Ex-bishop pledges to aid poor as Paraguay president

ASUNCION (Reuters) - A former Roman Catholic bishop who once led anti-government marches will take over as president of Paraguay on Friday, promising to end deeply ingrained corruption and give land to the poor.

Fernando Lugo, known as "the bishop of the poor", looks like a gray-bearded social worker. A slow-speaking 57-year-old with a wide grin, he wears sandals to important meetings and wants to live in his own house rather than the presidential residence.

Like Evo Morales, president of neighboring Bolivia, he eschews suits and is a former protest leader who faces huge expectations that he will bring about deep change in a country where four in 10 people are poor.

Lugo belongs to a new generation of South American leftist leaders but he has been cagey about his ideology.

"I'm in the center, like the hole in a poncho," he says, but he has also indicated he will steer a middle course between a socialist group led by Venezuelan President Hugo Chavez and more pragmatic leftist leaders in Brazil and Chile.

Lugo's election in April was a dramatic break with the past for Paraguay, a landlocked country of 5.6 million people which had been under the rule of the Colorado Party for 61 years, including 35 years of dictatorship.

"The new government will have to bring expectations down to earth. The best ideas can fail if there's no budget or human resources to bring them about," said economic analyst Ricardo Rodriguez Silvero.

FRUSTRATED WITH PRIESTHOOD

Lugo was briefly a teacher but was moved to join the priesthood after living in a small town where Catholics struggled to maintain their faith without a priest. He was ordained in 1977.

He joins a number of regional leaders whose political views were shaped by their own suffering or that of family and friends under military dictatorships of the 1970s and '80s.

Three of Lugo's brothers went into exile after being jailed and tortured for opposing the 1954-1989 dictatorship of Alfredo Stroessner. He also left Paraguay for four years because the government objected to his "subversive sermons."

Back in Paraguay in the 1990s, Lugo was named bishop in the poorest part of the country. He helped peasants seize land for farming but became frustrated with the limited influence of the Church, so he left the priesthood to get into politics.

During his campaign, Lugo trudged barefoot through the mud to meet with the poor, speaking the Guarani Indian language and promising to make land redistribution a priority.

He is a rare case of a former Catholic bishop becoming a nation's leader, after the Vatican recently and reluctantly downgraded him to layman's status on his request.

MIXED MESSAGES

During his campaign, Lugo dodged accusations that he received funds from Chavez, but once elected he named a foreign minister who promises close ties with Venezuela. That controversial choice weakened his coalition because he lost five senators from the alliance's biggest party, the Liberals.

However, he has sent a different signal with his choices for economy minister and central bank chief, men who pledge to bring private investment into corrupt state monopolies that provide the country's water, telephone and fuel services.

Sandwiched between Argentina and Brazil, Paraguay is deeply dependent on its neighbors, who are also its biggest trading partners. But Lugo promises to make Paraguay's larger and wealthier neighbors pay more for hydro-power it sends them.

Paraguay's economy is the healthiest it has been in a quarter of a century, growing 25 percent over the last five years thanks to booming exports of soybeans.

Public debt has come down, but now consumer prices are soaring, immigration to Europe has jumped and extreme poverty is also on the rise.

The bloated state sector is notoriously inefficient and corrupt.

Lugo said people he has approached to run and clean up the customs office are scared to take the job -- one candidate received a death threat -- because they would have to deal with bureaucrats who have built small fortunes by taking bribes to allow illegal imports of electronics.

The opposition is weak because the Colorado Party is deeply divided, but Lugo's own coalition is also fragile although he has tried to give each faction posts in his cabinet.

"I think Lugo chose the toughest way to govern," said columnist Edwin Britez, of the ABC Color newspaper.

(Editing by Hilary Burke and Kieran Murray)