On August 15, when Santiago Peña becomes president of Paraguay, few observers outside this South American nation of seven million will think twice.
In contrast to recent swings of power in Brazil and Colombia and the tumultuous elections now unfolding in Ecuador and Guatemala, Paraguay appears an island of stability. Peña’s conservative Colorado Party will remain in office as it has for all but five of the past 75 years—a durable political machine that in April’s election broke the anti-incumbent tide sweeping Latin America.
Yet Peña is not a typical Colorado Party politician, nor does political continuity ensure stability. Instead, the new president will face internal compromise and the creeping footprint of transnational organized crime. Without correcting course, Paraguay, strategically located between South America’s two largest economies, risks undermining regional security.
The new, old Paraguayan politics
As seen from the presidential palace, a salmon-colored edifice on the Paraguay River, the contrasts of modern-day Paraguay are stark. Past the worn façades of Asunción’s old downtown, foreign capital pours into high-rises and shopping malls in the new business district. Continue on and the capital region’s car-choked arteries dissolve into a patchwork of dirt roads traveled by motorbikes and cows, a reminder that most wealth still grows in the farmland beyond.
Peña’s rise to the presidency marks the emergence of Paraguay’s young urban class within the traditional political patronage networks that blanket this landlocked country. A former finance minister, the 44-year-old Peña is an Ivy League-educated, center-right technocrat, a profile generally appealing to foreign partners in Brasilia and Buenos Aires to Washington and Taipei.
Being a competent bureaucrat, however, brings little clout in Paraguayan politics. Mastery of machine politics, not macroeconomics, matters at the top of the Colorado Party, and Paraguay’s young democracy gives the legislature outsized power over the executive. Peña, formerly affiliated with the traditional opposition Liberal Party, faces a steep learning curve.
Moreover, the cornerstone of Peña’s political capital, former president Horacio Cartes, carries baggage. In the months prior to the election, the United States sanctioned Cartes for acts of significant corruption. Cartes will nonetheless head the Colorado Party through 2028, and cartistas have won leadership of both legislative chambers. The former president’s push to reassert control during Peña’s five-year term threatens to corrode democratic institutions, particularly the frail judiciary.
Accelerating insecurity
Peña will try to paper over political compromise by prioritizing a friendly investment climate and delivering growth that outpaces the regional average. Paring back the state to pursue efficiency could also open additional opportunities for criminal actors.
Squeezed between the protectionist markets of Brazil and Argentina, Paraguay has for decades operated as a hub for illicit trade. Today, transnational organized crime increasingly challenges state institutions.
The case of Ecuador’s rapid descent into drug violence serves as a warning for Paraguay, which, despite a relatively low rate of violent crime, is similarly exposed to powerful criminal groups from neighboring states. During the past decade, the PCC, the transnational Brazilian drug cartel, has consolidated power in Paraguayan prisons. Contract killings have become more common in the capital region as narco-logistics branch from the Brazilian border into the Paraguayan interior.
Recent counter-narcotics raids show that Paraguay is no longer just a marijuana producer but a center for cocaine transshipment. Cartels use airstrips across the western Chaco scrublands and ports on the lengthy Paraguay-Paraná River to move Andean production to Atlantic markets. Authorities identify the Asunción-area port of Villeta as one of Latin America’s top five seizing ports for Europe-bound cocaine. In July, German authorities traced a shipment of 10 tons of cocaine to a Paraguayan port, where the near-record cargo allegedly went unreported by customs personnel.
Under Paraguay’s new government, synergies between organized crime and economic actors are prone to grow. Given his pledge to create 500,000 new jobs over five years, Peña will be adverse to risk growth by cracking down on Paraguay’s illicit economies—which represent up to an estimated 46 percent of domestic output. Peña has argued that contraband poses a problem not for Paraguay, but Brazil, a line repeated by his Minister of Industry and Commerce. Cartes’ stake in contraband cigarettes, a trade believed to facilitate transnational narco-trafficking, complicates the fight against organized crime.
Beyond borders
Another half-decade of a compromised security apparatus threatens to undermine broader regional security. As a growing refuge for the PCC, Paraguay poses challenges for Brazilian law enforcement, and controlling contraband is a tall task along the Argentine border. In 2022, criminal networks orchestrated the assassination of a top Paraguayan prosecutor on Colombian soil.
Risks reach the U.S., too. Since the 1990s, Washington has monitored money laundering and Hezbollah-linked operatives at Paraguay’s tri-border with Brazil and Argentina. Over the past year, the Biden administration signaled the national security risks of Paraguayan corruption by sanctioning officials across high levels of government.
In response, Paraguayan policymakers face trade-offs. To diversify beyond soy and beef exports, Paraguay must integrate into regional value chains. At the eastern border, new maquila factories send auto parts to Brazil, and to the west, Chaco agroindustry grows in complexity. The outgoing Mario Abdo Benítez administration invested in bridges and 4,000 kilometers of newly-paved roadway, infrastructure spending that Peña says his administration will continue. Expanded logistics—such as the bi-oceanic highway cutting across the Chaco—may also benefit transnational actors moving illicit goods to market.
Enhanced cooperation with core partners, including the U.S., can help Paraguayan institutions reduce risk inherent in the country’s security challenges. Short-term steps include installing scanners at river ports and radar across the Chaco, plus building institutional capacity to utilize data and intelligence. Bolstering security measures without constraining Paraguay’s promising growth and regional integration should guide policy under the Peña government.
Paraguay’s long-term priority remains insulating democratic institutions from actors entangled in corrupt and criminal networks. As he takes office, it is unclear if Peña can find the political independence required to strengthen a vulnerable Paraguayan state. That question, given the growing stakes for regional stability and security, warrants greater attention on this country at South America’s center.
