(Bloomberg) -- Mario Abdo Benitez, a former senator from the ruling Colorado Party, won Sunday’s presidential election in Paraguay, in a surprisingly narrow victory over the opposition candidate.
Abdo Benitez, 46, whose father was the secretary of long-ruling dictator Alfredo Stroessner, had 46.4 percent of the vote, with almost 100 percent of voting stations counted, according to preliminary results from the electoral court. Former public works minister Efrain Alegre trailed with 42.7 percent of votes. Speaking at a press conference after the court’s statement, Alegre thanked his supporters, saying he respected the initial results, but would wait for final certification. The winner will take office August 15 when tobacco magnate and incumbent president Horacio Cartes steps down.
Speaking to a crowd in Asuncion, Abdo Benitez said he would work to win over those Paraguayans who voted for other candidates. “I invite them to be part of this story we are going to build together the coming years in Paraguay,” he said. “Today, I pledge to be a factor of unity in Paraguay.“
The new president will inherit one of the fastest growing economies in South America, but one that still suffers high levels of poverty and inequality. He has pledged to keep taxes low, but do a better job of collecting them to find higher spending on education and healthcare. The former senator has also promised to renegotiate the terms under which Paraguay sells power from the hydroelectric dams it shares with Brazil and Argentina.
The narrow victory means Abdo Benitez will probably have to incorporate some of his opponent’s proposals, such as a progressive income tax and greater social spending, in his agenda, said Juan Manuel Pazos, chief macro and sovereign debt strategist at the Buenos Aires-based brokerage Puente. Paraguay’s low tax take as a percentage of the economy should allow him to collect more taxes without hurting growth, he said.
“This result leaves Paraguay positioned to continue seeking an investment grade rating, which is important for bondholders,” said Pazos, whose firm is expanding its asset management business in Paraguay. “But at the same time, Abdo Benitez is going to have to execute an agenda of social contention. He has space to do both,”
Paraguay enjoyed a rare period of sustained growth during Cartes’ five-year term, with the economy expanding by an annual 6 percent between 2013 and 2017. However, an economic boom fueled largely by soybean and beef exports hasn’t erased many of the country’s dismal social indicators. More than a quarter of the population remains below the poverty line, and about a third of 15 to 19 year olds don’t receive any formal schooling.
Bondholders have benefited from the landlocked South American country’s impressive GDP numbers and reasonably solid public finances. Paraguay bonds maturing in 2044 rose the most among emerging U.S. dollar sovereigns today, rising 0.75 cent to 108.7 as of 9:37 a.m. in New York. Paraguay bonds maturing in 2048 fell 0.27 cent to 100.8.
As of last week, Paraguay’s U.S. dollar debt had returned 42 percent since Cartes took office in August 2013, compared with average emerging market gains of 31 percent in that period, according to data compiled by Bloomberg.
The U.S State Department issued a note of congratulations on Monday, highlighting the "strong bilateral relationship" between the two countries and stating that it was looking forward to working with President-elect Abdo Benitez.
©2018 Bloomberg L.P.