Lugo's ouster and the manner of his impeachment continue to provoke controversies in Latin American media.
Britain decided to send an ambassador to the impoverished landlocked nation as part of a wider campaign to counteract Argentine diplomatic maneuvers in Latin America.
Buenos Aires is challenging British sovereignty over the Falklands Islands. Argentina invaded the islands in 1982 and was beaten back by Britain after a 74-day conflict.
As Argentine-British relations hit a low last year, London announced plans for renewing diplomatic initiatives in Latin America, a move that mirrored U.S. President Barack Obama's diplomatic overtures in the region.
Britain closed its embassy in Asuncion in 2005 and is represented by its envoy in Buenos Aires.
But, as diplomatic complications go, tense Argentine-British ties are increasingly matched by acrimonious exchanges between Argentina and Paraguay since last year's change in Asuncion.
Argentina joined Brazil and Uruguay in a diplomatic response to Franco's take-over, which the three countries condemned. Their joint efforts prompted Mercosur regional economic bloc to brand Franco's presidency as a constitutional coup and initiate sanctions against Asuncion.
The political crisis was triggered by Lugo's impeachment on a charge that he failed to maintain law and order. Lugo resigned but changed his mind and claimed he had been ousted, a position backed by Mercosur.
The resulting troubles found Franco increasingly isolated but also brought home to Mercosur the folly of losing Paraguay's lucrative market. Mercosur also failed to convince the European Union and the Organization of American States in Washington to back its effort to ostracize Asuncion and isolate Franco.
In the months that followed Mercosur's diehard campaigners further reviewed their anti-Franco stance and a return to business as usual has seen more regional envoys returning to Paraguay. Mercosur has struggled to conceal its embarrassment over the fiasco.
Franco has promised to have elections April 21 and has told his detractors they are welcome to send in observers for the polls. Six men and a woman are candidates for the presidency which will further disarm critics, including Argentine, Brazilian and Uruguayan leaders who orchestrated Paraguay's suspension from Mercosur.
Paraguay's hydroelectric resources are shared by Argentina and Brazil. Both have resisted Paraguayan calls for fairer returns on its hydroelectric power generation. Several of the presidential candidates have pledged to fight for better deals for electricity sales and fairer terms for Paraguay's agricultural exports.
British Foreign Secretary William Hague cited "a considerable diplomatic advance in Latin America and the reversal of the previous government's policy of closing posts in the region."
"Paraguay is the country with the largest economy in the world that does not have resident British diplomatic representation and was the fastest growing economy in South America in 2010," Hague said.
"This new embassy will further strengthen British diplomatic engagement in the region. It will help to unlock commercial opportunities for British companies in this significant market. And it will allow us to work closely with Paraguay on regional issues such as counter-narcotics and organized crime."
Newly appointed Ambassador Jeremy Hobbs, a Latin American expert, served previously in Ecuador, Mexico and Colombia.
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