For the first time in three repressive decades, dissidents inside the ruling party and antigovernment protesters are openly defying the rule of President Alfredo Stroessner, the Western Hemisphere's longest surviving ruler.
Seeking to restore the heavily policed tranquility that has been a signature of Stroessner's 32-year-old regime, authorities last week used tear gas, clubs, water hoses, brass knuckles, horse whips and electrically charged cords to choke a mounting series of street demonstrations by opposition politicans, independent trade unionists, medical workers and university students.
Opposition leaders say they are pessimistic about achieving the kind of popular uprisings that early this year brought down dictatorial regimes in Haiti and the Philippines. But the taste of public protest that thousands of Paraguayans experienced for the first time may be difficult for authorities to wash away. Moreover, the economic troubles and accumulated political frustrations that produced the outbreaks are not likely to disappear.
Significantly, an anti-Stroessner current has emerged within the governing Colorado Party itself. Long seen as a monolithic organization unquestionably loyal to the Paraguayan leader, the party has served to institutionalize Stroessner's tight control by channeling patronage, gathering intelligence and enforcing order.
Younger members known as the "traditionalists" are pushing for changes in the party to shift it away from Stroessner's loyalists, labeled "militants." The aim is to assure that Stroessner, 73, does not seek another five-year presidential term in 1988.
The transition of most military governments in South America to civilian rule in recent years has isolated Paraguay and encouraged those here who seek an end to Stroessner's rule.
So has the cooler attitude toward Paraguay adopted lately by the Reagan administration, which now lists Paraguay along with Chile, Nicaragua, Cuba and Suriname as the Latin American countries still resisting a transition to democracy.
But the primary forces for change in this landlocked country of perhaps 3.6 million people have been internal, stemming largely from economic and generational developments. Stroessner's reign brought the first prolonged period of political stability in Paraguayan history, accompanied by economic modernization, literacy, and the emergence of a fledgling middle class.
In the last few years, however, growth has given way to recession, inflation, unemployment and a shortage of foreign credits, particularly since the completion of Itaipu, the world's largest dam, on Paraguay's border with Brazil -- the project's senior partner.
Even the business community has soured on the aging president, who has refused even to admit that troubles exist. He and his aides would not acknowledge, for instance, a drought in late 1985 that did serious crop damage.
"We need a reordering of the economy and a peaceful transition to a democratic system," said Tito Scavone, president of the Federation of Production, Industry and Commerce. "Stroessner has completed his time."
The government has offered no formal response to repeated appeals from Scavone's group of leading private industrialists for a free exchange rate, revision of energy prices, sale of state enterprises and elimination of monopolies.
A $100 million Central Bank scandal that broke last year has further disturbed many in the business and political establishment who had turned a blind eye toward Paraguay's prevalent corruption. Under the fraud, dummy import invoices drew dollars from the bank at the artificially low rate of 240 Paraguayan guaranis per dollar. The U.S. currency was then sold on the free market, where the dollar at the time was worth more than 1,000 guaranis.
For reasons that are still not clear to opposition groups or foreign diplomats, Stroessner let the scandal grow during much of 1985.
Local papers, which are not formally censored but are run by relatives or intimates of the president and so generally provide guarded coverage, gave ample play to the affair, which reached to the door of the Central Bank president and threatened to go farther. The major independent newspaper, ABC Color, was shut down by the government in 1984 despite repeated protests from foreign governments and press associations.
The case had been farmed out to several judges to facilitate investigation, but in March it was entrusted to a single magistrate -- a move widely interpreted as an attempt to contain and quietly quash the proceedings.
The Council of State, meantime, has decided not to lift the immunity privilege enjoyed by Central Bank President Cesar Romero Acosta.
Such maneuvers suggest that Stroessner remains in firm control, although he seems not to have realized he was opening a Pandora's Box when in an April 1985 speech he spoke out against corruption and contraband.
The bank fraud helped widen the Colorado Party split, which surfaced in the Paraguayan press at about the same time. Party dissidents used the corruption charges to press demands for reform.
These challenges to the old ways of doing things have emboldened other Paraguayans to venture into the streets with their criticism. The Authentic Liberal Radical Party, one of the so-called "irregular" opposition parties -- as opposed to the two "regular" opposition parties that sit in the legislature -- sponsored protests in two outlying towns of Caraguatay and San Jose de Los Arroyos in March.
Last month, 4,000 medical workers in Asuncion marched on government buildings to complain about salaries of $35 to $55 a month -- levels significantly below even the official minimum wage of $80.
To disperse the crowd, the police fired U.S.-made tear gas canisters, which bore an expiration date of August 1970. The last time tear gas wafted through the streets of Asuncion was in 1969, during a demonstration against Nelson Rockefeller's South American visit.
Even if Stroessner succeeds in restoring calm, he is expected to face a difficult battle inside his party in months ahead. Since taking power in a coup on May 4, 1954, he has easily gained reelection six times in votes that the government describes as a model of democracy but that the opposition says were a sham.
"The significance of what has happened is that Stroessner will now have to fight for reelection if he wants it," says a Latin American ambassador here. "Before, he always took it for granted."
Some suspect that Stroessner may be grooming his son, Gustavo, 42, an Air Force lieutenant colonel, to succeed him. The nominating convention for the 1988 presidential campaign is next year but maneuvering for delegates is already under way between party factions.
"The party's existing formulas are spent," said Angel Roberto Seifart, 44, a leader of the traditionalists. "Authoritarianism and the personality cult survive from a different era. We need to look for new formulas to resolve our problems."