(Bloomberg) -- Washington waded deeper into Paraguayan politics by making corruption allegations against Vice President Hugo Velazquez, who was also campaigning to run for president next year.

His blacklisting on Friday came just months before Paraguay holds primary elections and three weeks after the State Department banned ex-President Horacio Cartes from entering the US for alleged involvement in “significant corruption.” Cartes and Velazquez are from opposing factions of the ruling Colorado Party.

“It hit me like a bucket of cold water,” Velazquez told radio Monumental shortly after the announcement. I’m going to give up on my pre-candidacy for the presidency and also next week I’m going to present my resignation as vice president.” 

Velazquez denied wrongdoing, saying he will defend himself from what he considers an “injustice.”

Rarely has the US intervened so publicly in the domestic affairs of a Latin American ally in a region that still resents its backing of military regimes during the Cold War. A major exporter of beef and soybeans, Paraguay is one of the few nations that still maintain diplomatic ties with Taiwan. The landlocked country also consistently ranks among the most corrupt in South America, tying for second place with Bolivia in Transparency International’s 2021 corruption perception index.

Read More: US Adds Paraguay Ex-President Cartes to Corruption Blacklist

Speaking at a press conference in Asuncion, US ambassador Marc Ostfield said Velazquez used an associate, Juan Carlos Duarte, to offer a bribe of more than $1 million to a public official to obstruct an investigation that threatened his financial interests. Duarte, his immediate family members and those of Velazquez were also banned from entering the U.S.

“We are going to continue holding to account those who abuse their public office for personal gain,” Ostfield said. “We remain on the side of President Mario Abdo Benitez and his government in the fight against corruption and impunity.”

‘Surprise’ Decision

Abdo Benitez said the US decision took him by surprise and that his faction of the Colorado Party will choose a new candidate this weekend. He thanked Velazquez for putting his country before personal interests by dropping his candidacy and resigning from office. 

“I say it with pain because he was a friend and comrade. I thank him for his mature attitude,” he told reporters in Asuncion, calling the US an allied country and a strategic partner. “We are going to put ourselves at the disposition of the US government in what corresponds.”  

Paraguay’s 2031 global bond rose 0.1% to $100.2 in afternoon trading, while the currency was steady at 6,881 guaranis per dollar. 

The State Department’s growing scrutiny of Paraguay’s political elite comes as the country prepares to hold presidential primaries in December. Early polls show a three horse race between the Colorado Party, the Concertacion coalition of opposition parties and independent candidate Euclides Acevedo in general elections next April.

Voters 18 to 30 years old represent more than 60% of the electorate and tend not to be affiliated with the Colorado and Liberal parties that have ruled the country for generations, according to Ati Snead, who runs an eponymous polling firm.

“The candidate who manages to mobilize that large mass of voters that have little affinity with the traditional parties will become president in 2023,” Snead said.

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