Paraguay's diplomatic isolation is fast becoming a thing of the past as President Federico Franco receives the Organization of American States endorsement and a Mercosur diplomatic campaign falters.

Franco supporters have frequently contested Mercosur's suspension of the landlocked country after Franco won the presidency following impeachment and removal of former President Fernando Lugo.

Franco was vice president when the Paraguayan Senate impeached Lugo, forcing him to resign, and installed Franco as the new head of state.

Lugo lost out in political wrangling that followed a June 15 armed confrontation between police and landless peasants that left 11 peasants and six police dead at Curuguaty, southeastern Paraguay.

Mercosur and Union of South American States called Lugo's removal a coup and suspended Paraguay.

Paraguayans blame the left-wing and liberal bloc in the two organizations led by a triumvirate of Brazil, Argentina and Uruguay.

In recent months all three demonstrated a change of heart, trying to make amends. Argentina and Uruguay depend on Paraguayan hydro-electric power generation.

Mercosur nations also found the estrangement was hitting their exports to Paraguay.

OAS resisted lobbying by Mercosur and Unasur for Paraguay's suspension. Instead, OAS sent a fact-finding mission to Asuncion which concluded the charges against the new administration had no basis.

OAS says it considers Franco a legitimate and democratically appointed head of state and notes Franco is committed to having elections next year.

Former Costa Rican President and Nobel Peace Prize laureate Oscar Arias, sent by OAS to Asuncion, met this week with Franco and Foreign Minister Jose Felix Fernandez Estigarribia.

"We know nobody, nowhere in the world is questioning President Franco and we can forecast that the presidential election is going to evolve normally with guarantees for all candidates and that this government is committed to free and fair elections of which I have no doubts," Arias said.

"In OAS we are convinced that the process leading to the 21 April, 2013, elections will be transparent, peaceful and normal," he said.

Arias said it was important that "the world acknowledges this and supports what the Paraguayan government is doing in a climate of absolute tranquility. That is why it is important that we should be here and I have the job of being a guarantor of this and so I will, and proudly."

Arias plans to meet all Paraguayan political parties likely to take part in next year's elections.

He said he will also confer with leaders of the business community, media, unions and non-government organizations, as well as members of the Electoral Tribunal.

OAS Secretary General Jose Miguel Insulza said after an earlier visit to Asuncion that Paraguay was institutionally stable with normal political activity and full exercise of human and civil rights.

Paraguayan analysts say part of the problem may lie with Paraguay's demands for a fairer tariff for electricity imported by Brazil from the Itaipu border dam.

The Inter-American Commission on Human Rights, an OAS autonomous body, says Paraguay must investigate the Curuguaty killings and punish those responsible.

The Catholic Church in Paraguay also called on Franco's government to speed up an official investigation into the killings.

Meanwhile, the government is facing another political crisis over the killing this month of Paraguayan peasant leader Vidal Vega, who headed the landless peasants' Campesinos sin Tierra movement and the Committee of Relatives of Victims of the Curuguaty Massacre.

Vega was a key witness in the investigation of the Curuguaty killings that led to Lugo's removal from presidency.

Vega was killed in the presence of his family Dec. 1 by two men on a motorcycle who called at his home.