Paraguay achieved its independence from Spain in 1811. In the disastrous War of the Triple Alliance (1865-70) - between Paraguay and Argentina, Brazil, and Uruguay - Paraguay lost two-thirds of its adult males and much of its territory. The country stagnated economically for the next half century. Following the Chaco War of 1932-35 with Bolivia, Paraguay gained a large part of the Chaco lowland region. The 35-year military dictatorship of Alfredo STROESSNER ended in 1989, and, despite a marked increase in political infighting in recent years, Paraguay has held relatively free and regular presidential elections since the country's return to democracy.
Central South America, northeast of Argentina, southwest of Brazil
hydropower, timber, iron ore, manganese, limestone
Population - distribution
most of the population resides in the eastern half of the country; to the west lies the Gran Chaco (a semi-arid lowland plain), which accounts for 60% of the land territory, but only 2% of the overall population
Spanish (official), Guarani (official)
ASUNCION (capital) 2.356 million (2015)
- Conventional long form
- Republic of Paraguay
- Conventional short form
- Local long form
- Republica del Paraguay
- Local short form
- Geographic coordinates
- 25 16 S, 57 40 W
- Time difference
- UTC-4 (1 hour ahead of Washington, DC, during Standard Time)
- Daylight saving time
- +1hr, begins first Sunday in October; ends last Sunday in March
accepts compulsory ICJ jurisdiction; accepts ICCt jurisdiction
Landlocked Paraguay has a market economy distinguished by a large informal sector, featuring re-export of imported consumer goods to neighboring countries, as well as the activities of thousands of microenterprises and urban street vendors. A large percentage of the population, especially in rural areas, derives its living from agricultural activity, often on a subsistence basis. Because of the importance of the informal sector, accurate economic measures are difficult to obtain.
- External debt stocks
- US$ 16,161,991,000
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -461,989,486
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 10,815,678,944
- Exports of goods and services
- US$ 11,550,692,104
- Total Merchandise Trade
- FDI, net inflows
- US$ 315,265,500
- Commercial Service Exports
- US$ 776,896,592
cotton, sugarcane, soybeans, corn, wheat, tobacco, cassava (manioc, tapioca), fruits, vegetables; beef, pork, eggs, milk; timber
sugar processing, cement, textiles, beverages, wood products, steel, base metals, electric power
- soybeans, livestock feed, cotton, meat, edible oils, wood, leather, gold
- Brazil 31.7%, Russia 9.1%, Chile 7.1%, Argentina 7% (2015)
- road vehicles, consumer goods, tobacco, petroleum products, electrical machinery, tractors, chemicals, vehicle parts
- Brazil 25.4%, China 23.7%, Argentina 14.8%, US 7.9% (2015)
- Country Risk Rating
- A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high.
- Business Climate Rating
- The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.
- Agricultural sector (soya and beef)
- Abundant hydroelectric resources
- Prudent economic policies
- Deficient infrastructures (waterways, roads, electrical supply lines)
- Dependence on the agricultural sector
- Weak governance (corruption and cronyism)
- Large informal sector (40%)
In 2016, the Paraguayan economy stood out from other economies in the region because of its relatively high rate of growth, despite the recessions in its leading trading partners, Brazil and Argentina. The country, which is particularly reliant on the production and exports of its primary sector (almost 20% of GDP), recorded a very good soya harvest and expanding beef production, alongside increased hydroelectricity generation and private investment. Growth in 2017 should prove resilient, with the dynamism of the automotive parts assembly and textiles segments within the country’s “maquillas” and of the construction sector, and should help offset the potential negative impact of the La Niña climatic phenomenon on hydroelectricity generation and the agriculture sector. Improvements in the Brazilian and Argentinian economies should prove positive for Paraguayan exports, subject to unforeseen climatic events. Increased public spending will also help underpin activity but political disputes could delay the implementation of a number of infrastructure projects (roads, urban transit). Household consumption should also remain at a sustained level bolstered by the ongoing reduction in extreme and chronic poverty (the country improved from 11th place to 5th out of 18 Latin American and Caribbean countries between 2011 and 2014, according to the World Bank).
The government is expected to continue with the implementation of the budget reforms approved at the end of 2013, including the law on fiscal responsibility, in force as of 2015 and restricting the deficit to 1.5% of GDP, the tax reforms, and the public-private partnership (PPP) context aimed at boosting infrastructure investments. In 2016, the budget deficit was held below the limit set by the law on fiscal responsibility and this trend is expected to continue in 2017. The dynamism of economic activity should continue adding to increased tax revenues and help offset the growth in public spending, essentially in infrastructures. The government is also hoping other measures will help boost revenues. In 2016, VAT (10%) exemptions were approved for loans taken out by cooperatives, and it also promised to clamp down on tax fraud in Ciudad del Este, a re-exporting and trading platform. Paraguay however needs to widen its tax base, one of the narrowest in Latin America, to enable it to achieve its budget deficit reduction targets. The government is however facing public opposition. Finally, the efficiency of public corporations, operating in a number of sectors (ports, airports, telecoms, cement, alcohol), is poor because of a lack of investment. With the cautious management of the public budget, public debt is likely to stabilise at around 25% of GDP.
The recovery in economic activity in Brazil and Argentina should boost agriculture and energy exports (respectively 70% and 25% of exports), by volume, excluding any negative climatic events. The benefits associated with the surplus in goods will however be somewhat moderated by the expected rise in oil prices. Beyond the traditional terms of trade, the main determining factor in how the current account evolves in 2017 will be infrastructure investments. At the same time as public spending in partnership with the private sector becomes a reality, this will also trigger an increase in the volume of imported inputs and will in part offset the expected growth in export volumes. Direct foreign investment will help to prevent to some extent any significant weakening of reserves, which are at a satisfactory level (7 month’s imports).
The next presidential and parliamentary elections in Ecuador are scheduled for November 2018. The President, Horacio Cartes, Colorado Party (PC), cannot stand again as the Senate rejected his proposed amendment to the Constitution to allow the re-election of the president. The PC has said it will continue to press for an amendment, but its position, with a majority in the Senate but not in Parliament, appears weakened because the final decision is the responsibility of this latter and the PC is also facing dissidents within its ranks. This could also hamper the progress of the reforms, in particular the opening of State-owned companies to private shareholdings and the realisation of private-public partnership infrastructure projects. The business climate remains difficult mainly because of the scale of the informal economy. The country is also the most corrupt in Latin America after Venezuela.