Threshold Country Program Paraguay

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Since his election in 2003, the Paraguayan President Nicanor Duarte has recognized that corruption is one of the highest contributing factor to the poverty level in a country. In his Master Plan for the Administration (2003-2008), President Duarte has focused corruption as his number one priority and as an important factor for the reformation of public administration for Paraguay .

The Government of Paraguay (GOP) has expressed a wish that Paraguay qualify to obtain assistance under the Millennium Challenge Account (MCA) of 2003. Paraguay satisfied three of the six indicators needed to qualify (Paraguay FY05 Ranking Data) but obtained low marks with respect to control of corruption, government effectiveness and rule of law (8%, 16% and 25% respectively upon comparison with countries with similar characteristics). Since the GPA achieved by Paraguay did not qualify the country to try out for the direct MCA program, Paraguay was invited to present a plan for the Threshold Country Program in November of 2004. By October of 2005, the ‘Plan País' ( Paraguay 's TCP) was given to the MCC. The Board of Directors of the MCC approved Paraguay 's participation in the TCP on February 8, 2006 (Congressional Notification: February 16, 2006)

The two problems targeted by the Contract are: impunity and informality of the economy. Impunity exists due to a limited capacity in the justice sector to realize investigations, process corruption allegations, and implement internal controls and disciplinary measures. The district attorneys and the judges are not subject to careful scrutiny and, mostly, are not faced with disciplinary actions once they are found guilty of corrupt practices. The corruption found in the public sector mirrors that found in the private sector in their: greed for easy money, evasion of policies that enhance general productivity, avoidance of tax payments, corruption of government acquisitions, favoring legal barriers for business access and gaining privileged treatment through bribes and political favors. The result is a very big informal sector that does not follow rules and regulations established in the legal system that regulate the commercial activities of companies and individuals.

The GOP has addressed this issue in a number of ways. Since 2003, six of the nine Ministers of the Supreme Court were replaced due to suppositions of corruption (with the participation of civil society). General tax evasion was reduced and the first Stand-By Agreement with the International Monetary Fund was signed after more than 50 years. This latter agreement resulted in the adoption and rapid dissemination of macro-economic policies that impeded a massive cessation of national and international financial payments. A slight economic growth (first real increment in per capita income since 1996) was observed. The reformation in public procurement bids brought about greater transparency and a 40% reduction in costs. The latest figures in “Doing Business” however, reveal a decrease in rank from 2005 to 2006 of 2 points. The WGI (Worldwide Governance Indicators) show a slight decline in corruption control from a year ago as well. It shows a marked improvement of 4.4 percentile points from 2003-2004. The decline is of 1.4 percentile points from 2004-2005.

The Threshold Country Program-Paraguay is very ambitious in that it pretends to change a cultural paradigm in a two year period. The goals of reducing impunity and informality are to be reached following ten specific targets:

[ 1-] Fight against Impunity

a- Increase the Investigative Capability of the Public Ministry (ver)

b- Increase the Capability of the judiciary Disciplinary System(ver)

c- Strengthen Internal Controls Systems and Civil Society Participation in Oversight Activities at the Controller General's Office (ver)

d- Strengthening Oversight of the Public Registry to Safeguard the Integrity of Public Records (ver)

e- Increase Transparency and Effectiveness of Public Finance Legislative Oversight (ver)

[ 2-] Reduction of Informality

a- Increase Operational Efficiency and Transparency of the Government Tax Authority (ver)

b- Strengthening Border and Customs Controls (ver)

c- Increase the Ministry of Finance's Internal Investigation Capabilities (ver)

d- Design and Implementation of “One Stop Shops” and Call centers to facilitate the legal Establishment of New Businesses (ver)

e- Promotion of Investment in Maquilas (ver)

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