1942: Paraguay

Although Paraguay joined most of the Latin American nations in severing diplomatic relations with the Axis, the dictatorial nature of the Government and the strength of the resident German business community reduce the vigor of this small country's support of the United Nation's cause. During the year, however, certain definite measures have been taken against the Axis powers: Japanese balances to the amount of $67,000 have been frozen; the three Axis news agencies, the German Transocean, the Italian Stefani and the Japanese Domei, have been closed; and warning has been given to Axis nationals not to engage in political activity. Moreover, economic support from the United States has been a strong consideration in promoting some measure of cooperation in hemisphere defense. Lend-lease aid to the amount of possibly $7,000,000 is reported to have resulted in permission to the United States to improve airfields north of Asunción. A modern highway, connecting the country's two principal cities, is being constructed with North American capital. On May 8 a 'defense sanitation' and public works loan from the United States of $4,000,000 was reported. The elevation of the United States diplomatic mission in Paraguay from rank of legation to that of embassy was announced on Jan. 5, 1942.

Presidential elections were slated for 1943 but in September it was announced that 'high officers of the Army' had requested General Higinio Morínigo to remain as Provisional President for the next five years. Thus the military dictatorship which has governed Paraguay since 1940 under the strictest censorship in South America will be continued. The dissolution of the Liberal party in April on grounds of 'high treason' and the exile or imprisonment of its leading figures and of labor leaders and rebel students have effectively silenced the opposition and removed all traces of democratic government. The Morínigo regime depends on an army clique for support. Armed clashes between the factions within the army have been reported but the opposition of the older officers is not united enough to be effective. Persistent rumors of a revolt against the Government in December have been officially denied.

Paraguay's improved exchange position is reflected in the proposal in the autumn to resume service on the nation's external debt. The offer, made to holders of its £ sterling bonds, provides for interest payments at the full 3 per cent rate agreed upon under the 1921 settlement with the British bondholders. Paraguay has no dollar debt, although it recently secured a $4,000,000 public works loan from the United States. Brazil has also agreed to lend Paraguay about $5,000,000 to carry out its six-year public works program. In an attempt to recover its lost influence in Asunción, Argentina has cancelled the war debt incurred by Paraguay under the peace treaty of 1876.