Asuncion, Paraguay  - Former Roman Catholic bishop Fernando Lugo was sworn in Friday as Paraguay's president, in a historic transfer of power after 61 years of uninterrupted rule by the conservative Colorado Party.

The centre-left Lugo, 57, was inaugurated for a five-year term, at a ceremony in front of the Congress building in Asuncion attended by a slew of international dignitaries and thousands of citizens.

The leaders in attendance included Spanish Crown Prince Felipe and presidents Cristina Fernandez de Kirchner of Argentina, Luiz Inacio Lula da Silva of Brazil, Evo Morales of Bolivia, Michelle Bachelet of Chile, Rafael Correa of Ecuador, Tabare Vazquez of Uruguay, Hugo Chavez of Venezuela, Manuel Zelaya of Honduras and Ma Ying-jeou of Taiwan.

Lugo - a former bishop who subscribes to the controversial liberation theology and has no previous political experience - has put himself forward as a champion for the poor.

He succeeds Nicanor Duarte Frutos and is the first president in Paraguayan history to take power peacefully from a democratically elected predecessor of a different political party.

Lugo won April 20 elections with more than 40 per cent of the votes, beating main rival Blanca Ovelar of the Colorado Party.

There are great expectations for his government. Not only do voters expect him to fight poverty - which affects some 35 per cent of the 6.8 million Paraguayans - but they also want to see honest and efficient management.

However, the state government continues to be dominated by Colorado representatives at all levels, with allegations rife that many people within the system received their jobs through political favours. Lugo will also not have a favourable majority in Congress. (dpa)