The Government of the United States channels most of its economic and technical assistance to Paraguay through the U.S. Agency for International Development. USAID, operating as an integral part of the U.S. Embassy in Asunción, support the Paraguayan Government, the civil society and the private sector to consolidate democracy, protect the environment, improve the provision of health services and promote economic development through a job creation program.

Paraguay is undergoing a historic transformation towards consolidating its democracy and promoting a fair and licit market economy, both of which are primary U.S. national interests in Paraguay. The past 16 years, since the fall of the dictatorship, have seen the adoption of a new constitution, the establishment of freedom of expression, the development of a transparent and free electoral process, improvements in the judicial system and the strengthening of democratic institutions. The whole process faced several challenges, such as several coup attempts, the assassination of a Vice President and the resignation of a President.

Unfortunately, difficulties persists, despite efforts made to reduce poverty, fight corruption, address environmental degradation and lack of effective basic services to Paraguay's citizens. The administration continues to make sound decisions which demonstrate a serious commitment to fighting corruption, stabilizing the economy and beginning to address the concerns of the growing ranks of the poor. During 2004, the country experienced its eighth consecutive year in which per capita income was stagnant or declined. Paraguay's external debt is approximately $2.3 billion, almost 40% of gross domestic product.

Thousands of landless farmers have clamored for land and illegally invaded private properties. Perceptions of corruption are very high by Latin American standards, while foreign investment in Paraguay is the lowest in Latin America. The donor community and knowledgeable observers note important changes directly attributable to strong anticorruption measures taken by President Duarte. Paraguay is committed to implementing the reforms that are important to making the government more honest and responsible and to improving the policy and regulatory environment for business, reducing red tape and assuring fair and predictable rules of the game.

Notwithstanding the serious challenges, in November 2004, the Millennium Challenge Corporation designated Paraguay a Threshold Country, recognizing both the serious commitment and the significant measurable progress that the Duarte Administration has made in addressing Millennium Challenge Account (MCA) policies and precepts during its initial 14 months in office.

Mid- and long-term sustainable development in Paraguay is also threatened by the indiscriminate exploitation of land, water, and wildlife resources. Sustainable development is severely threatened by the depletion of Paraguay’s rich endowment of natural resources. Timber reserves have been nearly exhausted. Much of the once rich topsoil of the eastern border region (largely uncultivated until the 1970s) is now considered to be severely eroded. The eastern border region sits upon the Guarani aquifer, the largest underground water aquifer on the continent, and is being threatened by unchecked deleterious land use practices. Because watersheds have been negatively affected by deforestation and contamination, surface water flow volumes have decreased considerably in the last 20 years. Public authorities have been slow to respond to these challenges because of inadequate capacity.

On the social context, high maternal mortality rates contribute to poverty, and better reproductive health services are needed. Almost 40% of pregnant women do not receive adequate pre-natal care. Many citizens also lack access to other basic services, such as education, potable water, sewerage systems, solid waste collection, and basic infrastructure. Although national and local governments are hard pressed to adequately provide these basic services, there has been some improvement and some local governments are struggling to compensate for deficiencies in service provision by the national government.

Although many challenges lie ahead, the Government of Paraguay is demonstrating commitment to reform, economic stabilization, improving service provision and fighting corruption. USAID has an historic opportunity to play an important role in helping Paraguay improve its situation by supporting the Government of Paraguay’s commitment for change.

The USAID six-year program that started in 2001 was designed taking into account some of the above mentioned problems and challenges. The strategy has four ongoing program objectives that focus on economic growth, reproductive health, environmental initiatives and the strengthening of democracy. Two major themes that link these initiatives are: 1) a vibrant, pluralistic civil society as the basis for democratic governance, improved trade capacity (economic growth), improved health and provision of services and management of natural resources; and 2) government responsiveness, accountability, and accessibility to citizens strengthened through the decentralization of power and authority to local levels and measures which promote honesty and transparency throughout all levels of government.

The four areas are:

Strategic Objective, Democracy (1): Key Democratic Governance Practices Instituted.

Strategic Objective, Environment (2): Sustainable Management of Globally Important Ecoregions Improved.

Strategic Objective, Health (3): Use of Voluntary Reproductive Health Services Increased.

Strategic Objective, Economic Growth (4): Increased Incomes for the Poor in Selected Economic Regions.