For the first time in more than 60 years, Paraguay has a president from an opposition party.
Fernando Lugo advocates land reform
A split in the ruling Colorado party, which had ruled the country since 1947, allowed the centre-left former Roman Catholic Bishop, Fernando Lugo, to triumph in the presidential elections in April.
Though he received less than 50% of the vote, he won because there was no second round.
Mr Lugo heads a coalition called the Patriotic Alliance for Change, made up of several parties and organisations. His running candidate is from the traditional opposition party, the Authentic Liberal Radical Party.
Born in 1951, Mr Lugo became a priest in 1977, and served as a missionary in Ecuador for five years.
In 1992 he was appointed head of the Divine Word order in Paraguay, was ordained a bishop in 1994, and then served for 10 years as the bishop of the poor region of San Pedro.
There, his support for landless peasants earned him the reputation of being "the bishop for the poor".
He came to national prominence in March 2006 when he helped lead a big opposition rally in the capital, Asuncion.
He resigned from the priesthood in December that year, as the Paraguayan constitution prohibits ministers of any faith from standing as a political candidate.
But the Vatican initially refused to accept his resignation, arguing that serving as a priest was a lifetime commitment and instead suspended him from his duties.
However, in July, Pope Benedict XVI granted Mr Lugo an unprecedented waiver to remove his clerical status.
The Roman Catholic Church opposes clergy exercising political office.
"It's a great pain for the church to lose a bishop, a priest whom we tried to dissuade from the political option up to the last day of his election campaign," Archbishop Orlando Antonini, the papal nuncio, said.
"But the Holy Father recognised that he was elected by the majority of the people to lead Paraguay for the next five years."
Mr Lugo is keen to present himself as a moderate. He advocates land reform and other measures to tackle poverty, but has distanced himself from the region's more radical left-wing leaders like President Hugo Chavez of Venezuela and President Evo Morales of Bolivia.
Even though he says he does not consider himself a leftist, Mr Lugo does represent a major challenge to Paraguay's unequal social structure.
His most prominent pledge is to renegotiate the terms of the country's two huge hydro-electric projects.
In particular he wants Brazil to pay Paraguay a lot more money for the electricity it buys from their jointly-owned Itaipu dam, the world's biggest hydroelectric plant. He says he will take Brazil to the World Court in The Hague if necessary.