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AP Interview: Paraguay's new president wants taxes

Thursday - 9/19/2013, 11:10am  ET

Paraguay's President Horacio Cartes speaks during an interview at the presidential residence Mburuvicha Roga in Asuncion, Paraguay, Wednesday, Sept. 18, 2013. As one of the richest men in one of Latin America’s poorest countries, Paraguay’s new president says he knows the wealthy can do more to combat poverty, starting with growers like him who can afford to pay taxes on the soy profits that are fueling the country’s booming economy. (AP Photo/Jorge Saenz)

MICHAEL WARREN
Associated Press

ASUNCION, Paraguay (AP) -- As one of the richest men in one of Latin America's poorest countries, Paraguay's new president says he knows the wealthy can do more to combat poverty, starting with landowners like him who can afford to pay taxes on the soy profits that are fueling a booming economy.

In a wide-ranging Associated Press interview on Wednesday, President Horacio Cartes condemned tax evaders, said he'll require corporate partners to fund Paraguay's social development and took credit for the country's first tax on commodities. The new 10 percent tax on soy, corn, wheat and sunflower profits is expected to generate $300 million a year by 2015.

"Many governments tried to do it, they always attacked the soy industry but they were never able to impose a single tax. We did it in less than a month," said Cartes.

Cartes said one of his main challenges is to crack down on tax evasion that costs the country half its revenues. "Everyone must pay taxes. It's shameful that despite such a low overall tax burden (13 percent of GDP), many people don't pay."

Cartes sat down with the AP in the presidential residence hours after returning from Chile, where he sought advice from another multimillionaire president, Sebastian Pinera. He came back saying he wants to model his government on Chile's and create "a serious country" where investors can count on profits and all government spending is accounted for in databases that can be viewed online.

"What's public must be published," he said. "Citizens make the best watchdogs."

To be treated seriously, he said Paraguay also must own up to its mistakes, starting with his own Colorado Party's failure to create more opportunities during 61 years in power that included the 1954-1989 dictatorship of Gen. Alfredo Stroessner. An essentially nationalist party that claims to represent the poor should have done better, he said, but 40 percent of the 6.5 million Paraguayans are stuck in poverty, and 18 percent are extremely poor.

"That's why I made fighting poverty a key part of the campaign, so that tomorrow they can say 'this is what he said and this is what he did,'" Cartes said.

But as Paraguay's wealthy landowners swim in commodity profits and the economy grows at a 13 percent clip, the country is bankrupt.

Former President Fernando Lugo's government burned through a $3 billion surplus before his presidency was cut short by impeachment last year. By August, there was only $1 million left, forcing the government to cover operating expenses with new debt. Doctors and teachers haven't been paid for months, and if Cartes wants to travel anywhere, he has to buy his own fuel.

Cartes says the only way to satisfy the people's demands for jobs, education and other opportunities is "to have a country serious enough to create an ideal climate for foreign investment."

He said Chilean experts are already helping Paraguay modernize its databases, develop mining regulations and reform its educational system.

Cartes, 57, was elected despite accusations that his family's fortune was fed by money laundering, cigarette smuggling and drug trafficking. A U.S. federal law enforcement source told the AP that Cartes was under investigation for years, but he was never formally charged with any crime, let alone tried. Cartes has dismissed the allegations as unfair competition from rival tobacco companies, and as political mudslinging.

He said he would work to change Paraguay's image -- and his own as well -- by describing his challenges, warts and all, when he makes his debut on the world stage next week, speaking at the United Nations General Assembly.

"Paraguay has an immense number of poor people in a country that is immensely wealthy" in terms of its natural resources, he said. Chile also used to have a 40 percent poverty rate, he added. "The road they've traveled is the road I'm convinced we must travel as well."

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Associated Press writer Pedro Servin contributed to this report.


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