HISTORY
Spanish Settlement
On August 15, 1537, Spanish adventurers seeking gold established a fort on the Paraguay River, calling it Nuestra Señora de la Asunción (Our Lady of the Assumption), because that day was the feast day honoring the Assumption of the Virgin Mary. Colonial Paraguay and the territory of present-day Argentina were ruled jointly until 1620, when they became separate dependencies of the viceroyalty of Peru.
Beginning about 1609, the Jesuits, working under great hardship, established many missions called reducciones, which were settlements of Native American converts, whom the missionaries educated. The communal life on these settlements was similar to the original life of the Native Americans. Granted almost complete freedom from civil and ecclesiastical local authorities, the Jesuits, through the missions, became the strongest power in the colony. In 1750 King Ferdinand VI of Spain, by the Treaty of Madrid, ceded Paraguayan territory including seven reducciones to Portugal, and the Jesuits incited a Guaraní revolt against the transfer. In 1767 the missionaries were expelled from Spanish America, including Paraguay; soon thereafter, the missions were deserted.
In 1776 Spain created the viceroyalty of La Plata, which comprised present-day Argentina, Paraguay, Uruguay, and Bolivia. Paraguay became an unimportant border dependency of Buenos Aires, the capital of the viceroyalty, and sank gradually into relative insignificance until the early 19th century.
Independence
In 1810 Argentina proclaimed its independence of Spain, but Paraguay refused to join it and instead proclaimed its own independence on May 14, 1811. Three years later José Gaspar Rodríguez Francia made himself dictator and ruled absolutely until his death in 1840. Fearing that Paraguay might fall prey to stronger Argentina, Francia dictated a policy of national isolation. In the administrative reorganization following the dictator's death, his nephew Carlos Antonio López became the leading political figure. In 1844 López became president and dictator. He reversed the isolationist policy, encouraged commerce, instituted many reforms, and began building a railroad. Under his rule the population of Paraguay rose to more than 1 million.
Ruinous War
At his death in 1862 López was succeeded by his son, Francisco Solano López. In 1865, looking to build an empire, he led the nation into a war against an alliance of Argentina, Brazil, and Uruguay. The war devastated Paraguay, and when the death of López in 1870 ended the conflict, more than half of the population had been killed, the economy had been destroyed, and agricultural activity was at a standstill. Territorial losses exceeded 142,500 sq km (55,000 sq mi). The country was occupied by a Brazilian army until 1876, and the peace treaties imposed heavy indemnities on the country. In 1878 President Rutherford B. Hayes of the United States was arbiter in the settlement of boundaries between Argentina and Paraguay.
Reconstruction
Paraguayan history after the war was largely an effort to reconstruct the country. Immigration was encouraged, and Paraguay established subsidized agricultural colonies. The unsettling effects of the war, however, were apparent for many decades, particularly from 1870 to 1912, when no president was able to serve out a full term. Subsequently, periods of political stability alternated with periods of ferment and revolt. The administration (1912-1916) of Eduardo Schaerer was relatively enlightened. The country remained neutral and prosperous during World War I (1914-1918), and the administrations of Manuel Gondra (1920-1921), Eusebio Ayala (1921-1923), and Eligio Ayala (1923-1928) were on the whole periods of peace and progress. The border with Bolivia in the Gran Chaco, which had never been formally drawn, was the scene of numerous incidents between 1929 and 1932. In the latter year a full-scale war broke out when the area was invaded by Bolivia. An armistice was declared in 1935. In the final settlement, made by an arbitration commission in 1938, Paraguay was given about three-fourths of the disputed area. See Also Chaco War.
After the war, the government was reorganized to permit widespread economic and social reforms. By a new constitution adopted in 1940, the state was given the power to regulate economic activities and the government was highly centralized. Paraguay declared war on Germany and Japan on February 7, 1945. The country subsequently became a charter member of the United Nations.
Morínigo and Chávez
In 1940 General Higinio Morínigo had made himself president and ruled as a dictator for the next eight years. A coup d'état deposed him in 1948. In September 1949, Federico Chávez, an army-backed leader of a faction of the dominant Colorado Party, was elected president without opposition. He imposed a dictatorship much like that of Morínigo. In March 1951 the Chávez regime devalued the currency in an attempt to check inflation and the loss of gold reserves. The economic crisis was aggravated in 1952, when Argentina, itself the victim of depressed economic conditions, abrogated a barter agreement with Paraguay. During the year legislation granted various benefits to workers. In general elections held on February 15, 1953, President Chávez was reelected, again without opposition. He imposed wage and price controls in June 1953 to check inflation. On May 5, 1954, his government was overthrown by an army-police junta.
The Stroessner Regime
The electorate on July 11 endorsed General Alfredo Stroessner, commander in chief of the army and head of the Colorado Party. He was the only candidate. Attempts by leftist forces to seize power were put down in 1956 and 1957. A plebiscite in 1958 confirmed President Stroessner for another five-year term.
In elections for a new congress in 1960, all 60 seats were won by the president's supporters in the Colorado Party. Diplomatic relations with Cuba were severed in December. Paraguay was among the states that favored collective action by the Organization of American States against the Cuban regime, but such measures were not approved by the two-thirds majority required. In 1963 Stroessner was reelected president, running against the first opposition candidate in a Paraguayan presidential election in 30 years. He enjoyed some popularity in the mid-1960s, partly because of continued economic progress, but many Paraguayans had also fled into exile from his dictatorship. Stroessner continued in power in 1968 after having had the constitution altered the previous year to permit his reelection. He was again reelected in 1973, 1978, and 1983.
A significant step was taken by the Stroessner regime in the late 1960s with the establishment of close economic relations with neighboring countries. In May 1968 the La Plata Basin Pact was signed by the foreign ministers of Argentina, Bolivia, Brazil, Paraguay, and Uruguay. This agreement, calling for joint development of the La Plata River Basin, was expected to stimulate the economy of the entire region and would be of special importance to Paraguay, the least developed nation in the area.
In the 1970s and early 1980s Paraguay was relatively calm. Itaipu, the largest hydroelectric dam in the world, was built on the Alto Paraná River in a joint venture with Brazil. Inflation was controlled, but declining markets for Paraguayan exports led to rising unemployment and a worsening of the nation's trade position. The mid-1980s brought limited political liberalization, including, in 1987, the lifting of the state of siege in Asunción. Reelected to his eighth term in 1988, Stroessner was ousted in a military coup in February 1989.
Recent Developments
General Andrés Rodríguez, the leader of the coup that had removed Stroessner from office, won election to the presidency as head of the Colorado Party following Stroessner. In office, he inaugurated a program of privatizing state-owned enterprises, but the economy remained relatively stagnant, and his party lost some support. The Colorado nominee in the May 1993 presidential elections, Juan Carlos Wasmosy, won the office with only a plurality of the votes cast. Under Wasmosy, Paraguay joined Argentina, Brazil, and Uruguay in creating the Southern Cone Common Market (Spanish acronym MERCOSUR) in 1995. This trade association promised to lower tariffs and increase trade, sparking concerns that lower tariffs and economic integration would harm small Paraguayan businesses.
In 1996 Wasmosy, backed by many, mandated that the commander of the country's army, General Lino Cesar Oviedo, step down from his office. Oviedo agreed to resign only under the condition that he be named defense minister, therefore placing him in charge of Paraguay's military policy and finances. Fearing another coup, Wasmosy agreed, but when many citizens protested, he reversed his decision. Oviedo then announced his intention to run for the presidency in 1998.
