This paper offers a political economy interpretation of the “parliamentary coup” that took place in Paraguay in June 2012. It situates this analysis in the wider historical context of the protracted transition to democracy between 1989 and 2008, the rural class structure of the country, the changing character of contemporary agro‐extractive capitalism, and the long‐standing class struggle for redistributive land reform. By examining the Paraguayan agrarian reform impasse under the short‐lived government of Fernando Lugo (2008–2012) through an “interactive state/society” framework, this paper attempts to locate the sources of current social and political conflict in the country, and the demands of rival social groups. In doing so, the paper argues that the rise and fall of Lugo occurred in the context of structural legacies from the Stroessner era (1954–1989) that have remained largely unchanged and that coexist today with an expanding agro‐extractivist development model. They lead to the conceptualization of the continued “predatory” or “oligarchic” state in the country.