Paraguay: Multinationals reap benefits from coup government

August 5, 2012
Cartoon by Carlos Latuff.

In a speech marking the one month anniversary of the parliamentary coup that overthrow left-leaning Paraguayan President Fernando Lugo, the ousted leader said on July 22 that a motivating interest for the coup-plotters was a sought-after deal between Paraguay and Montreal-based mining company, Rio Tinto Alcan (RTA).

“Those who pushed for the coup are those who want to solidify the negotiations with the multinational Rio Tinto Alcan, betraying the energetic sovereignty and interests of our country,” Lugo told supporters.

Such an accusation reflects the widespread discontent among Paraguayan people toward the negotiations between RTA and the government of Federico Franco, Lugo’s right wing replacement.

It also points toward the new administration of Federico Franco’s larger strategy to open up Paraguay to multinational corporate exploitation, from RTA to Monsanto.

The RTA deal for a US$4 billion aluminum plant on the shores of the Parana River had been stalled by the Lugo administration due to concerns over the plant’s environmental impact. There was also a dispute over how much the company would pay for electricity from Paraguay’s Itaipu and Yacyreta hydroelectric power plants.

Yet shortly after taking office, Franco fast-tracked the RTA negotiations, pressuring his new minister of industry and commerce to swiftly move forward with the deal.

Civil society protests ensued. As Lugo’s comments about the RTA deal suggest, the issue has become a rallying point for justice amid post-coup Paraguay’s political and social crisis.

The views of Paraguayan engineer Ricardo Canese reflect the main concerns of citizens opposing the deal. In an article from the Paraguayan social research institute BASE-IS, Canese said the proposed deal with RTA would disproportionately benefit the company.

Canese pointed out that the government ― through the taxation of the Paraguayan people ― would be subsidising a massive amount of RTA’s energy over a period of 30 years.

Canese criticised the fact that the taxpayers would be spending $700 million in infrastructure to allow the company to install its operations in the country. RTA pledges to create 1250 jobs, but the company would annually use the same amount of electricity that 9.6 million people use during the same period.

Because of the controversial terms that Franco is pushing for with RTA, Lugo believes the contract will be discontinued once a democratic government returns to power. New elections are slated to take place in April next year.

In one interview, Lugo said: “I strongly doubt that the Paraguayan people will be respecting such a license that gives a single company the right to the electricity for a price as low as they have been talking about. This whole deal is very questionable.”

As well as Franco’s work with RTA, his administration has also allowed Monsanto an expanded presence in Paraguay. Such a move will worsen the existing crisis in the countryside, an area ravaged by soy plantations and pesticides. Only 2% of landowners control 80% of the land.

In the lead-up to the coup, Lugo's administration resisted the use of Monsanto’s genetically modified cotton seeds in the country. Yet just after taking power, the Franco administration threw government critics of the plan out of office. Franco's administration has approved the use of the controversial seeds in the country.

These two relationships with multinational corporations clearly show where the interests of the Franco administration lie.

The Lugo administration failed to fully implement its plans for land reform, justice and expanded rights in Paraguay, but the Franco administration, in just one month in office, has already proven to be closer ally of corporate globalisation.

As Uruguayan writer Eduardo Galeano said in an interview regarding the coup in Paraguay, the Lugo government tried “to bring about changes that were aimed at making the country more independent and just, but this was an unpardonable sin for the power brokers”.

[Benjamin Dangl is a journalist focusing on Latin America. He is the editor of Toward Freedom, a progressive on world events and Upside Down World, a website covering activism and politics in Latin America.]

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