Landlocked in South America and a Spanish possession until 1811, Paraguay gained large tracts of land from Bolivia in 1938. From then until the overthrow in 1989 of General Alfredo Stroessner, South America's longest-surviving dictator, it experienced periods of anarchy and military rule. The Paraguay river divides the eastern hills and fertile plains, where 90% of people live, from the almost uninhabited Chaco in the west. Paraguay's economy is largely agricultural.

Most Paraguayans are of combined Spanish and native Guaraní origin. The majority are bilingual, although outside the large cities Guaraní is spoken almost exclusively. Rural Guaraní, deprived of ancestral lands, have been forced into marginal labor and prostitution. While most immigrants have historically been European, Japanese, Koreans, and South Africans are recent arrivals.

Strengths

Electricity exporter – earnings obtain foreign exchange. Self-sufficiency in wheat and other staple foodstuffs. Cotton, oilseeds, notably soybeans.

Weaknesses

Reliance on agriculture and Brazilian and Argentine markets. No hydrocarbons produced. Weak banking and financial sectors. High unemployment. Political instability deters foreign investment.

A 1989 coup ended Gen. Stroessner's 34-year dictatorship. In 1993, his PC won the first free elections in 60 years, but with continued reliance on the military. The PC again won in 1998, despite the last-minute annulment of former army chief Gen. Lino Oviedo's presidential candidacy. Unrest in 1999 after the assassination of Vice President Luis Argaña, Oviedo's main opponent in the PC, forced the resignation of President Raúl Cubas, a supporter of Oviedo. A fragile coalition government survived a coup in May 2000 led by Oviedo – his third such attempt since 1993. Vice-presidential elections in August 2000 led to an unprecedented cohabitation between a PC president and his PLRA deputy.

The main aims are fairer integration in the Mercosur common market and good relations with the USA.

Under Stroessner, the military controlled political and economic life. In 1994–1995, Congress tried to limit its powers, but President Juan Carlos Wasmosy endorsed its political and institutional role. The pact between the military and the PC, in power since 1947, has been weakened by factionalism.

The joint Paraguay–Brazil Itaipú hydroelectric dam is the world's largest. The massive Yacyretá dam is operated with Argentina.

Apart from the destruction of forests for farming and for dams, a major ecological worry is the smuggling abroad of endangered species.

Roads badly need upgrading. The government wants to part-privatize the near-paralyzed FCCAL (railroad).

Hepatitis, typhoid, dysentery, and tuberculosis are endemic and leprosy is common. Medical care is expensive.

Education is compulsory to the age of 12, but under half go on to secondary school. Provision is limited in remote rural areas.

Paraguay is the contraband capital of Latin America, with trade in everything from cars to cocaine. Jungle airstrips near Brazil provide a route for narcotics.

Income inequality is great and rural poverty serious. Top military ranks and business and landed elites control wealth.

Tourist numbers are small. Most visitors are cross-border day-trippers from Brazil and Argentina, who flock to Ciudad del Este to buy cheap, mainly Far Eastern, electrical goods. The Chaco attracts tourists for safaris.

Paraguay was controlled by Spain from 1536 until 1811.

• 1864–1870 Loses War of the Triple Alliance against Argentina, Brazil, and Uruguay.
• 1928–1935 Two Chaco Wars against Bolivia over disputed territory.
• 1938 Boundary with Bolivia fixed; Paraguay awarded large tracts.
• 1954–1989 Rule of Gen. Stroessner; repressive military regime.
• 1993 First democratic elections.
• 1996 Coup attempt by Gen. Lino Oviedo.
• 1998–1999 Raúl Cubas elected president; resigns after assassination of vice president; Cubas and Oviedo leave country.
• 2000 Further failed coup attempt by Oviedo.