The pope, 78, paid special tribute to Paraguay's women, largely left widowed and orphaned during the War of the Triple Alliance from 1865 to 1870, which nearly decimated the male population.
"I would like especially to mention you, the women, wives and mothers of Paraguay, who at great cost and sacrifice were able to lift up a country defeated, devastated and laid low by war," Francis said.
Caacupe has become a place of international pilgrimage thanks to the presence of a small wooden statue of the Virgin Mary that has been credited with various miracles.
On the esplanade in front of the Caacupe basilica, delighted crowds played guitar, shook maracas and sipped gourds of mate -- the herbal drink beloved by many in the region.
Francis, who is from Argentina, is not visiting his home country on this trip but thousands of Argentines came by bus -- some on journeys lasting 50 hours -- to welcome the pope in a homecoming of sorts.
"Being here with you makes me feel at home, at the feet of our Mother, the Virgin of Miracles of Caacupe," Francis said.
Francis had visited a children's hospital in the Paraguay's capital Asuncion yesterday.
"We need to learn from you. We need to learn from your trust, your joy, and your tenderness. We need to learn from your ability to fight, from your strength, from your remarkable endurance," the pope told the kids.
In Caacupe, about 55 kilometers (35 miles) east of Asuncion, thousands spent the night outdoors ahead of the papal visit and about a million people had come to the town, a national police official said.
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