Paraguay's President Rejects Calls to Step Down
By REUTERS

ASUNCION, Paraguay (Reuters) - Paraguay's unpopular president, besieged by soaring unemployment and poverty, defiantly rejected on Wednesday calls for him to step down after massive protests left two people dead this week.

President Luis Gonzalez Macchi lifted a state of emergency earlier than expected after police broke up riots across the South American nation of 5 million people, but warned any repeat of such violence would not force him to resign.

``Let it be understood once and for all that I will only hand over power to whoever wins democratic elections in 2003,'' the president said in a televised address.

``I will never allow seditious groups who try to change the democratic process through violence to take power,'' he said.

The government had declared the suspension of some civil rights on Monday after thousands of protesters blocked major highways around the California-sized country, sparking clashes with police that killed two and left hundreds under arrest.

Paraguay's contraband-based economy, which has largely spun its wheels since the early 1980s amid constant political turmoil, has been further damaged in recent months by financial crises in neighboring giants Argentina and Brazil.

The riverside capital of Asuncion was calm. Teen-agers riding horse-drawn carts peddled oranges, stores that had been shuttered after the riots buzzed with shoppers and fewer police stood guard on street corners.

WORST RIOTS IN THREE YEARS

But political observers warned further violence was likely to try and turn up the heat on Gonzalez Macchi, who took office in 1999 after an elected president abruptly fled the country amid accusations he had arranged the assassination of his vice president and political enemy.

``In Paraguay we have endemic political violence that is chronic and will keep repeating itself,'' said Bernardino Cano Radil, a political analyst. ``The violence stifles the economy, which makes the violence worse. It's like the chicken and the egg and we can't get out of it.''

Gonzalez Macchi repeated accusations that former Gen. Lino Oviedo, who allegedly masterminded several failed coups over the last decade and lives in exile in Brazil, had instigated the worst riots in three years.

``It makes me indignant that the leaders of this conspiracy, comfortable and relaxed in their hide-outs, have used humble citizens as cannon fodder for their ambition for power,'' Gonzalez Macchi said in a televised address.

Oviedo denied involvement, and his cousin claimed the diminutive populist leader was in Brazil to study commercial fish cultivation, not stir up trouble.

Paraguay's government said, however, that it had audio tape indicating Oviedo had coordinated much of the riots by phone. Brazil said it could expel Oviedo if he continued to cause problems.

``The Brazilian government won't permit that Brazilian territory is used to carry out political rallies aimed at destabilizing any neighbor country,'' Brazilian Justice Minister Paulo de Tarso Ramos Ribeiro said after a hearing with Oviedo.

Vice President Julio Cesar Franco, who also leads the opposition party, is among several political leaders who have joined popular calls for the president to step aside.

Opposition to free market policies, increasingly seen around Latin America, has forced Gonzalez Macchi to scrap a privatization drive which in turn complicated talks for a standby loan from the International Monetary Fund to shield it from growing regional turmoil.

In a small shantytown less than 10 yards away from Paraguay's Congress, the site of some of the worst clashes on Monday, many people said they were pessimistic about the government's ability to improve the economy. "These inept people aren't capable of changing anything," said Jose, an unemployed carpenter. "The president has to leave now. We won't accept anything else."