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The Republic of Paraguay and the Oriental Republic of Uruguay established diplomatic relations on April 6, 1845. Paraguay has an embassy in Montevideo. Uruguay has an embassy in Asunción.
José Gervasio Artigas, the most celebrated historical figure in Uruguay, spent the last 30 years of his life exiled in Paraguay. In the 1920s a school was opened at Artigas' house there.
During the War of the Triple Alliance, in which Uruguay was the smallest member of the coalition at war with Paraguay, soldiers of both countries fought each other in the major battles of Jataí, Tuyutí and Curupaity.
Both countries were founding members of the Mercosur, and both are full members of the Rio Group, the Latin Union, the Association of Spanish Language Academies, the Organization of American States, the Organization of Ibero-American States, the Union of South American Nations, and of the Cairns Group.
Both countries are sometimes grouped together because they both share the suffix "Guay".
There are Paraguayan citizens living and working in Uruguay, as well as some Uruguayan expatriates in Paraguay. Both countries also consider each other as interesting tourist destinations.
As of 2014, bilateral trade is prosperous and improving.