Wikipedia:WikiProject Library of Congress Country Studies/Paraguay

Peace corps

History

Government

Because of Paraguay’s long history of dictatorship, the government has always exercised strict control over the political system and economic activities of the country, including local government activities. However, in 1992 Paraguay approved a new constitution that introduced several changes in its political system. The new constitution calls for a process of decentralization in which certain powers are to be transferred to municipal and departmental governments.

Since Alfredo Stroessner was overthrown in a military coup in 1989, Paraguay has undergone a process of democratization. Open elections, liberalization of the press, and public debate of issues have created an atmosphere conducive to change. In May 1993, Paraguay elected its first nonmilitary president in 40 years. In another landmark election in May 1998, Paraguay voted to pass the presidency from one civilian government to another. In March 1999, the assassination of the vice president led to the resignation of the new president. In spite of threats of a constitutional crisis, the presidency passed to the president of the Senate, Luis Angel González Macchi, as mandated by the constitution. The Macchi government, however, was ineffective in making necessary reforms, and the country’s socioeconomic difficulties worsened during his mandate. The current president, Nicanor Duarte Frutos, took office on August 15, 2003. Though Paraguay’s socioeconomic situation remains difficult, there is some hope among the people that the new government will tackle the country’s longstanding problems. Paraguay’s current president and government have a legitimacy that the former administration lacked and appear willing to implement some anti-corruption measures within and against the controlling party and the Supreme Court.

Economy

Roughly half the population lives in rural areas, and Paraguay relies on agricultural and forestry commodities for more than 95 percent of its exports. These sectors provide about one-third of the gross domestic product and 45 percent of the employment.

Principal exports have until recently been dominated by two commodities, cotton and soybeans, the former of which has traditionally been the main source of income for farm (campesino) families. However, the export of cotton has decreased over the past decade, while the export of meat has increased. The shift has contributed significantly to rising poverty among campesino families, as meat is produced by large ranches with low labor input. At the same time, dependence on so few export crops places Paraguay in a highly vulnerable position when there are drastic shifts in international market prices, as occurred in 1992, or serious climatic perturbations, as happened in 1998 during El Niño.

Household economic patterns in the countryside vary from basic subsistence to full-wage labor. Most families earn a living from a combination of strategies, with cultivation of some food crops and some cash crops, and occasional outside paid labor of one or more family members. As the population increases and land becomes more scarce, increasing numbers of farm families abandon the land and search for wage-labor opportunities in rural areas or the capital city of Asunción. A traditional release for Paraguay’s unemployed has been Argentina, but this option has closed because of that country’s own economic difficulties.

People and Culture

In Paraguay, a multitude of customs, beliefs, and art forms contributes to the richness of the culture. These customs and beliefs provide a sense of continuity to Paraguayans, and some may regard change with suspicion. The pace of life and work is slow. Paraguayans hold their native language, Guaraní, very dear, viewing it as the vessel that carries and transmits their culture. However, music is undoubtedly the art that has given Paraguay the greatest prestige around the world. It is the country’s most efficient means for the dissemination of its culture, even if the common tunes are known as “waltzes” and “polkas” (Guaranías are also a musical staple). Native handicrafts unique to Paraguay include the delicate ñandutí lace. Employing great imagination and skill, Paraguayan women produce some of the world’s finest lacework. Ñandutí, which is made in a circular design, takes its name from a Guaraní word meaning spider web.

Environment

Landlocked Paraguay, located in the heart of South America, is a place of great physical beauty and considerable environmental diversity. Surrounded by Argentina, Bolivia, and Brazil, it is linked to the Atlantic through the Paraná-Paraguay River system, which flows south through Argentina. The country lies in the subtropics mostly south of the Tropic of Capricorn. Similar to central Florida in climate, it can be very hot in the summer months and extremely cold in the winter months. Freezes are rare but do occur once or twice each year.

The Paraguay River divides the country into distinct eastern and western regions. Eastern Paraguay is more temperate and has a gentle, rolling terrain with wooded hills, subtropical forests, and fertile grasslands. Rainfall is plentiful for most of the year in this section of Paraguay. So, too, are heat and humidity, especially from October through April, when temperatures typically rise above 90 degrees Fahrenheit. The Chaco in western Paraguay is a low plain covered by marshes, savannas, and dense scrub forests. As one travels westward from the Paraguay River, rainfall becomes increasingly scarce and living conditions become increasingly harsh.

Although Paraguay is in many ways more fortunate than more densely populated Latin American countries, it is nonetheless undergoing an alarming degree of environmental degradation. Paraguay’s deforestation rate is among the highest in the world, and its fragile soils are subjected to unsustainable farming practices that also involve high use of chemical pesticides and fertilizers. These factors and others have led to decreased agricultural productivity and shortages of firewood, fruits, and lumber.

Cuisine

Paraguayans tend to eat more simple meals than people do in the United States. Dietary habits and the lack of agricultural diversity often limit meals to beans, rice, noodles, meat (when available), corn, onions, tomatoes, and manioc. Manioc or mandioca (more commonly known in other countries as yuca or cassava) is the staple food in rural Paraguay and is as ubiquitous at the table as bread is in other countries.

Geography and Climate

Unlike more tropical countries, Paraguay does have distinct seasons. Summer (November through March) is long, hot, and humid, with temperatures reaching as high as 105 degrees Fahrenheit (40 degrees Celsius). Winter (June through mid-September) is short and mild, with periods of cold weather (down to 30 degrees Fahrenheit) and occasional frosts. Because of the high humidity and lack of indoor heating, cold winter days may seem more severe than they actually are. The short spring and autumn seasons usually are mild and balmy.

Because of Paraguay’s southern latitudes, the length of daylight also differs according to the season. In the winter, the sun may set by 5 p.m. In September, the country goes on Daylight Savings Time, and by mid-December it is light outside until nearly 8:30 p.m. Paraguayans adjust their social and business calendars according to these differences. In the winter, activities are compressed, and people are in bed by 10 p.m., but in the summer, people may not even eat dinner until after 10. At the same time, activities slow down remarkably during the summer, especially in rural areas, and a long midday siesta divides the workday into early morning and late afternoon periods.

In the eastern part of the country, there is no marked rainy or dry season, and there is apt to be abundant rain throughout the year. Summer rains tend to be short and intense, while winter rains tend to be longer and lighter. There are months with little or no rain and months when it rains nearly every day.

=Social Activities

Recreation in smaller towns often centers on the family, with an occasional dance, soccer game, or horse race to attend. In the evening, many families gather with friends for volleyball games. The losers pay for drinks, which might be soft drinks (gaseosas) or beer. People frequently sit in clusters (often limited to one gender or age group) to drink the ubiquitous yerba maté, a common local drink made from the leaves of a shrub native to the region, either cold (tereré) or hot (in the early morning or in wintertime). During the hot summer, an important social activity is likely to be bathing in the local arroyo, or small stream. The electrification of the countryside has increased the popularity of telenovelas (soap operas).

In Asunción and larger towns, there is a wider variety of options for social activities, including movie theaters, nightclubs, restaurants, and sporting events.

CRS report

Political Situation

The current political context in Paraguay has been shaped by the country’s turbulent political history. In the late 19th century, a two-party system emerged withthe formation of the Colorado Party and the Liberal Party, but the Colorado Party soon became the dominant political force, ruling between 1887 and 1904. Paraguay was defeated in the War of the Triple Alliance (1864-1870) against Argentina, Brazil and Uruguay and lost 25% of its territory and over half of its population. This defeat led to an extensive period of political instability, with three civil wars in the first half of the 20th century and a war with Bolivia between 1932-1935, the Chaco War, that further weakened political institutions and hindered economic development. The Liberals ruled from 1904 until 1940, until the military assumed control with a succession of authoritarian leaders.

The Colorado Party returned to power in 1946, and has remained in power until the present day, making it the longest-ruling political party in the world. In the late 1940s, the party began to assume greater control over state institutions and the bureaucracy to the point where party membership was a prerequisite for civil service positions and promotion in the military, further perpetuating the Colorado Party’s dominance.

General Alfredo Stroessner, who was a member of the Colorado Party, staged a coup in 1954, and consolidated power in a repressive military dictatorship that lasted 35 years. The key to the Stroessner regime’s longevity was an alliance among the military, dominant economic groups, and the Colorado Party. The military regime was characterized by strong political repression, the personalization of authority, ultra-nationalist and anti-communist rhetoric, and widespread corruption. With democratic advances occurring in other South American countries, Stroessner ultimately was overthrown in a 1989 coup and fled to Brazil, where he lived until his death in 2006. In 2004, a Truth and Justice Commission ultimately was set up to investigate human rights abuses that occurred under the Stroessner regime.

The overthrow of the Stroessner regime initiated a process of democratization, with the enactment of a new constitution in 1992 and competitive elections held for the first time in 1993. Despite the democratic transition, however, many characteristics of the country’s extensive period of military rule have persevered. Although opposition parties have held a majority in Congress, the dominance of the Colorado Party has remained intact, including its control over the state apparatus. The political culture has remained a product of the country’s authoritarian past with pervasive corruption and clientelism. Nascent democratic institutions have been weak and almost every post-Stroessner President has faced some legal troubles.

In 1996, Army Commander General Lino Oviedo revolted after President Juan Carlos Wasmosy ordered him to step down. Oviedo resigned, but attempted to run in the 1998 presidential elections as the Colorado Party’s candidate. Oviedo’s candidacy was nullified after the Supreme Court upheld his conviction and ratified a 10-year prison term for his barracks revolt. Oviedo’s running mate, Raúl Cubas, was elected President in 1998 and defied the Supreme Court by freeing Oviedo from prison as one of his first acts in office. This action led to the initiation of impeachment proceedings against the President, and intensified the rivalry between Vice President Luis Maria Argaña and President Cubas and Oviedo. Argaña was assassinated in March 1999 and blame was placed on both Cubas and Oviedo, sparking widespread demonstrations and violence in Asunción. President Cubas was forced to resign, and both he and Oviedo fled the country. As a result, Luis Gonzalez Macchi, the president of the Senate, completed the presidential term and attempted to establish a government of national unity, but constant infighting within the coalition led to a weak government that was marred by corruption and inefficiency.

Nicanor Duarte Frutos of the Colorado Party (National Republican Association or ANR) was elected president on April 27, 2003, defeating Julio César Franco of the opposition Authentic Radical Liberal Party (PLRA, related to the original Liberal Party) as well as three other candidates in an election that observers judged to be free and fair. The Colorado Party also captured 37 seats in the 80-member Chamber of Deputies, the largest block, and 16 of 45 seats in the Senate, while the largest opposition party, the PLRA, won 21 seats in the lower house and 12 seats in the Senate. Three smaller parties won the remaining seats. During the campaign, Duarte portrayed himself as a strong leader, and he promised to implement widespread institutional reforms, prioritize the fight against corruption and establish a transparent government. As discussed below, President Duarte has enacted reforms that tackle tax evasion and corruption. Since his election, however, the President’s popularity has declined because of public concerns about rising crime and unemployment. As a result, he has resorted to more populist rhetoric as a means of retaining support for the Colorado Party.

Corruption

now in Corruption in Paraguay

2008 Election

more current info already in Paraguayan general election, 2008

Economy

The Paraguayan economy, which remains heavily dependent upon its traditional agricultural exports of soybeans, cotton, and meat, grew by 4% in 2006. Economic growth is forecast to reach 3.7% in 2007. Paraguay lacks significant mineral and petroleum resources, but possesses vast hydroelectric resources, including the world’s largest hydroelectric generation facility, the Itaipú Dam, built and operated jointly with Brazil. Remittances from Paraguayans living abroad have significantly contributed to sustained economic growth. According to the Inter-American Development Bank, remittances totaled some $650 million in 2006.

Paraguay experienced an economic recession for several years in the aftermath of a succession of bank failures from 1996-1998 that wiped out half of Paraguay’s locally owned banks. When elected in 2003, President Duarte inherited a government that had defaulted on $138 million in debt, primarily as a result of low tax revenue. Under President Duarte, the economy rebounded, due in part to the implementation of reforms that include anti-corruption initiatives, which have increased revenue, strengthened institutions, and created a more favorable environment for foreign investment.

Paraguay is heavily influenced by the economic conditions of its larger neighbors, Argentina and Brazil, which are fellow members of the Common Market of the South (Mercosur). As one of the smaller countries of Mercosur, Paraguay has complained that its exports face significant restrictions entering Argentina and Brazil. Paraguay’s industrial sector is still largely underdeveloped, with much of the population still employed in subsistence agriculture. Economic growth tends to be limited by Paraguay’s imports of manufactured goods, as well capital goods that are necessary to supply the industrial and investment requirements of the economy. This has led to a widening of the country’s trade deficit, estimated at $1.1 billion in 2006.

Paraguay’s informal sector is very large, estimated at about half of the country’s gross domestic product, and is estimated to employ over 40% of wage-earning workers. A significant part of the country’s commercial sector consists of importing goods from the United States and Asia for re-export into neighboring countries. Most of these imported goods are not declared at customs, preventing the government from obtaining substantial tax revenue. Counterfeit trade and smuggling are prevalent in the country’s border regions.

US Relations

Paraguay and the United States have good relations, cooperating extensively on counternarcotics and counterterrorism efforts. The United States strongly supports the consolidation of Paraguay’s democracy and continued economic reforms. President Duarte is viewed by many observers as very pro-U.S. and became the first Paraguayan head of state to be received at the Oval Office. The United States is Paraguay’s eighth largest trading partner, with trade increasing over the last four years. U.S. imports from Paraguay totaled about $58 million in 2006 while in the same year, the value of U.S. exports to Paraguay was over $910 million, according to Department of Commerce trade statistics. The protection of intellectual property rights (IPR) has been a U.S. concern, especially piracy, counterfeiting, and contraband. The Duarte government has made significant efforts to improve IPR protection, but the United States Trade Representative maintains that the country continues to have problems due to its porous border and ineffective prosecutions.

US aid

The United States provided about $13.3 million in aid to Paraguay in FY2006 and an estimated $11.7 million in FY2007. For FY2008, the Administration has requested $9.7 million in assistance, including $1.3 million to support child survival and health, $4.7 million in development assistance and nearly $3 million for a Peace Corps program. Development assistance includes support for projects that promote export diversification and private investment, as well as projects that aim to combat corruption and strengthen institutions. In past years, Paraguay had faced restrictions in terms of receiving Economic Support Funds (ESF) and International Military Education and Training (IMET) assistance because the Paraguayan government has not signed a bilateral immunity (Article 98) agreement that would give U.S. soldiers immunity from International Criminal Court prosecution. In the fall of 2006, however, President Bush waived the Article 98 restrictions for IMET and ESF for Paraguay.

In addition to regular foreign assistance funding, Paraguay signed a $34.65 million Threshold Program Agreement with the Millennium Challenge Corporation in May 2006, with the funds targeted specifically at programs to combat corruption. Paraguay also signed an agreement with the United States in 2006 under the Tropical Forest Conservation Act that provides Paraguay with $7.4 million in debt relief in exchange for the Paraguayan government’s commitment to conserve and restore tropical forests in the southeastern region.

Counternarcotics Cooperation

Paraguay is a major transit country for illegal drugs destined primarily for neighboring South American states and Europe. The Chaco region in the northwestern part of the country is a major transshipment point of illegal drugs, along with the tri-border area (TBA) with neighboring Argentina and Brazil. A 1987 U.S.-Paraguay bilateral counternarcotics agreement was extended in 2006. U.S. counternarcotics efforts in Paraguay have focused on providing training, equipment and technical assistance in order to strengthen the capacity of the country’s National Anti-Drug Secretariat (SENAD), along with initiatives to help combat money laundering and corruption. The United States is assisting in the completion of a helicopter pad and support facilities that would increase SENAD’s capacity to disrupt trafficking networks. According to the State Department’s March 2007 International Narcotics Control Strategy Report, SENAD arrested several major Brazilian drug traffickers and in 2006, carried out drug seizures that inflicted an estimated financial loss of $39 million to narcotics traffickers.

TBA and Terrorism

The United States is particularly concerned about illicit activities in the TBA, where money laundering, drug trafficking, arms smuggling, and trade in counterfeit and contraband goods are prevalent. Such activities thrive in the tri-border region due to porous borders, a lack of surveillance, weak law enforcement and pervasive corruption by local officials, especially in the Paraguayan border city of Ciudad del Este. The United States has worked closely with the governments of the TBA countries on counterterrorism issues through the “3+1” regional cooperation mechanism, which serves as a forum for discussions, and the United States has provided anti-terrorism and anti-money-laundering support to Paraguay. For a number of years, the United States has had concerns that the radical Lebanon-based Hezbollah and the Sunni Muslim Palestinian group Hamas have used the TBA for raising funds among its sizable Muslim communities by participating in illicit activities and soliciting donations. Nevertheless, according to the State Department’s annual terrorism report for 2006 (issued in April 2007), there is no corroborated information that these or other Islamic extremist groups have an operational presence in the TBA.

The State Department’s terrorism report states that Paraguay did not exercise effective immigration or customs control on its borders, and that although Paraguay is generally cooperative on counterterrorism efforts, its judicial system remains severely hampered by a lack of strong anti-money-laundering and counterterrorism legislation. In May 2007, Paraguay’s Chamber of Deputies approved a bill that would incorporate a clause on terrorism in the country’s penal code, making terrorist association and the financing of terrorist activity punishable crimes. In August 2007, however, Paraguay’s Senate delayed the bill because of concerns that its definition of a terrorist act could lead to legitimate social protests being labeled criminal acts.

Travel.state.gov

Crime

in Crime in Paraguay

Transportation

Only minimal standards must be met to obtain a Paraguayan driver's license, and driver education prior to licensing is not common. Drivers throughout Paraguay routinely ignore traffic regulations. No vehicle insurance is required, and many Paraguayans drive without any insurance coverage. Persons who drive in Paraguay should be prepared to drive defensively and with their own insurance in both urban and rural areas.

Public transportation is readily available for urban and inter-city travel. Buses vary in maintenance conditions and may not meet U.S. safety standards. Armed robberies and pick pocketing occur on buses in cities and rural areas, sometimes with the apparent collusion of the bus driver. Taxis are available and may be called using telephone numbers listed in the newspapers. No passenger train service exists. Bicycle travel may not be safe due to traffic and other road hazards.

Most urban streets consist of cobblestones over dirt. Some roads in Asuncion and other large cities are paved. However, these roads frequently develop potholes that often remain unrepaired. Nearly all rural roads are unpaved, and during rainy periods and the rainy season (November-March/April), they may be impassable. Road signs indicating hazards, such as sharp curves or major intersections, are lacking in many areas.

Driving or traveling at night is not advisable outside Asuncion because pedestrians, animals, or vehicles without proper lights are often on the roads. In addition, assaults and other crimes against motorists traveling at night have occurred. Extra precautions should be exercised along infrequently traveled portions of the rural roads.

Intercity highway maintenance is not equal to U.S. standards. The privately maintained toll road between Caaguazu and Ciudad del Este and the routes between Asuncion and Encarnacion and Asuncion and Pedro Juan Caballero are in good condition. Most other intercity routes are in good to fair condition, with brief stretches in poor condition. The Trans-Chaco route is in fair condition except for the portion between Mariscal Estigarribia and the Bolivian border, which is unpaved and at times impassable.

Economic policy

Over the last decade, Paraguay's economic policy framework has encouraged the re-export trade to Brazil and Argentina and provided tax and regulatory advantages as well as softloans to non-competitive local industries. In agriculture, the government has continued non-transparent state-run cotton programs for small farmers and kept hands off large-scale private sector oil seed production, the leading source of hard currency from exports. Government investment has shrunk as spending on debt service and government salaries, to provide political patronage, drain government revenue.

The economy in Paraguay has been falling for the past three years, while population growth has continued unabated. According to the Paraguayan Central Bank, the GDP fell by 0.5 percent in 1999 and 0.4 percent in 2000. It is expected to fall by 0.5 percent in 2001. Until the mid-1990s, Paraguay largely avoided deficit spending and kept foreign debt at manageable levels. Government spending as a percentage of GDP began to increase earlier in the decade, but deficits were avoided due to revenue windfalls from taxes and tariffs on imports from the re-export trade. This windfall was not productively invested, but rather spent to swell already bloated government payrolls.

The Central Bank under the Cubas administration (August 1998 - March 1999) kept interest rates high on guarani-based bonds sold to private banks, limiting liquidity, and keeping exchange rate pressures off the guarani. In an effort to stimulate the economy, the Gonzalez Macchi government has lowered interest rates from 29 to 9.5 percent between May 1999 and September 2000. However, the regional crisis started in Argentina and the fall in the value of the Brazilian real have forced the Central Bank to bring short-term rates back up to 28 percent. A series of banking failures and political instability over the last several years has led investors to move to dollar-based deposits and loans. The Paraguayan government is heavily dependent on tariff revenue, which will continue to shrink in the near future as Mercosur adjusts downward its common external tariff rate.

Paraguay’s membership in Mercosur offers some opportunities. Efforts to improve weak infrastructure, especially in power transmission and distribution; telecommunications; road, river, and civil aviation systems; postal system; potable water; and sewage treatment provide potential markets for United States' goods and services. Privatization of state monopolies is moving forward, with the first privatization of the fixed-line telecom company expected to be completed by the end of 2001. With its partners in Mercosur, Paraguay has renewed discussions with the U.S. on promoting economic integration and business facilitation under a 4+1 formula.

Exchange Rate Policy All foreign exchange transactions are settled at the daily free market rate. The Central Bank practices a dirty float, with periodic interventions aimed at stabilizing the guarani. With the recent fluctuations in the value of the Brazilian real, these interventions have become more frequent. Over the past 9 months, the guarani has depreciated by 29 percent against the dollar. On October 11, the market rate stood at 4,440 guaranies to the dollar. It is legal to hold savings accounts in foreign currency, and in October 1994 a decree was promulgated that legalized contractual obligations in foreign currencies. With a lingering recession, the failure of many local banks, and exchange rate uncertainty, the dollar has become the preferred unit for large purchases, savings, and virtually all international transactions. Two-thirds of all funds in Paraguayan savings accounts are in dollar-based accounts as of October 2001. 3. Structural Policies Consumer prices are generally determined by supply and demand, except for public sector utility rates (water, electricity, telephone), petroleum products, pharmaceutical products, and public transportation fares. The Ministry of Finance oversees all tax matters. Under current law, the corporate income tax rate is 30 percent. There is no personal income tax. As an incentive to investment, the tax rate on reinvested profits is 10 percent. The existing Investment Promotion Law (Law 60/90) includes complete exemption from start-up taxes and customs duties on imports of capital goods. There is a 95 percent corporate income tax exemption for five years on the income generated directly from investment approved for fiscal incentives under law 60/90. The Ministry of Finance, at the urging of the IMF, is currently studying the elimination of a variety of tax breaks, including Law 60/90, to help balance the budget. Implemented in 1992, the value-added tax (IVA) stands at ten percent. Some analysts have estimated that IVA compliance hovers around 30 percent. Charges of corruption among tax officials are endemic. Nearly half of all tax revenues are collected at customs on imported merchandise. Agriculture makes up over 25 percent of GDP, but contributes less than one percent of government revenue. Even though land taxes are low, chaotic land title records make land tax evasion the norm. 4. Debt Management Policies In 1992 the government reduced external debt with both official and commercial creditors through a drawdown of foreign reserves. Since that time, however, increasingly large public deficits have nudged public debt back upward. Foreign reserves stood at $680 million at the end of August 2001. The government’s debt at the end of July 2001 totaled $2.160 billion. Nearly all of this is bilateral or multilateral debt with minimal outstanding loans to private sector banks. Although the World Bank had initially announced that it would close its office in Paraguay at the end of 2000, the office has remained open, though staffed only part-time. A recent IMF survey showed that Paraguay was generally on target with the IMF plan, though the pace of state reform was still deemed to be too slow. Paraguay continues to meet its obligations to foreign creditors in a timely fashion.

6. Export Subsidies Policies There are no discriminatory or preferential export policies. Paraguay does not subsidize its exports. However, Paraguay exports 90 percent of its cotton crop, and government-subsidized credit to small-scale producers signifies an indirect export subsidy. The government provides small-scale farmers with subsidized inputs, such as seed and pest control products.

7. Protection of U.S. Intellectual Property Paraguay belongs to the World Trade Organization (WTO) and the World Intellectual Property Organization (WIPO). It is also a signatory to the Paris Convention, Berne Convention, Rome Convention, and the Phonograms Convention. In August 2000, Paraguay ratified the WIPO Copyright Treaty (LAW 1582) and the WIPO Performances and Phonograms Treaty (LAW 1583). In January 1998, the U.S. Trade Representative designated Paraguay as a “Special 301” Priority Foreign Country. On February 17, 1998, the U.S. government initiated a 301 investigation of Paraguay as a result of its inadequate enforcement of intellectual property rights, its failure to enact adequate legislation, its status as a distribution center for counterfeit merchandise, and the large illicit re-export trade to other MERCOSUR countries. On November 17, 1998, USTR concluded a bilateral Memorandum of Understanding (MOU) and Enforcement Action Plan that contain specific near-term and longer-term obligations to improve the intellectual property regime in Paraguay. The agreement contains commitments by Paraguay to take action against known centers of piracy and counterfeiting; pursue amendments to its laws to facilitate effective prosecution of piracy and counterfeiting; coordinate the antipiracy efforts of its customs, police, prosecutorial, and tax authorities; implement institutional reforms to strengthen enforcement at its borders; and ensure that its government ministries use only authorized software. As a result of this agreement, the U.S. government has revoked Paraguay’s designation as a Priority Foreign Country and terminated the Special 301 investigation. Implementation of the MOU is being monitored under Section 306 of the U.S. Trade Act. On September 20, 2000, the United States and Paraguay signed a Memorandum of Agreement under which the U.S. government agrees to jointly develop and fund a program to improve Paraguay's IPR protection regime. Since then, progress has been made in the enforcement of intellectual property rights, though much still remains to be done. Patents: The Senate is currently considering the final version of comprehensive patent legislation. Domestic industry has successfully lobbied to weaken the law. Paraguay also has patent obligations as a member of the WTO. Trademarks: On August 6, 1998, a new Trademark Law was promulgated that includes a broader definition of trademarks. The law prohibits the registration of a trademark by parties with no legitimate interests. Provisions provide specific protection for well-known trademarks. The law also includes stronger enforcement measures and penalties for infractions. In practical terms, trademark violation is still rampant in Paraguay, and resolution in the courts is slow and nontransparent. The new law provides an important first step, but must be followed by increased enforcement and modernization of the judicial system to become fully effective. Copyrights: A new Copyright Law was signed on October 15, 1998, which follows international conventions to protect all classes of creative works. Software programs receive thesame treatment as literary works under the law. The law contains norms that regulate contracts related to copyrights. Law 1444, passed on June 25, 1999, made copyright violations “public actions,” allowing public prosecutors to take legal action without requiring the offended party to seek redress. Practical application of copyright protection suffers the same systemic challenges as trademark protection. 8. Worker Rights In October 1993, the Paraguayan Congress approved a new Labor Code that met International Labor Organization standards. a. The Right of Association: The constitution allows both private and public sector workers, except the armed forces and police, to form and join unions without government interference. It also protects the right to strike and bans binding arbitration. Strikers and leaders are protected by the Constitution against retribution. Unions are free to maintain contact with regional and international labor organizations. b. The Right to Organize and Bargain Collectively: The law protects collective bargaining. When wages are not set in free negotiations between unions and employers, they are made a condition of individual employment offered to employees. Collective contracts are still the exception rather than the norm in labor/management relations. c. Prohibition of Forced or Compulsory Labor: The law prohibits forced labor. Domestics, children, and foreign workers are not forced to remain in situations amounting to coerced or bonded labor. d. Minimum Age for Employment of Children: Minors from 15 to 18 years of age can be employed only with parental authorization and cannot be employed under dangerous or unhealthy conditions. Children between 12 and 15 years of age may be employed only in family enterprises, apprenticeships, or in agriculture. The Labor Code prohibits work by children under 12 years of age, and all children are required to attend elementary school. In practice, however, many thousands of children, many under the age of 12, work in urban streets in informal employment. e. Acceptable Conditions of Work: The Labor Code allows for a standard legal work week of 48 hours, 42 hours for night work, with one day of rest. The law also provides for a minimum wage, an annual bonus of one month’s salary, and a minimum of six vacation days a year. It also requires overtime payment for hours in excess of the standard. Conditions of safety, hygiene, and comfort are stipulated. f. Rights in Sectors with U.S. Investment: Conditions are generally the same as in other sectors of the economy.