The high-ceilinged house of Domingo Laino, the economist who currently heads the Paraguayan political opposition, looms on Boulevard Espana like one of those decaying Louisiana plantation homes, dusty and colonial and surrounded by browning lawn. To get there from downtown Asuncion you walk under the palm trees of Plaza Independencia, past the barefoot shoeshine boys and the murmuring young men with their hands full of smuggled Japanese watches, around the Mercedes Benzes idling in the early heat. The taxicabs line up alongside the plaza, and what you tell your driver by way of instructions is, "Laino's house, please."

In the living room a young red-haired woman in sandals throws open the shutters to let the morning sun stream in across the faded armchairs, the red tile floor, the old framed photographs and the solemn portrait of Laino's grandfather-in-law, Alfredo Stroessner, the Paraguayan president. Laino comes in looking pleased, surprised and not entirely awake. It was not possible to telephone first, since the government took away his telephone three years ago, and he runs his fingers sleepily through his rumpled hair and thick black beard as he says hello with the kiss to each cheek.

He is wearing a red shirt that arcs over his belly and untied shoes with no socks. Outside the windows, still in the wide metal shards left by the police two weeks earlier, lie the hacked-up remains of Laino's fence.

Laino built the fence last month. He and his wife have grown accustomed to the plainclothes police spies who stand around on the sidewalk outside their house, but Laino was beginning to believe it would be nice to have some privacy on the lawn. So he put up a solid sheet of metal outside part of his house. When he left home some days later, men with a walkie-talkie came over and ripped down the fence.

"You have converted your house into a fortress with this fence," Laino says the chief of police told him. "This has been looked upon very badly in high circles." Anything might be going on behind this fence. Laino might be training guerrillas or hiding communists. Large, alarming meetings might be taking place. Dignitaries pass by the Boulevard Espana all the time. What would they think of such a fence?

The story of Laino's fence has become one of the tales that float now through the murky political life of Paraguay, which is a warm and landlocked chunk of South America that has numerous black cows, a wide river giving off damp heat on windless days, gentle music sung to a strummed harp and a cargo music sung to a stummed harp and cargo planes full of luxury goods that are smuggled into and out of the country. The smuggling is so commonplace that the visitor finds herself in the living room of an elderly, white-haired woman who is serving tea under billowing lace curtains and explaining which general runs the scotch and cigarette smuggling and which general runs the flour and sugar smuggling.

GEN. STROESSNER has been president for 27 years. He is reelected by staggering majorities every five years, during a 24-hour lifting of the state-of-siege laws.

There was a new tale not so long ago about him. You could hear the rumors all over town: the general was dying. The general's handshaking arm was stiff; the general walked very slowley; the general no longer spoke with any force; the general had lip cancer or prostate cancer; the general had to go to the United States for an operation.

When the rumors turned out to be false, or at least as false as the counter-rumors could prove them, a small tremor of disappointment went through the opposition: there was the general, portly and white-haired, opening factories and shipping docks on the color front pages of the morning newspapers. He shows no signs of discontent with the work. A political opposition member, not Laino, says the rumors were born of hope.

"It's because people hope so deeply that something will happen to this man", he says and then falls silent, sipping tonic to cut the heat. They were something to feed on, these rumors. They helped give a name to a Paraguayan idea that was gradually taking shape, and idea by now so startling that most Paraguayans are too young or too politically battered to imagine its possibilities beyond simply tasting the unfamiliar words on the tongue: post-Stroessnerismo.

PARAGUAY IS ABOUT the size of California. Most of its people are bilingual, and the working class and poor in particular speak to each other in Guarani; the language of the Indian people who lived there when the Spaniards first arrived. In the 1800s Paraguay had one dictator who called himself El Supremo had shut the country, forbidding all access in or out, for 25 years.

A later dictator led Paraguay through a war against the combined forces of Argentina, Brazil and Uruguay. When it began, there were 525,000 people in Paraguay; when it ended, there were 221,000, and only 28,000 were male. The man who led Paraguayans in that war is now a national hero, and his body rests in a pantheon in the central plaza, guarded by two motionless teen-age soldiers whose gaze falls directly on the contraband radio and perfume shops across the street.

The nation's largest business is smuggling.After 1983, when the massive Itaipu Dam is scheduled to begin operation, it may be the international sale of hydroelectric energy. But until then the economic center of the country is the airport, which is named after Stroessner and sits like a giant concrete dragonfly in the middle of the cow pastures outside Asuncion.

Into this airport come the cases of whisky, the cartons of cigarettes, the cameras and watches and bottled French perfumes. Some of the items are marked "in transit," exempting them from import taxes, and are then loaded onto smaller airplanes and shipped to Argentina and Brazil. Nobody pays import taxes to bring them into Argentina and Brazil, which is a violation of those countries' tariff laws, but highly profitable for the Paraguayans who make possible this arrangement -- this service stop, if you will.

Certain payments are necessary to see that everything goes as planned. Certain payments are also necessary for an importer who wants to avoid official Paraguayan customs fees while bringing his typewriters, washing machines, raincoats, bathroom fixtures, Brazilian automobiles and car stereos in to the Paraguayan shops.

The shops are very popular with visiting Argentines and Brazilians, who swarm to Asuncion to wander the streets examining major brand imports that cost two-thirds what they would cost at home.

For conceptual purposes, it helps to think of this as a parallel tax system. The money goes into the arrangers' pockets instead of the national coffers. And the chief arrangers, according to just about every journalist, diplomat, political activist and professor this visitor met in Paraguay, are high military officials.

In Paraguay this is simply the way things are.

"People don't see it as a big surprise that a military man has a big, big house with a garden, and three or four cars and so forth, and a $1,000 salary," says a Paraguayan professional. Another man, scarcely old enough to remember a time when Stroessner was not president, says quietly and without any audible anger, "I was born and grew up knowing this was a regimen of thieves."

EVER SINCE HE TOOK over the country in 1954, the regimen has belonged to Stroessner, who has managed to turn Paraguay into a cross between a feudal barony and Richard Daley's Chicago. His portrait hangs in Paraguayan living rooms, in Korean immigrants' badly lit grocery stores and in the Asuncion airport, where the enormous painting of the mustached president looms over the immigration desk.

The president's party is called the Colorados. One of the primary motivations for being a Colorado, aside from having been born to a Colorado father, is the desire to avoid poverty. The country's patronage system is massive, effective and capped by the wealth of the contraband trade. Political opposition members are jailed, tortured, underpaid, exiled, refused passports, denied telephones or deprived of their fences, depending on the times.

With governments rising and falling on his every border, Stroessner has parceled out repression and the spoils so effectively that Paraguay rolled through a turbulent period in Latin American history with scarcely a quiver. The United States looked on him kindly because he was anticommunist.

"The price of peace," is the favored government phrase, and although opposition leaders spit it out while talking about gangsters and payoffs, even they seem a little bewildered by the prospect of a Paraguay without Stroessner. Nobody here knows precisely what post-Stroessnerismo means. Aside from certain generals whose names are almost invariably linked with very big contraband operations, Stroessner has chosen no heirs apparent. Indeed, one of the things he does best is stripping power from potential challengers.

"Every head that tried to raise itself in the last 27 years," said a Paraguayan political observer, "has been cut."

There is talk of an interim military government of Stroessner supporters who would gradually prepare for a full lifting of the state of siege laws and a resumption of political activity. There is talk of some new Stroessner-like figure who would fight it out with the old Colorado infrastructure and take the country into a period of great and possibly violent instability.

But the remarkable part is that there is any talk of this nature at all. At 67, Stroessner is heading into his 28th year in command of this small nation. He cannot last forever, obviously, and when the first voices were raised not long ago to ask what would follow him, it was as though someone had pried open a door that had been shut so long most people forgot it was there.

The old joke goes that a Paraguayan opposition leader's second finger is shorter than all the rest. What shortens it is tapping the table for emphasis while saying, "This year it's going o change."