Trade Contraction and Economic Decline: The Paraguayan Economy under Francia, 1810–1840
I argue here that economic activity fell considerably in the first three decades of Paraguay's early national period, below levels it had attained in the late colonial period and would attain again only after the midnineteenth century. I attribute this economic depression primarily to regional political fragmentation and the institutional regression it triggered. In the i8 ios, the United Provinces of the River Plate sought to keep the former Viceroyalty of the River Plate under a single federal government, but failed to prevent Paraguay's early secession. Their subsequent trade blockades and military threats had profound economic and political effects on Paraguay: revenues from foreign trade taxation fell, scale economies in defence and justice provision vanished, a standing army emerged, government budget deficits worsened, mercantilist regulations heightened, the fiscal burden increased, and transactions costs generally rose. Proponents of federation, more representative governments, and freer trade progressively declined, while supporters of secession, political absolutism, and government regulation became ever more prominent. In the I8zos, blockade relaxations exacerbated economic intervention by the state, which substantially redistributed property rights