Paraguay Anti-Corruption Sanctions and Their Lessons
By Gita Howard, Piero Fiorino, and Chloe Zoeller
In Paraguay, impunity rates for government officials involved in corruption are alarmingly high. The U.S. government’s recent targeted sanctions against allegedly corrupt officials seem to have played a role in pressuring the new Paraguayan government to take steps to investigate and address corruption. They may also have weakened some perpetrators’ influence and power and disrupted their connections to the private sector. Human Rights First and the Pan American Development Foundation developed a detailed case study on the situation in Paraguay.
Ahead of the April 2023 presidential election, the Colorado Party, Paraguay’s ruling party and dominant political force, was more fractured than it had been in decades. During the presidential primary, the party’s two leading candidates for president—then Vice-President Hugo Velázquez, and Santiago Peña, a candidate appointed by former President and the party’s most powerful actor, Horacio Manuel Cartes-Jara—represented separate wings of the party.
While the U.S. government had imposed targeted sanctions on Paraguayan individuals focused primarily on a smuggling network and former officials prior to the 2023 campaign – one set of actions in 2019 and two others in 2021 – the U.S. government issued two separate rounds of sanctions against top Colorado Party officials allegedly engaged in corruption prior to both the Paraguayan primary and general elections. Ultimately, Velázquez, Cartes, several companies linked to Cartes, and three mid-level alleged perpetrators were subjected to asset freezes, travel bans, and prohibitions on conducting business with U.S. persons.
First, in the summer of 2022 and prior to the primary elections for the Colorado Party, the United States issued visa bans under the Section 7031(c) program on Cartes and Velázquez. Critics, including Colorado Party members, accused the U.S. of election meddling. As a result of the sanctions, Velázquez announced he would resign as Vice President and drop out of the presidential race. In fact, he remained in his position as Vice President, but did bow out as a candidate. While the U.S. sanctions targeted both Cartes and Velázquez, representing both Colorado Party factions, some observers speculated that the sanctions led to the Colorado Party consolidating around one candidate and weakening the opposition’s chance of winning the election.
The second round of sanctions on Cartes, Velázquez, and associated companies – imposed before the general election in January 2023 – used the Global Magnitsky sanctions program and had further impacts. As these sanctions ban financial transactions with the sanctioned parties, the sanctions caused Cartes’ business partners to distance themselves from him and resulted in divestments from and dissolutions of companies he controlled. Additionally, given the power and timing of these additional sanctions, some saw them as another attempt at election meddling. These sanctions also impacted domestic investigations, and encouraged the continuation of others.
Finally, in its most recent corruption-focused sanctions against Paraguayans, the United States targeted three mid-level and less publicly known perpetrators of alleged corruption. After the U.S. focus on high-level officials, this action signaled to lower-level Paraguayan officials that despite their levels of seniority, there can be international repercussions for engaging in corruption.
Since President Peña was elected in April and took office in August, he has put increased attention on addressing corruption, perhaps in part because of the sanctions and Paraguay’s friendly ties with the United States. For instance, Peña and the legislative and judicial branches of government launched a new anti-corruption initiative. Peña stated that he would implement, “a clear, forceful, unwavering pro-transparency policy.” It is too soon to tell whether these changes will have substantive impacts on corruption in Paraguay.
Some lessons can tentatively be drawn from these uses of targeted sanctions. Different sanctions tools have different strengths in promoting accountability; while publicly announced visa bans can be effective in naming and shaming, sanctions like Global Magnitsky also impose financial consequences that can cause significant business and monetary losses to allegedly corrupt actors.
Additionally, multiple rounds of sanctions on actors at an array of levels within a hierarchy can generate momentum toward or at least commitments to addressing sanctionable behavior. At the same time, the value of these commitments may be questionable when the government that may investigate the sanctioned persons is influenced by those same persons.
Sanctioning perpetrators in a country with close ties to the U.S. can be particularly impactful, as such governments are more concerned with maintaining positive bilateral relationships and are less willing or able to dismiss U.S. actions. This seems to be the case for Paraguay, as President Peña made some commitments to addressing corruption since the sanctions were announced.
Last, when a government imposes politically sensitive sanctions in the period ahead of an election, it should anticipate complaints of political and electoral interference, even if the sanctions target multiple candidates, parties, or factions. The sanctioning government should be prepared to explain the basis for its actions, timing, and choices.
Chloe Zoeller is a Senior Program Manager at the Pan American Development Foundation. Piero Fiorino is a student at New York Law School; he served as an intern on Human Rights First’s accountability team in the fall of 2023.
