What will Paraguay’s new president mean for the environment?

Experts analyse Santiago Peña’s signals on energy, trade, drought and deforestation
<p>Paraguay is experiencing more regular and extreme climate events, including drought and forest fires. Santiago Peña will need to confront these threats, and their implications for energy and trade, when he assumes the presidency on 15 August (Illustration: Jazmín Troche, William Matsumoto / El Surtidor)</p>

Paraguay is experiencing more regular and extreme climate events, including drought and forest fires. Santiago Peña will need to confront these threats, and their implications for energy and trade, when he assumes the presidency on 15 August (Illustration: Jazmín Troche, William Matsumoto / El Surtidor)

When he takes office as Paraguay’s president on 15 August, Santiago Peña will not be greeted with the easiest of in-trays.

The recently elected former finance minister will be taking over a country that saw economic contraction in 2022 as a result of its worst drought in nearly 80 years; a country that has seen a national emergency declared twice in the last five years due to forest fires; one whose main trade route, the Paraguay River has twice broken its historic low level in the last three years; and a country in the midst of a silent but widespread health crisis, as heatwaves drive the spread of diseases such as chikungunya.

Peña, an economist, former International Monetary Fund official and eventual candidate for the right-wing Colorado Party, won with 43% of the vote in the 30 April elections – some way ahead of the broad coalition Concertación (28%), and the National Crusade (23%), an anti-establishment nationalist party headed by Paraguayo Cubas, who has since been arrested after instigating protests over alleged, and unsubstantiated, electoral fraud.

The Colorado Party, the dominant force in Paraguayan politics, having governed almost without interruption for 75 years, also managed to secure a majority in both houses of the country’s congress.

According to Camilo Filártiga, programme officer for electoral processes at International IDEA, an organisation supporting global democracy, Peña was successful as “he managed to unify and discipline the party vote and put forward an effective, traditional and conservative discourse,” as opposed to the “uncertainty” offered by the Concertación coalition and its candidate, Efraín Alegre.

With his comfortable election out of the way, President-elect Peña must now look ahead to confronting a range of challenges facing his nation, including growing pressures on the environment and climate.

Paraguay’s energy questions

Much like his fellow leading candidates, Peña made sparing reference to environmental issues during his election campaign, with his ambitions summarised in a single poster, entitled “Paraguay Conserves”. This presented a range of broad promises, as well as references to existing policies, such as the protection of watercourses that the country depends on for trade and hydroelectricity generation.

Peña’s environmental programme proposes the “strengthening” of public and private protected areas, which in the country’s east are impacted by illegal cannabis plantations, and in the Chaco region, by the expansion of cattle ranching and charcoal production, often on Indigenous lands.

illustration on three environmental challenges for Paraguay
(Graphic: Jazmín Troche, William Matsumoto / El Surtidor)

The Paraguay Conserves poster also highlights the creation of an early warning system for climate risks, though this was already part of the country’s national adaptation policy for 2022–2030. This system will be important for decision-making in livestock and crop production, which suffered catastrophic losses in 2021 when it did not rain for almost a year. These difficulties have been compounded by waves of forest fires since 2020, linked to land clearance for agriculture and worsened by heatwaves, the frequency of which has tripled in the last 40 years in Paraguay.

Santiago Peña also proposes to “promote renewable energies”. In this area, he faces the historic task of renegotiating part of an agreement struck with Brazil 50 years ago that created Itaipú, one of the world’s largest hydroelectric plants, which straddles the border between the two countries on the Paraná River. In 2022, the plant supplied 86.4% of all the electricity consumed in Paraguay and 8.7% of Brazil’s total demand.

One of the central issues of this negotiation – and one defining the energy transition of a country whose energy mix otherwise still depends on fossil fuels and biomass – is how to make use of the surplus electricity that Paraguay is entitled to from Itaipú. Both nations are entitled to 50% of the generation from the plant, but Paraguay currently sells its surplus to Brazil at low prices, an area in which it hopes to negotiate a more beneficial deal.

Unlike outgoing president Mario Abdo Benítez, who indicated that discussions over the short-term details of the two countries’ agreement were a more urgent priority, President-elect Peña said that “Paraguay does not need to renegotiate Itaipú to have that energy now.” He proposes “sitting down” with Brazilian president Luiz Inácio Lula da Silva to “imagine a relationship that can last for the next 50 years.”

Guillermo Achucarro, a climate and energy policy researcher at the National University of Asunción, told Diálogo Chino that the difference in discourse between Abdo and Peña is not in fact significant, and that he is pessimistic about the potential gains for Paraguay from renegotiations. “If anything is achieved,” he said, “it will be crumbs.”

Achucarro questioned the way in which Paraguay’s transition away from fossil fuels towards renewable energy has so far developed, with an emphasis on large infrastructure projects that have benefited from favourable conditions offered by the government, and been surrounded by environmental and social tensions.

Omega Green is one such project. A planned biofuels factory that will be South America’s largest when it opens in 2025, it will make use of forest plantations that include pongamia, an exotic species that could compromise the biodiversity of the Chaco region, but which has been declared “native” by a state resolution.

Elsewhere, a planned green hydrogen factory led by Atome Energy, a company started by British oil firm President Energy, was greenlighted during the government of former president Horacio Cartes (2013–2018), and granted access to energy at a lower tariff than the market rate.

Beyond these existing projects for green hydrogen, and biomass, from which Paraguay derives just over a third of its energy, there is no indication yet of how, or if, Peña’s government will approach renewables such as wind and solar. These sources are so far practically non-existent in the country’s energy mix, but as the threats from drought rise due to climate change, and strain hydropower output, the need to diversify generation may become more pressing.

Deforestation and agriculture

Other enduring environmental questions facing the new Peña administration relate to deforestation – notably in the Chaco, a biome Paraguay shares with Argentina, Bolivia and Brazil – and the role of the country’s agriculture sector in driving it.

Cattle ranching is the primary driver of the deforestation, both legal and illegal, that has taken place over the last decade and a half in the Paraguayan Chaco. An official report acknowledged that 667,000 hectares of the region were deforested between 2017 and 2020, 88% of the total deforestation recorded in the country.

Peña’s Paraguay Conserves poster mentions plans to restore areas of degraded forest and to “strengthen” national parks and nature reserves, but there has been no suggestion of concerted efforts to combat agriculture-driven deforestation. To the contrary, as Paraguay and its Mercosur partners negotiate a new trade deal with the European Union, the president-elect has denounced environmental conditions that look to restrict products linked to forest loss, such as the EU’s new zero-deforestation sourcing law.

illustration on agribusiness in Paraguay
(Graphic: Jazmín Troche, William Matsumoto / El Surtidor)

During the election campaign, candidates faced pressure from Paraguay’s agriculture sector over relations with China, with many discontent that accessing the Asian nation’s large market remains challenging for the South American country’s products due to its ongoing diplomatic ties with Taiwan.

Opposition candidate Efraín Alegre openly questioned these continued relations, but Peña has ruled out a switch. He has said that this is not an obstacle to the business that Paraguay already has with China, claiming that “there are no restrictions whatsoever.”

Peña has also argued that the quality of Paraguayan commodities is already an argument to convince potential buyers. “China is not going to buy Paraguayan meat or soybeans because there is a diplomatic interest,” he said during his campaign. “It is going to buy because Paraguay has good quality meat and soybeans at competitive prices.”

Lis Garcia, an agribusiness specialist and researcher at the thinktank BASE-IS, told Diálogo Chino that the opening of the US market for beef exports is also in process, but “it doesn’t look like it will prosper”. One possible reason for this is allegations of labour exploitation on Paraguayan farms. The United States announced in March that it will fund the International Labour Organization to investigate and address these accusations.

The course that Peña takes on expanding markets for Paraguayan commodities will have implications for the country’s environment that will require careful management, but the direction of this course as yet remains unclear.

For Guillermo Achucarro, Paraguay’s main challenge in the next five years, and one that the president-elect must govern, is “to survive the next extreme climatic phenomena, such as the flooding predicted for 2023. One year it rains a lot, one year it’s drought, the next summer we have forest fires and an epidemic.” The biggest question, Achucarro added, is how Santiago Peña will manage these multiple crises.

This story was produced by Diálogo Chino and El Surtidor.