According to the latest available government figures, the defense budget for 1985 was 13.9 billion guaraníes (for the value of the guaraní--see Glossary). That figure represented approximately 10.1 percent of the total expenditures of the central government, down from the 13- to 14-percent levels sustained in the early 1970s. When measured in current guaraníes, military spending increased more than fivefold during the 1972-82 period. The most rapid growth occurred in the 1979-81 period, when revenues from the Itaipú project were at their highest (see Fiscal Policy , ch. 3). When factoring in inflation during the ten-year period, growth was a more modest, but still respectable, 80 percent. The sharp dropoff in revenues from Itaipú was reflected in defense expenditures after 1982 when measured in current guaraníes, military spending fell by 10 percent in 1983, thereafter rising relatively sharply. These increases were insufficient to match high levels of inflation during the period, however. When measured in constant 1980 guaraníes, defense spending fell almost 30 percent during the 1982- 85 period.

When compared with other Latin American countries, the portion of the national budget devoted to defense was about average. The military's percentage of the gross national product ( GNP--see Glossary) was about 1 percent in 1985, a low percentage for Latin American nations. The level of military expenditures per soldier was among the lowest in the hemisphere.

A breakdown of the defense budget was not publicly available in late 1988, but the army, as the largest service, was known to account for the biggest portion. A large part of army spending went to fund civic-action projects. It must therefore be assumed that the purely military operations of the army, as well as those of the navy and air force, were affected adversely by budget constraints during the mid-1980s. Any modernization of the military's relatively obsolete inventory would require a significant increase in defense spending.

The domestic defense industry was very limited in scope, and the nation imported almost all of its military equipment. The Directorate of Military Industries, an agency subordinate to the Ministry of National Defense, maintained a complex in Asunción that produced explosives and repaired and maintained military vehicles. Under the auspices of the army quartermaster, such items as field kitchens and uniforms were manufactured locally. The navy also maintained repair workshops and a naval shipyard.

The army, which had owned large tracts of land since the 1800s, ran a number of ranches and farms. The produce from these operations helped to supply the military's food requirements. In conjunction with these operations, the army also operated a slaughterhouse and a meat-packing concern.

Data as of December 1988