A Klepto-Military Reigns Supreme In Paraguay, a Smuggler's Paradise

PARAGUAY, the last country in South America to shed its long history of military dictators, voted in its first democratically elected civilian president 18 months ago. But the shadow of the military still lingers.

While President Juan Carlos Wasmosy is credited with ending his nation's economic isolation and paving the way for full democracy, he has not confronted the military or cut back the endemic corruption and smuggling traditionally protected by the armed forces. ``Paraguay continues just like always,'' a diplomat in Asuncion says.

An agrarian nation of 4.5 million people, Para-guay has long been a smugglers' showcase of electronic goods, perfume, and stolen cars. Contraband goods flow in and out of Asuncion, Paraguay's capital, on their way to other Latin American nations, especially Brazil and Argentina. The World Bank estimates that Paraguay's annual illicit business profits are $600 million, while other sources say it ranges between $2 billion and $15 billion.

Some observers say they worry that the traditional Paraguay of graft and corruption is overshadowing the potentially new Paraguay, one of four South American partners of Mercosur, the hemisphere's second largest free-trade bloc that includes Brazil, Argentina, Uruguay, and Paraguay.

``We could become the kleptocracy of Mercosur,'' said Jose Luis Simon, director of the Paraguayan Center for Sociological Studies.

Critics argue that President Wasmosy has shied away from eradicating the contraband industry by not opposing the smugglers' major source of protection: the armed forces.

``Wasmosy is afraid of confronting the military,'' said Ricardo Caballero, a columnist for the Asuncion daily, ABC Color. ``He knows they want to keep their illegal operations, since a career in the Army is still the shortest pathway to riches.''

Confronting the military would also mean challenging the most powerful Army officer, Gen. Lino Cesar Oviedo. Diplomats say there is no evidence that General Oviedo - who makes no secret about the fact that he wants to run for president in 1998 - is directly involved in corruption. But few doubt he benefits from it.

``Since he's the lion,'' Mr. Caballero says, ``he must be getting the lion's share.''

The military's control of contraband goods flourished under the dictatorship of Gen. Alfredo Stroessner Mattiauda, who ruled for 34 years before being overthrown in a coup in 1989. ``Stronismo,'' as the military-contraband business scheme is often called, garnered loyalty by doling out smuggling zones to key officers. As a result, many officers today live in mansions, drive expensive cars, and spend vacations abroad.

Despite the criticism, Wasmosy has made some headway in cleaning up Paraguay's shady image. He has retired 16 of the most corrupt generals and has recently appointed Ruben Fadlala as customs director of Ciudad del Este, a city on the eastern border with Brazil known as the smuggling capital of Paraguay. The reportedly honest Mr. Fadlala has since ordered federal agents to stop all container trucks on the city outskirts to assess taxes and confiscate illegal drugs.

Drugs are another crucial part of the illegal economy in a country where, by some estimates, illegal commerce still makes up nearly 60 percent of economic activity and half of international trade. US officials say Paraguay is an important transit stop with an estimated ton-and-a-half of cocaine going each week to the United States and Europe.

But the government's failure to weaken the military has permitted local anti-drug agencies to be lax in their arrest of cocaine traffickers. While Paraguay's neighbors confiscate tons, Paraguay has seized only about 200 pounds in the past two years.

In fact, former US Ambassador Jon Glassman was so frustrated by the Wasmosy government's lackluster performance that he asked the Clinton administration to brand it as uncooperative. Instead, Glassman was recalled to Washington for being too undiplomatic.

Wasmosy insists that he has been cooperative but argues that his government doesn't have the means to fight drug traffickers. As proof of his resolve, he cites the constant death threats he receives by mail and by phone.

``After we decided to confront the traffickers and smugglers,'' he recently told the Monitor, ``they threatened me with death and killed my right-hand man against drugs.''

In December, the US Embassy in Bolivia received information that Wasmosy could be assassinated at the New Year's Day inauguration of Brazilian President Fernando Henrique Cardoso. At the Brasilia event, the Paraguayan leader was the most heavily guarded head of state with an escort of two armored cars and a police helicopter flying overhead.

Yet few critics believe the military wants Wasmosy out of the way. After all, they say, he hasn't interrupted their business ventures and is himself a product of Stronismo.

WASMOSY was a civil engineer who became one of Paraguay's richest men in the 1970s on construction contracts from the giant Itaipu hydroelectric project. It is widely believed that he won his Colorado Party's primary election thanks to fraud engineered by Oviedo, who Wasmosy promoted to commander of the armed forces after assuming the presidency.

Ironically, Oviedo has since become the president's worst political problem. He has embarrassed Wasmosy - not the first time - by defying the Congress after it had passed a law last year prohibiting military personnel from making political statements.

``They want us to keep our tails between our legs, to live like cockroaches beneath the boards,'' he told a group of peasant farmers. ``We don't know if the man was born who can sew up the mouths of the military.'' Oviedo received not even a reprimand from the president, who argued that the general did nothing more than ``insult politicians.''

In the meantime, the Congress is studying new laws that would make it illegal for soldiers on active duty to engage in commercial ventures and require them to declare the origin of all assets.

Most important, this move illustrates that a new generation of post-Stroessner modernizers are emerging, banking on Mercosur with its system of rules to usher in an era of corrupt-free business.

In Asuncion, two shopping centers are now under construction. Pizza Hut has opened several stores, and McDonald's may arrive no later than 1996. Foreign investment is currently estimated at $349 million.

``Mercosur is the best thing for Paraguay,'' said TV anchorman Benjamin Fernandez. ``It means we will stop being an island and become part of the continent.''