INTRODUCTION This strategy will coincide with a turning point in Paraguay’s history, since the political conditions now in evidence hold out the possibility of reversing the institutional and economic deterioration and the rising poverty levels seen in the country in recent years. The Bank has an important role to play in Paraguay, and this is reflected in the common thread running throughout the new strategy: the provision of support for steps that the government can take, based on the legitimacy it has acquired and in the context of an enabling environment, to set in motion a sustained growth cycle that will provide relief from poverty and lead to greater equity. The priority placed on these strategic areas reflects Paraguay’s need to find its way back to an economic growth path in per capita terms, following the significant deterioration in the growth rate seen since 1995. This downturn has had a considerable impact on poverty levels (three fourths of the increase in the poverty rate is accounted for by the country’s low growth rate). State action is vital in order to make any substantial gain in competitiveness and to capitalize upon the economic reactivation that has been sparked by the improvement in external conditions, as well as to ensure that programs aimed at reducing inequality are truly effective. This country strategy paper sets forth the Bank’s strategy with Paraguay for 2004-2008 and replaces the country paper (document GN-2118-1) approved in October 2000. The preparation of this country strategy paper has been based on an analysis of the relevant factors,* an extensive dialogue with the authorities, and consultations with political parties and the main stakeholders in society at large, as well as with other financial institutions and donors active in the country (see Annex 5). These consultations were begun at a difficult juncture in the political affairs of the country, following the end of the Administration of González Macchi, who, as President of Congress, had taken office as President of Paraguay after the assassination of the Vice President and the resignation of the country’s elected President. The presidential candidates thus embarked upon the electoral process in the midst of a power vacuum and a deterioration in governance. Fewer than 10% of Paraguayans were satisfied with the state of their democracy (the lowest rating in Latin America), and the level of confidence in the country’s political parties was 7%, according to a Latinobarómetro survey. The Bank met with all the presidential candidates and their economic teams to familiarize them with its activities in the country and to learn about their various governmental platforms. Meetings were also held with a number of business associations and civil society organizations. Both the party primaries and the general elections in April were transparent and thus gave President Nicanor Duarte Frutos and the elected congressional representatives the necessary legitimacy to build the public’s confidence in the country’s democratic *
The studies and notes prepared in connection with the formulation of the Bank’s country strategy with Paraguay are cited throughout the text, and the corresponding bibliographical information is provided in Annex 4. All the documents listed in that annex can also be accessed at the webpage for the country strategy.