Poised for Growth Projected 2016 change in GDP in South America Ecuador -2.0% Brazil -2.5% Venezuela -4.8%
a currency fraud charge that was eventually dropped. He was a focus of a U.S. money-laundering investigation, according to a 2010 classified memo published by WikiLeaks, but was never charged in the probe. The company he co-founded and still partly owns, Tabacalera del Este, makes the popular brand of cigarette called Eight. Large quantities of Tabacalera cigarettes are smuggled into Brazil and beyond, according to a study commissioned by British American Tobacco.
The company insists it sells cigarettes legally and that Brazil’s steep taxes entice others to smuggle them across the border. Cartes has come under fire for benefiting from illegal commerce. “How is it possible that packs of the brand of thehe president are found in Brazil, in Colombia,mbia, in Argentina, in Mexico, in Australia,alia, everywhere?” asks Senator Desiree siree Masi of the opposition Democraticic Progressive Party. “The Paraguayann customs code speaks clearly aboutbout smuggling, saying ng that companies wouldld be responsible for their actions and omissions.”ssions.” The president has as dismissed such allegaegations as politically lly motivated.
Cartes has beenen trying to pull off one off the hemisphere’s more remarkableemarkable transformationss for himself and his country by promising a government that’shat’s efficient, fiscally robust, and transparent. The aim is for the fragile democracy to overcomevercome decades of despotism, poverty, andd corruption.i
His reforms include a cap on the budget deficit of 1.5 percent of gross domestic product and a public-private partnership to invest in infrastructure. He passed over loyalists of his Colorado Party to put technocrats in his cabinet. Finance Minister Santiago Peña, who holds a master’s in economics from Columbia University and aligns himself with the Liberal Party, says he decided to work for Cartes despite the president’s past. “It was clear from the very beginning that he had a vision,” he says.
Cartes, who declined to comment for this story, has supported legislation requiring that salaries of public employees be made public. The move undermines the political elite, which has long used patronage jobs to reward supporters and family members. His efforts have won Cartes praise from the World Bank and Harvard management professor Michael Porter. On Porter’s Social Progress Index, Paraguay ranked 56th out of 133 countries in 2015, 16 spots higher than in 2014.
Paraguay’s economy remains a standout in a region hurt by corruption and a commodities bust. Construction cranes loom over Asunción, the capital. Foreign investors are buying land to raise livestock or cultivate crops. GDP should grow more than 3 percent this year, second-best in South America after Guyana, according to the World Bank. The International Monetary Fund recently said growth should continue at that rate through 2017. Even so, critics say Cartes hasn’t been able to createcreat enough jobs, build enough new roads, or improve mass tran transit because of an inert burea bureaucracy and the inability of hish staff to adapt their businessbusin acumen to the compro compromises and coalition-buildi tion-building of politics. Claudia Po Pompa, an independent politi political analyst, says Cartes mis mistakenly thought he could p push things through w without the party. “Business is not government,” she says. “He had to learn that the hard way.”
Even the new transparency laws, w which won raves abroad, have bo boomeranged at home. They revealed widespread padding of public pay payrolls that ignited studentd protests and d stoked voter discontent. In one case, a senior official of the National University of Asunción allegedly paid inflated salaries to himself, his secretary, and her family. Cartes’s “biggest failure is to not use that information to punish some close collaborators of the executive branch,” says Sebastián Acha, a former congressman who runs an Asunción think tank.
In January, Cartes demanded that public agencies divulge data on workers’ qualifications and levels of training, in an effort to rid state payrolls of unqualified and no-show employees. Union leaders labeled his plan a ploy to hurt workers’ rights.
Soon after, Cartes’s minister of industry and commerce, Gustavo Leite, defended his boss, telling reporters it was important that Paraguayans learn who abused the public trust. “I am proud to work for a president who doesn’t steal,” he said.
The bottom line Paraguayan President Horacio Cartes has stirred opposition with financial reforms and a crackdown on patronage. As if his country’s 25 percent unemployment rate, stagnant economy, and deteriorating credit rating weren’t bad enough, South African President Jacob Zuma faces a political graft scandal that threatens to wreck the party of Nelson Mandela. With more than 60 percent of the vote in every parliamentary election since 1994, the African National Congress remains the top political power in South Africa. Yet internal divisions are pitting the forces of fiscal discipline, represented by Finance Minister Pravin Gordhan, against the pro-Zuma camp, which has less regard for investors and financial markets.
Over the past few years, Zuma has drawn fire over the slow pace of government reform and a mounting number of scandals and missteps, including the appointment of an inexperienced