"It is for the newspaper."
Translation:É para o jornal.
É pelo jornal = it is by means of the newspaper / it is in behalf of the newspaper.
Yes, I'm extremely confused by this too. Also, "pelo" was in the list of options!
Unfortunately, Duolingo's hints are not always specific to the exercise, and even though it doesn't work here, Duolingo is correctly pointing out that "pelo" can be translated as "for the" in some situations. For example, "Ele espere pelo carteiro" (He waits for the postman).
Native speaker danmoller tries to explain the difference between "por" and "para" here: https://www.duolingo.com/comment/3185480.
I'm really confused as to the usage of "para" versus "por". Can somebody shed some light, please?