In Paraguay, a rich conservative must tackle poverty

By Daniela Desantis and Hilary Burke

ASUNCION (Reuters) - For Horacio Cartes, a millionaire cigarette and soft drink magnate who will be Paraguay's next president, the challenge now is to run a country where most people can only dream of having a sliver of the wealth he does.

The 56-year-old, who won election on Sunday with 46 percent of the vote and will take office in August, campaigned as a center-right conservative at a time when most of Latin America is run by leftists.

Indeed, Cartes has touted a pro-business agenda that includes modernizing the bloated state, which employs about 10 percent of all workers in Paraguay. At a news conference on Monday, he said the state's "main responsibility is to create an environment so that the private sector can work with calm."

He also wants to attract up to $2.7 billion in private capital to refurbish Paraguay's airports and build new highways.

"We have to try to make investments in infrastructure without growing our mass of public workers," he said on Monday.

Yet it may not be quite that easy.

Cartes himself has acknowledged that, to be successful, he must also cater to Paraguay's poor masses. Poverty runs near 40 percent and per-capita gross domestic product was just $5,413 in 2011, the second-lowest in South America behind only Bolivia, according to International Monetary Fund data.

The country of 6.6 million has long been one of the region's most politically unstable, with a fragile economy dependent on agriculture. The last elected president, Fernando Lugo, was impeached last year following civil unrest.

A political novice who never voted before 2009, Cartes will have strong support from Congress, but will also have to sustain the support of his center-right Colorado Party, whose 60-year reign was interrupted by Lugo's election in 2008.

On Sunday, the Colorado Party won control of the lower house and 19 of 45 Senate seats, preliminary election results showed. The Liberals had the second-biggest showing and leftist coalitions came in third place, with Lugo elected senator.

Cartes has promised to reform the Colorado Party, infamous for corruption and whose long period in power included General Alfredo Stroessner's 1954-1989 dictatorship. But some in the party will likely push back against change.

"It's very difficult to know what Cartes wants to do," said political analyst Jose Carlos Rodriguez.

"In principle, he has a neo-conservative project that gives a strong impulse to private companies and nothing to the state. But there's a major inconsistency there and he'll also have a powerful party that will demand certain benefits."

NOTORIOUS FOR CONTRABAND

Paraguay relies heavily on soybean and beef exports but it is also notorious for contraband trade and money laundering. Growth is seen at 13 percent this year after a severe drought caused a contraction in 2012, according to the central bank.

Land conflicts have intensified in recent years and the small, violent left-wing Paraguayan People's Army operates in northern regions.

In January, the Liberal government took an unprecedented step to tap global debt markets, selling $500 million in 10-year bonds that were nearly 12 times oversubscribed.

Cartes expressed misgivings on Monday over the bond, saying the issue was a "very positive step" but that the money could not be used on salaries or other fixed costs that would "grow the daddy state."

On Monday, Paraguay's global bond was trading largely steady. A New York-based trader said it was yielding at 4.37 percent, or 26 basis points tighter than when it was first issued at par, but he said the paper was very illiquid.

Latin America's leftist bloc is especially strong in the Mercosur trade group, which includes Brazil, Argentina, Venezuela and Uruguay. Mercosur suspended Paraguay in June when Lugo was ousted, arguing the two-day impeachment trial was tantamount to a coup.

Soon after, Mercosur brought in socialist Venezuela even though its inclusion was never approved by Paraguay's Congress.

Cartes told reporters on Sunday that he had already made contacts with Mercosur officials to ensure Paraguay's full return to the group. The presidents of Argentina and Uruguay welcomed Paraguay back into the fold after Cartes' victory.

Fiona Mackie, Paraguay analyst at The Economist Intelligence Unit research firm, said she did not think Cartes would pursue plans to open airports and state utilities to private investment due to resistance within the Colorado Party.

"That said, a Cartes government would be relatively open to foreign investment in mineral resources," she wrote last week, noting the recent discovery of a major titanium deposit and plans for an aluminum smelter by Rio Tinto Alcan.

(Additional reporting by Mariel Cristaldo and Joan Magee for IFR in New York; Editing by Brian Winter, Eric Walsh and Vicki Allen)

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Clinton: Nigerian poverty fuels religious violence

ABEOKUTA, Nigeria (AP) -- Former U.S. President Bill Clinton said Tuesday that Nigeria must do more to alleviate the extreme poverty across the nation's predominantly Muslim north in order to halt the wave of bombings, shootings and kidnappings by Islamic extremists there.

Clinton's comment comes as Islamic terror groups have claimed the kidnappings of foreigners in recent days from the region and Nigeria's weak central government appears unable to contain the spreading violence. He said that poverty remains the main driver for the attacks and needs to be addressed by strong local and federal government programs.

Extremists from a radical Islamic sect known as Boko Haram killed at least 792 people last year in Nigeria, according to an Associated Press count. Fighters who said they belong to Boko Haram claimed responsibility Monday for the kidnapping of seven French tourists in northern Cameroon. Ansaru, which analysts believe is a splinter group from Boko Haram, has claimed the kidnappings of seven foreigners — a British citizen, a Greek, an Italian, three Lebanese and one Filipino — all employees of a Lebanese construction company named Setraco.

"You have to somehow bring economic opportunity to the people who don't have it," Clinton said Tuesday. "You have all these political problems — and now violence problems — that appear to be rooted in religious differences and the all the rhetoric of the Boko Harams and others, but the truth is the poverty rate in the north is three times of what it is in Lagos," Nigeria's largest city.

Clinton said that oil-rich Nigeria, which earns billions of dollars from its oil industry and is a major supplier to the U.S., must not take a "divide the pie" approach toward attacking poverty. That appeared to be a subtle reference to the endemic corruption that envelopes government and private industry in the country.

"It's a losing strategy," the former president said. "You have to figure out a way to have a strategy that will have share prosperity."

Poverty is endemic in Nigeria, and corruption has siphoned away billions in oil earnings since the country began exporting crude more than 50 years ago. Government statistics show that in Nigeria's northwest and northeast, regions besieged by Islamic insurgents, about 75 percent of the people live in poverty.

Analysts say that poverty, despite decades of military rule by leaders from the north, coupled with a lack of formal education has driven the region's exploding youth population toward extremism. Those attacks also have strained relations between Christians and Muslims in Nigeria.

Clinton spoke Tuesday in Abeokuta as part of an awards ceremony put on by ThisDay newspaper and its flamboyant publisher Nduka Obaigbena, who has invited the former president several times to Nigeria, along with other celebrities. The event, put on by a newspaper publisher sometimes accused by his staff of not paying them from months at a time, was also attended by former Nigeria military ruler and President Olusegun Obasanjo.

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Jon Gambrell can be reached at www.twitter.com/jongambrellAP .

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