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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 and the National Peoples Party agreed to form a coalition government. Prime Minister Luis Contreras had by 1942 gained more or less now a free hand in running the country from Argentina. 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 still 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. Things had remained stable but the growing power and influence of the Marxist Party in the rural areas was worrying and as they increased their share hold in the foodstuff sector of the country the Coalition were fearful the Marxists could cut off the food supplies to the towns or restrict supply as ransom to achieve their political ends. At the very least they were making large amounts of money which were filling the Party coffers.

Luis Contreras had promised to build 20,000 homes a year to re-house the population in 1939 but by the end of 1943 the total was less than 38,500 since the programme began but the year had seen massively increased building. A follow-on project for six more model estates collapsed during the summer of 1942 as the Argentine firms sought more lucrative government-backed projects in Argentina. Local firms managed to start two of these schemes, one in Asuncion and one at Caacupe. Slum conditions eased a little and as rural employment recovered less people were flocking to the towns. Education policies were on track however and healthcare had improved across the nation with more widespread services although aid groups were still funding around 40% of the healthcare system. A gap in funding being particularly in evidence by the end of the year.

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 1943 some 2,300,000 pesos of unpaid tax was confiscated and added to the nation’s coffers. 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 and during 1943 two new Commune farms had been created but drought affected the crops and livestock but with determination the settlers decided to stick it out. In 1943 Party efforts focused on acquiring a the de-nationalised food shops but two new Commune Farms were created in more fertile areas and turned a small surplus of profit. 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 1942 an agreement was reached on the maximum level of rent a landowner could set for farmers and farmworkers. During 1943 the policy largely held firm but attempts to make it easier for small-holding farmers to buy land passed through the Chamber but the Landowners Association proved able to hamper the implementation.

Economics
Inflation had been 7.5% at the end of 1942. During the year it rose during the summer and fell later on but by December 1942 was at 6.5%. The Central Bank of Argentina removed the pegging of interest rates to Argentine levels during 1941 and during 1943 rose from 6% to around 8% where they remained stable. 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. The new Paraguayan Vice-Director Dr. E. Pirelli launched his plan to de-nationalise the State-owned series of food shops in both the towns and the rural areas which had reduced food prices. By July 1942 over 300 such shops were open. The sell-off during July 1943 raised a large amount of capital (around 1.1 million pesos). Several large Argentine stores saw the opportunity to invest and around 80 shops in the larger towns were snapped up. In the rural areas the Marxist Party Commune farms invested some of its profits and brought around 95 shops and set up a sizable distribution system. At one stroke the Marxist Party had found itself running a large foodstuffs organisation from grower to seller as a non-profit making enterprise. The Economic Board were worried about this but the majority of the rest of the shops were sold to local businesses or businessmen, sixty remained unsold and were closed. The policy was mixed as food prices in the towns rose 10% almost immediately, but those in the largely Marxist-controlled areas with access to farm produce tended to remain stable. The workers in the towns and cities and the small middle-classes were not happy at the price rises but the creation of shop-owners was felt to be a good policy. The Government itself viewed the Commune Farms branching out into commerce as a portend of the Marxist party wielding power far beyond its numbers with the ability to strangle food supplies to the southern towns if it wanted to.

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. Some re-equipment had taken place during 1942 with the Army beginning to evaluate several Argentine tanks to rebuild its force. The Air Force received a squadron’s worth of FMA I-01-IIB Buchon fighter-bombers and these formed the first Paraguayan fighter defence since the war. A scheme to build four new airstrips in remote rural areas was approved in April 1942 with construction beginning that September. All were finished during the final quarter of 1943. A new large gunboat was laid down in January 1942, a so-called River Battleships’ by the Argentines at AFNE Paraguay to rebuild the fleet and make a much stronger defence against the potential RSAN opposition. However, protests by the SAE Government due to the breaching of the 1936 Treaty of Valparaiso led to her suspension and no new vessels were acquired for the Rio Paraguay.

Interesting write-up.

I remember that Paraguay ordered some Coati advanced trainers for their air force a year or three back; but I don't remember how many we determined were necessary. I think it was six or twelve. Does Paraguay want any more of those, and can ENAER demonstrate the Zafiro basic trainer/liaison aircraft to the PAF?

I think it was six Coati. The PAF would like to order six more.

At the moment they don't have a need for additional basic trainers but ENAER are welcome to demonstrate the type.

Okiedokie, excellent. Order will be filled immediately.