Alleged king of contraband favourite for Paraguay’s presidency

Five years ago today Paraguay was a country striding towards a better future.

On April 20th, 2008, voters elected former Catholic bishop Fernando Lugo as president, bringing to an end six decades of increasingly mafia-style rule by the populist Colorado party with promises to clean up public life and redistribute wealth in a desperately unequal society.

But the new dawn turned out to be a false one. Lugo was impeached last June after four wasted years in power and now the man favourite to win tomorrow’s presidential election is a shady Colorado businessman whom foreign governments believe is involved in drug trafficking and cigarette smuggling.

Horacio Cartes laughs off the suggestion that he is a "narco". But during the campaign he has ducked talking to foreign reporters least they question him about US diplomatic cables which discuss Drug Enforcement Agency investigations that identify him as heading up an organisation "believed to launder large quantities of United States currency generated through illegal means, including through the sale of narcotics".

And while Washington clearly believes Cartes is involved in Paraguay’s booming drug trade the Brazilians have identified him as a key player in the country’s cigarette smuggling rackets.

Paraguay’s outsized cigarette industry is built for contraband. Local factories produce 20 times more than domestic demand and legitimate exports do not explain the surplus, most of which is exported illegally around the world — in 2006 gardaí seized five million cigarettes hidden in a container that originated in Paraguay.

The main destination for such contraband is Brazil where a 2004 congressional investigation identified a firm owned by Cartes (himself a smoker) as a major offender in flooding the country with illegal cigarettes.

Some in Asunción shrug their shoulders at all this and explain that Cartes amassed his dubious fortune in a different era when rules did not apply in Paraguayan business and that this past should not be read as a guide as to how he would rule as president. Maybe so, but for all his modernising business bluster on the stump Cartes’s campaign has been dogged by ample evidence of good old-fashioned Colorado vote-buying.

Luckily for him his opponents have had their own corruption scandal. The president of Paraguay’s congress was forced to resign this week after evidence emerged his party – the National Union of Ethical Citizens – was paid a $15 million bribe with public money to back the ruling Liberal party candidate Efraín Alegre.

Alegre was one of Lugo’s better ministers until Lugo dismissed him during the civil war with his erstwhile Liberal allies that dogged his presidency.

The impeached president’s supporters say he was betrayed by the Liberal who used his personal appeal to oust the Colorados but then sought to corner his government for themselves. The Liberals, in turn, claim Lugo failed to recognise he was elected by a broad coalition of which they were the largest component and acted as if his fringe left-wing allies had been swept to power with him.

The truth probably lies somewhere in between, with the Cartes-inspired but Liberal-backed impeachment of Lugo the inevitable denouement of the ideologically incoherent coalition required to eject the Colorados after decades in power.

Surprisingly, under Federico Franco, the man who succeeded Lugo, the Liberals have managed to do more in 10 months than Lugo did in four years, including passing a law that means better off Paraguayans will finally have to pay income tax, a historic step along the way to tackling the country's myriad social problems.

Lugo himself should win a seat in the country’s senate tomorrow, his campaign boosted by the news that DNA tests show he is not the father of a 10-year-old boy, keeping the official count of his offspring by various women at two.

His impeachment last year led to Paraguay’s suspension from the regional Mercosur trade bloc, with Brazil and Argentina supposedly furious at what they saw as a “democratic rupture”.

But today the anger is all on Paraguay’s side. It has seen its neighbours use the suspension to usher Venezuela into the bloc over long-standing Paraguayan objections and then remain silent as the chavistas in Caracas executed their own rupture when skating around the constitution’s succession clauses during the terminal illness of Hugo Chávez.

This unequal treatment has revived memories of the “war of the triple alliance” of the 1860s fought by Paraguay against Brazil, Argentina and Uruguay.

This historical calamity which left two thirds of the country’s population dead has understandably left Paraguayans extremely sensitive to unequal treatment from their bigger neighbours. But both Cartes and Alegre agree that the new president will have to renegotiate Paraguay’s return to the bloc where it will inevitably have to sit alongside Venezuela.

But if Cartes wins it remains to be seen just how willing the international community will be to sit alongside a supposed drug trafficker and cigarette-smuggler.