Paraguayan president vows to fight poverty

from the Financial Times

This introduces the newly sworn in president of Paraguay, Fernando Lugo. The new leader of Paraguay promises to work to fight poverty and remove corruption from the government. - Kale

by Jude Webber in Buenos Aires

Wearing a white shirt and his trademark sandals, the 57-year-old, dubbed the "bishop of the poor", donned the red, white and blue presidential sash before breaking into a grin and flashing a thumbs-up sign to a crowd of thousands of cheering supporters.

Mr Lugo's election victory in April achieved what many had considered impossible - the peaceful ousting of the Colorado party, which had ruled Paraguay since 1947, including the 35-year dictatorship of Alfredo Stroessner.

"Change is not just an electoral issue . . . today is the end of a Paraguay famous for corruption," Mr Lugo said in his inaugural address.

Although the commodities boom has turned Paraguay into the world's No 4 soy producer and it is the world's third-biggest electricity exporter in an energy-starved region, its $13bn economy has failed to attract foreign investment. Extreme poverty has risen to nearly 20 per cent of the country's 6.8m people, despite economic growth of 6.4 per cent last year.

"The big challenge for the new government will be to keep the economy growing and to generate jobs," Dion-isio Borda, the new economy minister, told the FT.

Mr Borda, a US-trained economist and political independent, is credited with stabilising the economy and enacting tax reforms during his previous stint in the post in 2003-05, and is expected to maintain fiscal discipline

He will have to boost scant state resources to pay for ambitious pledges to halve poverty, streamline the bloated civil service, attract private investment to stumbling state monopolies and add value to the country's agricultural exports. Unpopular tax rises are on the cards.

"We will have to make tax adjustments," Mr Borda said, noting that Paraguay's tax haul was just 11.6 per cent of gross domestic product, the lowest in the region, with corporate and sales tax rates of no more than 10 per cent and no personal income tax.

He would not say if agricultural export tariffs would be introduced. A plan to raise farm export tariffs in neighbouring Argentina was dropped last month after protests and a failed parliamentary vote.

Latin America's latest unorthodox leftwing leader is striving to avoid comparisons with Venezuela's Hugo Chavez or Bolivia's Evo Morales, and sees himself as a moderate.

He will need to be a skilled negotiator, holding together a gaggle of coalition parties, and brokering deals in Congress, where he lacks a majority and outgoing President Nicanor Duarte Frutos is expected to remain an influential force.