WesWorld

Paraguay: A History, by L. Carlos, Bahia Free Press, 1957
The beginning of a new decade saw Paraguay still locked into a desperate spiral. The Argentine government was still making broad-policy decisions and economic control was still tightly controlled by Argentina but gross abuse of power by the National Party supporters was risking a general rural uprising and re-ignition of the Civil War.

Politics
The elections of June 1941 to the Chamber of Deputies saw the Catholic Peoples Party securing 40% of the vote, the National Peoples Party 38%, The Marxist Party 9.7%, The Northern Democratic Party 8.3% and The Asuncion Workers Party and The Landworkers Party each secured a miserly 1.3%. The Catholic Peoples Party refused to work with the Marxists and while the National Party briefly thought about doing so it then went on to talk to the new Northern Democratic Party but no agreement was reached. Therefore on June 8th the Catholic Peoples Party and the National Party agreed to form a coalition government. The CPP dropped its call for Luis Contreras to resign as Prime Minister after recognising his political talent and weight would be useful and Eduardo Marados found himself as the new Social Minister. This uneasy alliance forged on during 1942 and slowly a sense of national identity began to creep back into politics in Paraguay. The Prime Minister since the end of the Civil War, Luis Contreras, had used the disinterest of the Argentine “Peoples Government” Socialist alliance led by Vice President Enrique Pastelle to take a firm grip on domestic policy. When the 1942 elections in Argentina re-affirmed that coalition a swing in the balance of power took hold.

The attempt to merge both nations into a union had crumbled as the Argentine Conservative Party tumbled from power and the country shifted to the centre-left. There were powerful elements on the right still but for them Paraguay was no longer an issue. Paraguay had been made more stable, in the eyes of Cordoba, but the efforts to peg the interest levels of both nations had nearly ended in fiscal disaster for both nations. Argentine investment into rebuilding Paraguay had sucked much needed capital out of Argentina. The “Peoples Government” in Cordoba sought to redirect those efforts back into its home nation. Contreras had by 1942 gained more or less now a free hand in running the country. Politically all talk of any union had gone and a new national realpolitik began to take hold as Argentine withdrew its control.

As yet Conteras could not point to any real policy successes, especially any without some kind of outside aid. The unrest of 1939 and 1940 over taxation had nearly reignited the civil war in the rural areas of the country. Luis Contreras had promised to build 20,000 homes a year to re-house the population but by late 1940 fewer than 4,600 had been built and by the end of 1942 the total was less than 20,500 since the programme began. However, four major Argentine construction firms began a series of projects that by the end of 1941 had built five model estates (almost the size of small towns) in Asunción, Encarnation, Caazapa and Villa Hayes. A follow-on project for six more such model estates collapsed during the summer of 1942 as the Argentine firms sought more lucrative government-backed projects in Argentina. Housing construction once again slumped and the once bulldozed slums began reappearing as larger numbers of people left the rural areas in search of work. Education policies were on track however and healthcare had improved across the nation with more widespread services although aid groups were still funding around 30% of the healthcare system.

Resistance to paying taxes was dealt with by a new Fraud Department created in 1941 and the police had new powers to fine and arrest non-payers and corrupt officials. Led by the former Argentine security minister ‘Chico’ by the end of 1942 some 1,900,000 pesos of unpaid tax was confiscated and added to the nation’s coffers. The pressure began to encourage further businessmen to become more honest in their accounting, and some Argentine investors still opted to make available capital as the business regulations tightened further and chances of losing all their money to fraud began to lessen. In the rural areas the evictions had largely been stopped by government pressure and as the year progressed tougher measures were brought to bear. The Marxist Party by November 1940 using public subscriptions and donations had brought enough land to set up five large Commune Farms housing around 700 peasants. During 1941 another 2,000 peasants had been accommodated on three new Commune Farms but space was restricted and many soon drifted away to the towns in search of work. During 1942 two new Commune farms had been created but drought affected the crops and livestock but with determination the settlers decided to stick it out. The leader of the Catholic People’s Party, Eduardo Marados, had published a Land Plan in 1941 and when he became Social Minister in June 1941 he began enacting some of the measures in the plan. While it proved impossible to agree a national wages policy and many members of the Landowners Association were still paying wages far below that required by the Social Fund, by November an agreement was reached on the maximum level of rent a landowner could set for farmers and farmworkers. This was still at a rate higher than many farmers wanted, a point the Marxists exploited, but at least the rate of rent increases fell.

Economics
Inflation had been 11.8% at the end of 1941. During the year it rose and fell a little but by December 1942 was at 7.5%. Interest rates remained pegged at Argentine levels only until September 1942 and then the Central Bank of Argentina removed the pegging when the Ministry of Finance ended the practice. Interest rates in Paraguay soared to 10% but by the end of the year had stabilised to around 6%. The Argentine-run Economic Board made few other major changes to its policy preferring to get Paraguay onto some sort of even keel before further tinkering was made to policy. A new Paraguayan Vice-Director Dr. E. Pirelli was appointed and as policies in Argentina changed to favour a retreat so more economic plans began to be formulated and enacted by the Department of Economics. The nationalised food sellers and State-owned series of shops in both the towns and the rural areas had certainly reduced food prices and this seemed to have cooled the inflation rate too and by July 1942 over 300 such shops were open but the Economic Board set a date of July 1943 as the planned denationalisation, which they hoped would net a useful capital gain for the nation’s coffers.

Defence
Argentine military control officially came to an end in late March 1939 and only modest Army, Air Force and Navy detachments remained in Paraguay to fulfil the joint defence agreement signed in March 1937. The Paraguayan Army remained static with two Divisions which were broken into several battalion-sized elements for policing the country. There were plans by the Ministry of Defence for a third division but the cost implications and shortage of manpower, not to mention Argentine disapproval of the scheme, meant that it was shelved by the end of the year. Some re-equipment had taken place during 1941 with ex-Argentine armoured cars providing some mobile firepower and the Army also began to seek tanks as well to rebuild its force. The Argentine Naval Brigade IV at Encarnation for the control of the upper Rio Paraguay and joint national defence remained in place under the command of a Paraguayan officer, Almirante Jose Alfredo Bozzano Baglietto. A new large gunboat was laid down in January 1942, the first of the so-called River Battleships’ to rebuild the fleet and make a much stronger defence against the potential RSAN opposition. The Air Force lacked any funds to purchase any new aircraft but it was at last at full manpower and only a third of the technical roles were still performed by Argentine personnel. A scheme to build four new airstrips in remote rural areas was approved in April with construction beginning that September.