The Paraguayan government's domestic and international standing rapidly degenerated over the weekend after the Senate impeached President Fernando Lugo on June 22, replacing him with his vice president, Federico Franco. There have been minor protests, and several South American countries condemned Lugo's impeachment, calling it a "coup in disguise." Member states of the Union of South American Nations (UNASUR) recalled their ambassadors from Paraguay, and Venezuela — which supplies roughly 30 percent of Paraguay's oil consumption, according to ABC Color — said it would halt oil exports to the country. The foreign ministries of Brazil and Argentina said Paraguay would be barred from attending the June 28 Mercosur summit and from participating in the trade bloc entirely until new elections are held in 2013.
With internal and international pressure bearing down on Paraguay, the new Franco government may be forced to make concessions — perhaps even to give power back to Lugo — to avoid being cut off from international markets entirely.
The Franco administration has been trying to shore up its legitimacy overseas and to negotiate with its neighbors, but Lugo's efforts have put Franco in a difficult position. After initially accepting the results of the impeachment proceedings, on June 24 Lugo denounced his impeachment as a coup, formed a parallel state council and began dealing directly with foreign governments. (He will reportedly attend the UNASUR summit while Franco will not.) Lugo has urged his supporters to protest but has stressed that their actions should remain peaceful. Lugo now seems to be attempting to capitalize on foreign pressure on the new government to overturn his impeachment.
And the foreign pressure is substantial. Venezuela's oil embargo is serious in itself, and being cut off from Mercosur will isolate Paraguay from significant funding support, such as the Mercosur Structural Convergence Fund, which is providing $400 million to expand the country's electricity grid. The pressure would climb if Mercosur and UNASUR decided to pursue their anti-coup clauses to the fullest extent, which would mean lifting trade preferences and closing Paraguay's borders, effectively isolating Paraguay from the world. This threat is under discussion but is not likely to pass, since key players like Brazil have significant commercial and geopolitical interests in Paraguay.
Paraguay will not be able to withstand these pressures for long, and Franco's chances of retaining the presidency are limited. Instead, he will try to negotiate some sort of understanding with his regional partners, but ultimately he may be forced to concede to reinstate a sense of legitimacy to the Paraguayan government. Another option would be to call for early elections, a proposal that has been discussed between the South American countries.
