566. Country Analysis and Strategy Paper for Paraguay, February 13, 1970.1 2

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I. Statement of Rationale and Basic Strategy

The significance of Paraguay to the United States is less than that of most other independent countries of South America. Paraguay is small and land-locked, no important mineral resources have as yet been discovered, private American investment is of modest proportions, the American resident community is small, and Paraguay is not a major market for American products. The significance of the United States to Paraguay is important, however, given the following facts: Paraguay has an interest in United States cooperation and support not only because of the United States’ great power status and free world leadership, but also as a counterweight to any pressure from Argentina or Brazil; the Paraguayan Government recognizes that the United States is directly or indirectly the country’s principal source of development capital; the United States has an important share of the Paraguayan commercial banking field; the United States is a major trading partner for Paraguay; and an American meatpacking firm is the country’s largest private employer.

The primary interest of the United States in Paraguay is that Paraguay not became a trouble-spot, whether by the acquisition of power by elements hostile to the United States, by the adoption of repressive measures resulting in widespread unrest, or by any other development adversely affecting United States hemispheric interests. Whether this kind of stability is ensured by President Alfredo Stroessner, whose departure must be considered possible after sixteen years in power, or by some other leader fundamentally well disposed to the United States is immaterial. Neither is there any choice to be made on ideological or other grounds between the ruling Colorado Party, its traditional foe the presently [Page 2] split Liberal Party, or factions within either; these elements all profess Paraguay’s historical friendliness toward the United States. The Armed Forces, which are an essential element as the guarantor of stability and the final arbiter when Stroessner passes from the scene, are also pro-United States.

Continued stability will require further economic and social development, broader participation in the political process, and a loosening of restraints by the regime in power: these are corollary interests of the United States. The secondary interests of the United States are that Paraguay continue to support the United States in international forums and that Paraguay cooperate responsibly in regional political and economic actions.

These considerations determine for the present CASP time frame a United States policy posture toward Paraguay made up of the following elements:

—Continuation of bilateral United States economic and military assistance at not more than present levels.

—Recognition of the leading role of multilateral lending agencies, particularly the IDB, in furnishing development loans to Paraguay.

—Cooperation with the present Paraguayan authorities, while keeping lines of communication open to Colorado Party, military, opposition and other elements.

—Help, if possible, in resolving the seriously unsettling dispute between Church and State should this worsen markedly, while retaining our present acceptability to both sides as a friendly and objective interlocutor.

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—Studied expression of United States disapproval of political repression by the Government when appropriate.

The Country Team did not seriously consider any alternative basic posture. More direct intervention into internal political problems and a major increase in United States economic and military assistance were dismissed as not only unproductive but contrary to current policy as defined in President Nixon’s address of October 31, 1969 and in related policy statements.

Over the next four to five years, the United States should continue to be a major factor in Paraguay’s economic and social development. Despite the rather large and visible development role which the United States plays on the Paraguayan scene, there are, however, factors over which the United States has relatively little influence. For example, in spite of advances in some areas and certain limited but hopeful improvements in fiscal matters, the Paraguayan economy has not shown significant growth in relation to population in recent years. Previously submerged balance of payments problems are now coming to the fore which could provoke dramatic increases in the cost of living, cutbacks in private investment, and other limitations on the ability to undertake the public investment needed for development. As a stable currency has been the pride of the Stroessner regime, it will resist as long as possible any change in the exchange rate.

The United States should use CIAP as a primary mechanism to achieve the solution of current fiscal, monetary and balance of payments problems. The Paraguayan Government should be continually aware of its problems and understand the need to make those unavoidably hard decisions necessary to maintain an adequate rate of development. The Paraguayan Government should also formulate an agricultural policy directed toward increasing production, particularly production of export products.

Annual increases in population continue to offset real economic growth. While there are manifestations of interest in family planning techniques on the part of some Paraguayans, the Government and many other Paraguayans see population increases as the solution to the problem of [Page 4] uninhabited lands. The Paraguayan Government should, therefore, recognize the adverse effects of high population growth upon family welfare and general economic growth, and take remedial measures.

The Paraguayan educational system is not only sub-standard, particularly on the elementary level, but it is not universal. The poor quality of Paraguayan education is an important factor in the high unemployment and underemployment rates. The Government should take more effective steps to improve the quality and applicability of the education systems

There is no serious security threat to the Paraguayan Government either from abroad or internally, nor does any threat of an insurgency nature appear likely within the time period under consideration. The military play an important role in maintaining internal security. Additionally, the Paraguayan Armed Forces contribute to social and economic improvement through civic action programs in such areas as internal transportation, road construction, medical services, potable water, vocational education and mapping. The United States military presence has been well received and it is appreciated by the Paraguayans. A modest United States military presence should be retained here in the form of both material assistance and training under MAP.

Because of such possibilities as illness, death, or a coup, one must recognize that Stroessner might not remain in power during the time period under consideration. It is important, therefore, to continue to seek and maintain good relations with personalities and groups, both civilian and military, of potential importance in a post-Stroessner era.

With these emphases in mind, United States assistance resources should be concentrated in agriculture, education, population control, and the maintenance of a modest United States military presence. The totality of United States resources, through CIAP and independently, should be utilized to influence fiscal and monetary policy, to promote improvements in the educational system and agriculture, and to lay the foundation for a population control program. Every effort must be employed to ensure the maintenance of contacts with all political and military leaders.

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[Omitted here are Section II, “Assessment of Current Situation and Near-Term Prospects;” and Annexes A and B.

  1. Source: National Archives, RG 59, Central Files 1970–73, POL 1 PAR–US. Secret. Drafted by Arzac; cleared by the Country Team in draft; approved by Brewin. Transmitted to the Department of State as an attachment to Airgram A–12.
  2. The Embassy stated that the main interest of the United States in Paraguay was to maintain a stable, pro-U.S. Government, bulwarked by economic and social development and broader participation in the political process.