The streets of Asunción will be a sea of red and white as Paraguay sample the big time against Spain

The enthusiasm is inescapable. Everywhere you go people wear official Paraguayan striped red and white T-shirts. Bank clerks, TV presenters, cashiers at supermarkets, children, teachers and government officials, women and men – are all dressed in the Paraguayan team colours. Spain may be the favourites in everyone else's eyes in today's quarter-final, but belief is spreading.

In the streets things are no different. Cars and buses, houses and shops show proudly the national colours and the country's flag (red, white and blue). TV sales have soared and even expensive flat screen TVs have sold out. One shop has even promised to give customers their money back if Paraguay go on to win the World Cup.

Most offices, including government buildings, have set aside a room to watch the games and most have come to an arrangement with employees to compensate the lost working hours. When Paraguay play, the roads empty. There are no phone calls, meetings are postponed and a ceremonial silence precedes each game. The whole country comes to a standstill.

In day-to-day conversation there is only one subject – football. Normal people have become so knowledgeable on the technical aspects of the game, it seems, that any one of them would expect to hold their own in a debate with the most experienced football commentators.

When the national team have won, Paraguayans, who are mostly quiet and reserved, have celebrated with dances and songs in the streets. Each victory has been considered a historic achievement, especially after Paraguay reached the quarter-finals for the first time with the defeat of Japan.

But then, Paraguay is not used to being in the international spotlight. For many years, the country has supplied young football talent to the best club sides in the world, according the players celebrity status in a country that usually has no part in the international jet set. Now things are different.

Up to 40,000 people were in the main square to watch the penalty shoot-out, shouting in unison, "Paraguay, Paraguay" after the victory. "What the [team] was able to realise deserves a dignified celebration, the Paraguayan people's will. Let's party now," the president, Fernando Lugo, urged.

Things did not quite go according to that plan, however, after the win in Pretoria with reports that 50 people were arrested in the streets of Asuncíon and that police had to use rubber bullets and teargas to restrain drunken fans.

Nonetheless, there is a newfound spirit. More than 3,000 fans are thought to have flown to South Africa to follow the team after they reached the last 16. In January this year, Salvador Cabañas, the country's top scorer in the World Cup qualifiers, was shot in the head in Mexico City. The player miraculously survived and is recovering back home. The attack has had an extraordinary effect in uniting the nation behind the team.

A smartly produced TV campaign, filmed prior to the incident, shows Cabañas as the marshal conducting his troops during the 1870's Triple Alliance war. That war was lost to a secret alliance between Argentina, Brazil and Uruguay, but in this fantasy world, the World Cup is a chance for Paraguay to gain some international pride and bring hope to thousands at home who consider the country's team victories as a community success.

Come what may today against Spain, Paraguay may be able to claim oneupmanship in one sense, if the Vatican is to be believed. An article published in L'Osservatore Romano has claimed that football originated with the Guaraní Indians of Paraguay in the 17th century. An account of the game from a Spanish Jesuit priest, José Manuel Peramas, who lived near Asunción, read: "They did not throw the ball with their hands like we do, but rather they kicked it with the upper part of their bare feet, passing it and trapping it with great agility and precision."

Today, hundreds of thousands of Paraguayans will be hoping that legacy can prompt a result no one expects.