Improving the Business Environment in Paraguay… Really?

President Bush addressed the Council of the Americas yesterday, a business organization whose stated goal is to promote democracy and free markets in the Americas.  Among the different subjects he touched in his speech, Bush highlighted the work of the Millennium Challenge Account (MCA) in Latin America.

The MCA’s goal is to provide bilateral aid to countries whose policies promote good governance and economic freedom. In Latin America, some of the standard bearers of good governance and economic freedom according to the MCA are Honduras, Nicaragua and Paraguay.

Bush proudly said in his speech that “In Paraguay, we’re working… with local leaders to reduce the cost of starting new businesses.” It sounds quite good, but when you look at the MCA’s Threshold Quarterly Report for Paraguay, you find among the accomplishments of the program this:

The Finance Ministry conducted simulated purchases to detect firms not following local tax regulations, resulting in the suspensions of more than 70 businesses. The business suspensions received significant positive media coverage and have generated greater tax compliance overall.

It sounds like U.S. aid money is being spent to shut down businesses in Paraguay. That hardly fits my idea of encouraging economic freedom in Latin America.