutors and police in investigation techniques critical to money laundering and terrorist cases.

Paraguay made some progress on counterterrorism legislation in 2009. The Paraguayan Congress passed a measure in July 2009 that modifies the anti-money laundering law. The passed bill empowers the Secretariat for the Prevention of Money Laundering (SEPRELAD) in several ways. It elevates the agency to the level of a ministry that reports directly to the President, it broadens its capacity to require Suspicious Transaction Reports from a wider group of financial institutions, and it increases SEPRELAD’s power to audit financial institutions to ensure their procedures are adequate to prevent money laundering. In addition, the Executive has initiated legislation that would criminalize the offences of terrorism, terrorist association and terrorist financing. Attempts to gain the approval of Congress on such legislation were made in 2007, November 2009, and December 2009. In December 2009, President Lugo withdrew the counterterrorism legislation that would modify some aspects of the criminal code over objections raised by human rights organizations who argued that the new legislation threatened the international protection of human rights and may undermine freedom of assembly and freedom of speech. Paraguayan authorities, however, remain optimistic that a modified initiative may pass later in 2010.56

June S. Beittel is analyst in Latin American Affairs (UNACE) for CRS. Parts of this report were contributed by Mark P. Sullivan, Specialist in Latin American Affairs. This report was published by the Congressional Research Service under the title “Paraguay: Political and Economic Conditions and U.S. Relations,”

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