Although no longer occupying the proscenium, the Paraguayan armed forces continued to play a decisive role in the country’s political and economic life, therefore characterized by substantial political instability due to repeated conflicts of power between military and civilians.

According to Localcollegeexplorer, in May 1993, JC Wasmosy was elected to the presidency of the republic as candidate of the Asociación Nacional Republicana (ANR, commonly known as Partido Colorado), which, however, in the contemporary legislative consultations for the first time since 1947 had failed to win a majority in any of the two branches of Congress, following the good results achieved by the centrist Partido Liberal Radical Auténtico (PLRA) and the center-left coalition Encuentro Nacional (EN). Forced to make continuous compromises with these formations, in January 1994Wasmosy concluded a ‘governability pact’ with the PLRA to guarantee the approval of some bills and overcome the hostility of the more conservative faction of his own party, which was headed by a loyalist of the former Stroessner dictator, LM Argaña. The latter, despite having obtained the nomination as presidential candidate in the primary elections of the party in December 1992, had been replaced with Wasmosy by the electoral court of the ANR, which under pressure from the military leaders had pretextly annulled the outcome of the primary. Thanks to the governability pact, the president was able to initiate a partial reform of the judicial system and implement his programs of privatization of public companies and restructuring of the pension system.

Like the previous one, the new administration proved unwilling to any hypothesis of agrarian reform and did not hesitate to repress the increasingly numerous episodes of occupation of large estates by landless peasants. The dissatisfaction of the peasants, previously expressed only in demonstrations of a local nature, resulted from 1994 in mobilization on a national scale and managed to obtain the support of some important trade union organizations, in turn dissatisfied with the neoliberal economic policy and worried about the possible negative employment effects of the imminent entry into force of MERCOSUR.

Financial torts and bribery continued to occur during the Wasmosy administration; in particular, in the spring of 1995an investigation into the disappearance of four million dollars from the country’s central bank revealed the institution’s involvement in a series of illegal operations and the existence of a parallel financial system. Moreover, despite the continuous pressure exerted by the United States, the government avoided taking decisive action against the drug trade and the laundering of money deriving from drug trafficking in order not to enter into conflict with the military leaders, heavily involved in such activities; for the same reason the administration was reluctant to put into practice the measures requested by the MERCOSUR members to crack down on commercial piracy, smuggling and the counterfeiting industry, which helped fuel, together with the activities related to drug trafficking,

During 1996, the fragile balance between civilian and military institutions began to crack again, endangering the very life of the Wasmosy administration.

Initially the president had opposed any attempt to downsize the role and prerogatives of the armed forces, entering into conflict with Congress since August 1993 for having appointed General Oviedo commander in chief of the army (protagonist of the coup d’etat with which Stroessner had been ousted and the architect of Wasmosy’s political rise). Executive and legislature again found themselves at odds in May 1994 when, heedless of a veto by the president, Congress passed a law banning serving members of the armed forces from engaging in political activity. In fact, almost all the senior executives were still members of the ANR (the affiliation to the Partido Colorado it had been made mandatory during the Stroessner regime) and the 1992 Constitution prohibited the military from joining parties without ruling on serving officers still enrolled in the ruling party. After the approval of the reform, relations between the president and commander of the army deteriorated considerably. To the disagreement on some appointments for the high commands was added that for the ostentatious political aims of Oviedo, intending to run for the colorados in the 1998 presidential elections and for this, regardless of the new prohibitions, engaged in rallies and party meetings. For such activities in April 1996 Oviedo was removed from his post by order of the president; the general refused to obey and threatened to bomb the presidential palace to force Wasmosy to resign. Only international, and in particular American, pressure allowed a compromise to be reached, according to which Oviedo surrendered his arms and left active duty to take up the post of Defense Minister. However, Congress refused to ratify the appointment and Oviedo, now without its troops, was arrested the following June on charges of sedition, an accusation from which he was acquitted however a few months later.

Thanks to the support of the armed forces and a large mass following ensured by his populist programs, Oviedo managed to win a controversial victory over Argaña in September 1997 as a candidate of the NRA in the 1998 presidential elections. The result helped to explode the divisions within the ruling party: arrested in December 1997 on the orders of Wasmosy for insulting the presidency (the general had publicly accused the head of state of corruption), in the following March Oviedo was convicted by a special military tribunal to 10 years’ imprisonment for the failed 1996 coup attempt and replaced as candidate of the NRA by R. Cubas-Grau, initially candidate for the vice-presidency. In spite of these contrasts, the Colorados managed to prevail in the general elections of May 1998, winning the presidency with Cubas-Grau (54 % of the votes against 42 % went to D. Laíno, candidate of Alianza Democrática, a coalition between PLRA and EN) and regaining the majority in both branches of Congress. In office since August 1998, Cubas-Grau ordered the release of Oviedo, after having commuted his sentence from 10 years to three months in prison. The immediate reaction of the Congress – which the next day condemned the presidential decree and discussed the opening of an impeachment process for Cubas-Grau – was the first sign of the worsening of the power conflict between the presidency and the Congress: the release of Oviedo and, above all, the assassination (on March 23) of the vice-president Argaña, whose principals were indicated by the opposition in Cubas-Grau and Oviedo, led two thirds of the Congress to vote the impeachment for the president (who therefore fled to Brazil, while Oviedo took refuge in Argentina). In the power vacuum thus created, the highest office of the State was assumed – according to the constitutional dictates – by the President of Congress, Partido Colorado L. Gonzáles Macchi who formed a coalition government (March 1999), the following month announced a four-year economic development plan and in October proceeded to reorganize the armed forces.