Economy of Paraguay

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Economy of Paraguay

Asunción is the capital and largest city of Paraguay

Currency Paraguayan guaraní (PYG, ₲)

Fiscal year Calendar year

Trade WTO, Mercosur, Prosur
organizations

Country group Developing/Emerging[1]

Upper-middle income economy[2]

Statistics

Population  6,956,071 (2018)[3]

GDP  $41.855 billion (nominal, 2022)[4]

 $108.290 billion (PPP, 2022)[4]

GDP rank 97th (nominal, 2022)

95th (PPP, 2022)

GDP growth 3.4% (2018) 0.0% (2019e)

−2.8% (2020f) 4.2% (2021f)[5]
GDP per capita  $5,615 (nominal, 2022)[4]

 $14,528 (PPP, 2022)[4]

GDP per capita 102nd (nominal, 2022)
rank
98th (PPP, 2022)
GDP by sector agriculture: 17.9%

industry: 27.7%

services: 54.5%

(2017 est.)[6]
Inflation (CPI) 3.7% (2020 est.)[4]
Population  24.2% (2018)[7]
below poverty
 17.0% on less than $5.50/day (2018)[8]
line
Gini coefficient  46.2 high (2018)[9]
Human  0.717 high (2021)[10] (105th)
Development
 0.582 medium IHDI (2021)[11]
Index
Labor force  3,530,715 (2019)[12]

 67.4% employment rate (2018)[13]

Labor force by agriculture: 26.5%
occupation
industry: 18.5%

services: 55%

(2008)[6]

Unemployment  5.7% (2017 est.)[6]

Main industries sugar, cement, textiles, beverages, wood products, steel, base

metals, electric power
Ease-of-doing-  125th (medium, 2020)[14]
business rank

External

Exports  $11.73 billion (2017 est.)[6]

Export goods soybeans, feed, cotton, meat, edible oils, wood, leather
Main export  Brazil 31.9%
partners
 Argentina 15.9%

 Chile 6.9%

 Russia 5.9%

(2017)[6]

Imports  $11.35 billion (2017 est.)[6]

Import goods road vehicles, consumer goods, tobacco, petroleum products,

electrical machinery, tractors, chemicals, vehicle parts
Main import  Brazil 24%
partners
 United States 22%

 China 17%
  Argentina 10%

 Chile 5%

(2017)[6]
FDI stock  $6.235 billion (31 December 2017 est.)[6]

 Abroad: $705.1 million (31 December 2017 est.)[6]

Current account  −$298 million (2017 est.)[6]
Gross external  $17.7 billion (31 December 2017 est.)[6]
debt

Public finances
Public debt  19.5% of GDP (2017 est.)[6]
Budget balance −1.1% (of GDP) (2017 est.)[6]

Revenues 5.524 billion (2017 est.)[6]

Expenses 5.968 billion (2017 est.)[6]

Credit rating Standard & Poor's:[15]

BB (Domestic)

BB (Foreign)

BB+ (T&C Assessment)

Outlook: Positive[16]

Moody's:[16]

Ba2

Outlook: Stable
Foreign reserves  $7.877 billion (31 December 2017 est.)[6]

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars.

The economy of Paraguay is a market economy that is highly dependent on

agriculture products. In recent years, Paraguay's economy has grown as a result of
increased agricultural exports, especially soybeans. Paraguay has the economic
advantages of a young population and vast hydroelectric power. Its disadvantages
include the few available mineral resources, and political instability. The government
welcomes foreign investment.[17]
Agriculture represents 30% of its GDP. According to official figures, 5% of landowners
own 90% of the land.[18]

Contents

 1Overview
 2History of economic advancement
 3Agriculture
 4Industry
 5Manufacturing
 6Structure of the economy
o 6.1Mining and minerals
o 6.2Industry and manufacturing
o 6.3Energy
o 6.4Services
o 6.5Tourism
 7Banking and finance
 8Labor
 9Currency, exchange rate, and inflation
 10Foreign economic relations
 11Transport
 12Media and communications
 13Statistics
 14See also
 15References
 16External links

Overview[edit]
Paraguay is a middle-income country that changed rapidly in the 1970s and 1980s as a
result of hydroelectric development, agricultural colonization, construction, and cash
crop exports. Nevertheless, the country's gross domestic product (GDP) in 1986 was
approximately US$3.4 billion, or roughly US$1,000 per capita, ranking Paraguay only
ahead of Bolivia among countries of South America. Paraguay was the most agricultural
economy of South America, and that sector influenced the performance of virtually
every other sector of the economy. The over dependence on agricultural economy and
low tax collections deteriorated the already wide gap wealth distribution. The extreme
poverty increased from 16% to 20% during 2001 to 2012, even as the economy grew.
By 2013, it has a human development index of 0.669 which is even lower than Bolivia.
The Paraguayan economic miracle of the 1970s came to a halt in 1982 because of the
completion of construction at Itaipú, lower commodity prices for cotton and soybeans,
and world recession. The economy recovered in 1984 and 1985, stagnated in 1986, and
continued to expand in 1987 and 1988. Despite its rapid growth, the Paraguayan
economy became increasingly dependent on soybeans and cotton for exports and
overall economic dynamism. These two crops, however, remained subject to external
price fluctuations and local weather conditions, both of which varied considerably.
Economic growth in the post-World War II period occurred in the context of political
stability characterized by authoritarian rule and patronage politics. Government
economic policies deviated little from 1954 to the late 1980s, consistently favoring a
strong private-enterprise economy with a large role for foreign investment. Unlike most
Latin American economies, in Paraguay import tariffs were generally low, fiscal deficits
manageable, and exchange rates not overvalued. These trends faltered in the 1980s as
the government took a more active part in industry, deficits rose, and the national
currency was generally overvalued and devalued numerous times. Throughout the post-
World War II era, Paraguay had no personal income tax, and government revenues as
a percentage of GDP were among the lowest in the world.
Despite the sustained economic growth that marked the postwar period, the distribution
of economic benefits was highly inequitable. Although GDP expanded rapidly in the
1970s, most economists estimated that income distribution worsened during the
decade. Government spending on social services was particularly lacking. Paraguay's
poverty was mostly a rural phenomenon, which increasingly involved competition for
land in the eastern region near the Brazilian border, especially in the departments
(administrative divisions) of Alto Paraná, Canendiyú, and Caaguazú. Nonetheless, land
tenure was not generally the acute social problem it was in many developing countries.
Although Paraguay faced significant obstacles to future economic development, it
displayed extraordinary potential. Paraguay contained little oil and no precious
metals or sea coasts, but the country was self-sufficient in many areas and was
endowed with fertile land, dense forests, and swift rivers. The process of opening up the
eastern border region to economic activity and continued agricultural expansion was
expected to effect rapid changes in once-isolated Paraguay. Likewise, the development
of a series of hydroelectric plants along the Río Paraná linked Paraguay to its neighbors
and provided it access to cherished energy resources and badly needed export
revenues. Finally, road construction united different departments of Paraguay and
provided the country its first access to the Atlantic Ocean via Brazil. These processes of
infrastructure development, hydroelectric expansion, agricultural colonization, and a
cash crop explosion allowed Paraguay by the late 1980s to begin to tap its potential

History of economic advancement[edit]

Until the Spanish established Asunción in 1537, economic activity in Paraguay was
limited to the subsistence agriculture of the Guaraní Indians. The Spanish, however,
found little of economic interest in their colony, which had no precious metals and no
sea coasts. The typical feudal Spanish economic system did not dominate colonial
Paraguay, although the encomienda system was established. Economic relations were
distinguished by the reducciones (reductions or townships) that were established
by Jesuit missionaries from the early seventeenth century until the 1760s. The
incorporation of Indians into these Jesuit agricultural communes laid the foundation for
an agriculture-based economy that survived in the late twentieth century.
Three years after Paraguay overthrew Spanish authority and gained its independence,
the country's economy was controlled by the autarkic policies of José Gaspar
Rodríguez de Francia (1814–40), who closed the young nation's borders to virtually all
international trade. Landlocked, isolated, and underpopulated, Paraguay structured its
economy around a centrally administered agricultural sector, extensive cattle grazing,
and inefficient shipbuilding and textile industries. After the demise of de Francia,
government policies focused on expanding international trade and stimulating economic
development. The government built several roads and authorized British construction of
a railroad.
The War of the Triple Alliance (1865–70) fundamentally changed the Paraguayan
economy. Economic resources were employed in and destroyed by the war effort.
Paraguay was occupied by its enemies in 1870; the countryside was in virtual ruin,
the labor force was decimated, peasants were pushed into the environs
of Asunción from the east and south, and the modernization of the preceding three
decades was undone. Sleepy, self-sufficient Paraguay, whose advances in agriculture
and quality of life had been the envy of many in the Southern Cone, became the most
backward nation in that subregion.
To pay its substantial war debt, Paraguay sold large tracts of land to foreigners, mostly
Argentines. These large land sales established the base of the present-day land
tenure system, which is characterized by a skewed distribution of land. Unlike most of
its neighbors, however, Paraguay's economy was controlled not by a traditional, landed
elite, but by foreign companies. Many Paraguayans grew crops and worked as wage
laborers on latifundios (large landholdings) typically owned by foreigners.
The late 1800s and the early 1900s saw a slow rebuilding of ports, roads, the railroad,
farms, cattle stock, and the labor force. The country was slowly being repopulated by
former Brazilian soldiers who had fought in the War of the Triple Alliance, and
Paraguay's government encouraged European immigration. Although few in
number, British, German, Italian, and Spanish investors and farmers helped modernize
the country. Argentine, Brazilian, and British companies in the late 1800s purchased
some of Paraguay's best land and started the first large-scale production of agricultural
goods for export. One Argentine company, whose owner had purchased 15 percent of
the immense Chaco region, processed massive quantities of tannin, which were
extracted from the bark of the Chaco's ubiquitous quebracho (break-axe) hardwood.
Large quantities of the extract were used by the region's thriving hide industry. Another
focus of large-scale agro-processing was the yerba maté bush, whose leaves produced
the potent tea that is the national beverage. Tobacco farming also flourished. Beginning
in 1904, foreign investment increased as a succession of Liberal Party (Partido Liberal)
administrations in Paraguay maintained a staunch laissez-faire policy.
The period of steady economic recovery came to an abrupt halt in 1932 as the country
entered another devastating war. This time Paraguay fought Bolivia over possession of
the Chaco and rumors of oil deposits. The war ended in 1935 after extensive human
losses on both sides, and war veterans led the push for general social reform. During
the 1930s and 1940s, the state passed labor laws, implemented agrarian reform, and
assumed a role in modernization, influenced in part by the leadership of Juan Perón in
Argentina and Getúlio Vargas in Brazil. The 1940 constitution, for example, rejected the
laissez-faire approach of previous Liberal governments. Reformist policies, however, did
not enjoy a consensus, and by 1947 the country had entered into a civil war, which in
turn initiated a period of economic chaos that lasted until the mid-1950s. During this
period, Paraguay experienced the worst inflation in all of Latin America, averaging over
100 percent annually in the 1950s.
After centuries of isolation, two devastating regional wars, and a civil war, in 1954
Paraguay entered a period of prolonged political and economic stability under the
authoritarian rule of Alfredo Stroessner. Stroessner's economic policies took a middle
course between social reform, desarrollismo, and laissez-faire, all in the context
of patronage politics. Relative to previous governments, Stroessner took a fairly active
role in the economy but reserved productive activities for the local and foreign private
sectors. The new government's primary economic task was to arrest the country's
rampant and spiraling price instability. In 1955 Stroessner fired the country's finance
minister, who was unwilling to implement reforms, and in 1956 accepted
an International Monetary Fund (IMF) stabilization plan that abolished export duties,
lowered import tariffs, restricted credit, devalued the currency, and implemented
strict austerity measures. Although the sacrifice was high, the plan helped bring
economic stability to Paraguay. Labor unions retaliated with a major strike in 1958, but
the new government, now firmly established, quelled the uprising and forced many labor
leaders into exile; most of them remained there in the late 1980s.
By the 1960s, the economy was on a path of modest but steady economic growth. Real
GDP growth during the 1960s averaged 4.2 percent a year, under the Latin American
average of 5.7 percent but well ahead of the chaotic economy of the two previous
decades. As part of the United States-sponsored Alliance for Progress, the government
was encouraged to expand its planning apparatus for economic development. With
assistance from the Organization of American States (OAS), the Inter-American
Development Bank (IDB), and the United Nations Economic Commission for Latin
America (ECLA), in 1962 Paraguay established the Technical Planning Secretariat
(Secretaría Técnica de Planificación—STP), the major economic planning arm of the
government. By 1965 the country had its first National Economic Plan, a two-year plan
for 1965–66. This was followed by another two-year plan (1967–68) and then a series of
five-year plans. Five-year plans—only general policy statements—were not typically
adhered to or achieved and played a minimal role in Paraguay's economic growth and
development. Compared with most Latin American countries, Paraguay had a small
public sector. Free enterprise dominated the economy, export promotion was favored
over import substitution, agriculture continued to dominate industry, and the economy
remained generally open to international trade and market mechanisms.
In an economic sense, the 1970s constituted Paraguay's miracle decade. Real GDP
grew at over 8 percent a year and exceeded 10 percent from 1976 to 1981—a faster
growth rate than in any other economy in Latin America. Four coinciding developments
accounted for Paraguay's rapid growth in the 1970s. The first was the completion of the
road from Asunción to Puerto Presidente Stroessner and to Brazilian seaports on the
Atlantic, ending traditional dependence on access through Argentina and opening the
east to many for the first time. The second was the signing of the Treaty of Itaipú with
Brazil in 1973. Beyond the obvious economic benefits of such a massive project, Itaipú
helped to create a new mood of optimism in Paraguay about what a small, isolated
country could attain. The third event was land colonization, which resulted from the
availability of land, the existence of economic opportunity, the increased price of crops,
and the newly gained accessibility of the eastern border region. Finally, the skyrocketing
price of soybeans and cotton led farmers to quadruple the number of hectares planted
with these two crops. As the 1970s progressed, soybeans and cotton came to dominate
the country's employment, production, and exports.
These developments shared responsibility for establishing thriving economic relations
between Paraguay and the world's sixth largest economy, Brazil. Contraband trade
became the dominant economic force on the border between the two countries, with
Puerto Presidente Stroessner serving as the hub of such smuggling activities.
Observers contended that contraband was accepted by many Paraguayan government
officials, some of whom were reputed to have benefited handsomely. Many urban
dwellers' shelves were stocked with contraband luxury items.
The Paraguayan government's emphasis on industrial activity increased noticeably in
the 1970s. One of the most important components of the new industrial push was Law
550, also referred to as Law 550/75 or the Investment Promotion Law for Social and
Economic Development. Law 550 opened Paraguay's doors even further to foreign
investors by providing income-tax breaks, duty-free capital imports, and additional
incentives for companies that invested in priority areas, especially the Chaco. Law 550
was successful. Investments by companies in the United States, Europe, and Japan
comprised, according to some estimates, roughly a quarter of new investment. Industrial
policies also encouraged the planning of more state-owned enterprises, including ones
involved in producing ethanol, cement, and steel.
Much of Paraguay's rural population, however, missed out on the economic
development. Back roads remained inadequate, preventing peasants from bringing
produce to markets. Social services, such as schools and clinics, were severely lacking.
Few people in the countryside had access to potable water, electricity, bank credit, or
public transportation. As in other economies that underwent rapid growth, income
distribution was believed to have worsened in Paraguay during the 1970s in both
relative and absolute terms. By far the greatest problem that the rural population faced,
however, was competition for land. Multinational agribusinesses, Brazilian settlers, and
waves of Paraguayan colonists rapidly increased the competition for land in the eastern
border region. Those peasants who lacked proper titles to the lands they occupied were
pushed to more marginal areas; as a result, an increasing number of rural clashes
occurred, including some with the government.

Agriculture[edit]

Graphical depiction of Paraguay's product exports (2019).

In 2018, Paraguay was the 6th largest producer of soy in the world, with 11 million tons
produced (behind the US, Brazil, Argentina, China and India). In the same year, the
country produced 5.3 million tons of maize, and 6.1 million tons of sugarcane, ranking
21st in the world in both; this year, the country also produced 3.3 million tons
of cassava, 892 thousand tons of rice, 722 thousand tons of wheat, 223 thousand tons
of orange, 116 thousand tons of yerba mate, 107 thousand tons of sorghum, in addition
to smaller productions of other agricultural products. [19]
Industry[edit]
Industry, especially the manufacturing sector, historically was linked to agricultural
processing until the 1970s, when the construction of hydroelectric plants and new
industrial incentives began to broaden the industrial base. Industry was composed
principally of manufacturing and construction. Paraguay had no real mining sector, but
the manufacture of construction materials included limited mining activity. Manufacturing
and construction in the economy in the late 1980s remained dependent on
developments in other sectors, such as agriculture and energy, for their growth.
Although industry was becoming more visible in Paraguay in the 1980s, industry's share
of GDP actually declined in the 1970s and 1980s because of more rapid growth in
agriculture.

Manufacturing[edit]
Manufacturing accounted for 16.3 percent of GDP in 1986 and employed roughly 13
percent of the labor force, making Paraguay one of the least industrialized nations in
Latin America. Manufactured exports, by most definitions, accounted for less than 5
percent of total exports; when semiprocessed agricultural products were included,
however, that figure reached 77 percent. The growth of the country's manufacturing
industries was hampered by numerous structural obstacles. These included a small
internal market, limited physical infrastructure, costly access to seaports, a historical
lack of energy production, and the openness of Paraguay's economy to the more
industrialized economies of Brazil and Argentina. Another significant factor was the
ubiquity and profitability of smuggling operations, which encouraged importing and
reexporting rather than production.
Paraguay's earliest manufacturing industries processed hides and leather from its
abundant cattle and tannin from quebracho trees. Small-scale manufacturing, especially
textiles, flourished under the Francia dictatorship, when the nation's borders were
closed. The War of the Triple Alliance, however, devastated what little industry and
infrastructure the country had, causing Paraguay to enter the twentieth century as an
almost completely agricultural society. Land sales to foreigners stimulated increased
agricultural processing in the early twentieth century, including meat packing and the
processing of flour, oilseeds, sugar, beer, and pectin extract. After the early 1900s,
small-scale manufacturing in all subsectors grew at a slow, but steady pace, with some
of the fastest growth occurring because of the shortages during World War II.
The government's role in promoting industry increased in the postwar era, and in 1955
the Stroessner government undertook the country's first industrial census. Over the next
twenty years, the government enacted a number of industrial incentive measures, the
most important of which was Law 550. Law 550 promoted exportoriented industries or
those that would save foreign exchange. It also provided liberal fiscal incentives for
companies to develop specific areas of the country, especially the departments of Alto
Paraguay, Nueva Asunción, Chaco, and Boquerón. Incentives for business were related
mostly to import-duty exemptions, but they included a variety of tax breaks and placed
no restrictions on foreign ownership. Approximately one-fourth of all new manufacturing
investment from 1975 to 1985 was registered under Law 550. Most foreign investments
originated from Brazil, West Germany, the United States, Portugal, and Argentina in that
order of importance. The dynamic processes of agricultural colonization and
hydroelectric development, combined with such attractive industrial incentives, caused
manufacturing to grow at an unprecedented rate in the late 1970s and early 1980s.
Unlike many other Latin American governments, which followed an import-substitution
industrial policy, the Paraguayan government had played a minimalist role in the
economy through most of the postwar era, curtailing import tariffs and maintaining a
realistic exchange rate. In the 1980s, however, Paraguay's exchange rate became
overvalued and several state-owned heavy industry plants became operational.
In the late 1980s, the major subsectors of manufacturing were food, beverages, and
tobacco; textiles, clothing, leather, and shoes; wood and related products; and
chemicals, petroleum, and plastics. Despite some increases in heavy industry in the
economy during the 1970s and 1980s, Paraguayan industry was generally small-scale.
Manufacturing production remained focused on consumer goods, and capital goods
comprised under 5 percent of industrial output. In fact, in the 1980s Paraguay did not
contain even one of Latin America's 1,000 largest companies, at least some of which
were found in most other countries in the region. Virtually every subsector of Paraguay's
manufacturing was characterized by numerous small- to medium-sized firms and a few
large firms, which often were foreign owned. Most companies operated well below their
capacity.
The food, beverages, and tobacco subsector has been the core manufacturing activity
throughout Paraguay's history. In the late 1980s, this subsector continued to dominate,
accounting for about 45 percent of industrial activity, depending on agricultural output in
a given year. Agro-processing involved a large number of small, inefficient, and often
family-run firms as well as a small number of large, efficient, and usually foreign-owned
firms. The larger firms produced only the most lucrative items, such as oilseeds, meats,
and various beverages, often for export. Some of the most common small-scale
producers manufactured milled items, baked goods, sugar and molasses, dairy
products, candy, manioc flour, vinegar, coffee, and tobacco. Along with raw agricultural
produce, processed and semiprocessed food generated nearly all of the country's
exports in the late 1980s. But, as with other manufacturing subsectors, the profitability
of the food subsector often was impaired by contraband items from Brazil and
Argentina, such as flour, meat, or dairy products. Paraguayan goods crossed borders
unofficially, as well, thus lowering official exports.
The second most important manufacturing activity also relied on agricultural inputs for
its base. Utilizing Paraguay's rich endowment of hardwood trees, the wood subsector
represented about 15 percent of all industrial activity and contributed over 8 percent of
exports in the 1980s. The most voluminous wood export was lumber, which was
produced by hundreds of small sawmills throughout the central and eastern border
regions. In addition to saw wood, mills also produced a variety of milled wood, plywood,
chipboard, and parquet flooring. Although the country cut and processed only a fraction
of its hundreds of species, Paraguayan wood was known for its quality. The country
also contained several small paper companies and one large paper and cardboard
factory located at Villeta.
Textiles, clothing, leather, and shoes comprised the third largest manufacturing
subsector. These industries were traditional, grounded in the nation's abundance of
inputs like cotton fibers, cattle hides, and tannin extract. The subsector accounted for
about 10 percent of all manufacturing. The textile industry performed spinning, weaving,
and dyeing operations and produced finished fabrics that amounted to over 100 million
tons in 1986. Most fabrics were derived from cotton fibers, but a growing number of
synthetic and wool fibers also were produced. Textile production provided inputs to
approximately sixty clothing firms that operated under capacity and were generally
inefficient. As with so many other manufacturers, clothing companies met stiff
competition from widespread unregistered imports, which often originated in Asia and
typically entered across the Brazilian border. The leather industry was characterized by
200 or so small tanneries dotting the Paraguayan countryside. In addition, many
medium and two large tanneries fashioned leather goods. The leather industry operated
at only about 40 percent of capacity, however. The shoe industry comprised a few
hundred small workshops and a dozen or so mediumsized firms, which produced some
5 million pairs of leather and synthetic shoes a year.
The processing of petroleum, chemicals, and plastics repeated an increasing activity. In
the late 1980s, this subsector represented less than 5 percent of industrial activity, but
its share of manufacturing output was expanding because of the growth of heavy
industry in Paraguay, especially industry related to the energy sector. The country also
produced fertilizers, industrial gases, tanning chemicals, varnishes, and detergents. In
1987 a group of Japanese investors was considering the construction of a new fertilizer
plant with a 70,000-ton capacity per year. Since the early 1980s, ethanol was being
produced in large quantities, and the government was considering producing methanol.
Also processed were paints, soaps, candles, perfumes, and pharmaceuticals. One of
Paraguay's fastest growing industries was the new, relatively modern plastics
subsector, which supplied a wide variety of goods to the local market.

Structure of the economy[edit]

Soybeans and silos on a farm in rural Paraguay

The most important component of the Paraguayan economy is the farming sector,
which contributed 27% to GDP in 2006. The participation of commerce was 20.2%, and
that of other services, including government, 38.4%. Industry's part (including mining
and construction) was about 20%.
After years of economic crisis, between 1999 and 2002, the Paraguayan economy grew
at between 2.9 and 4.1% per year from 2003 to 2006. For 2007, the estimated growth is
about 6.4%. Inflation in 2007 reached 6.0%.
Most enterprises are small, micro and individual ones, including subsistence jobs like
street vendors. Only 4% of the Paraguayan labor force works in companies with more
than 50 employees.
In June 2007 external foreign exchange reserves amounted to US$2153 million, and the
foreign official debt US$2154 million, close to parity. The fiscal surplus is provisionally
reported as 0.5% of GDP in 2006 and 2007. Paraguay's economy (GDP) grew 5.8% in
2008, fastest growing sector being agriculture with 10.5% growth. [20]

Cattle on cleared land in the Chaco

Commerce in Ciudad del Este, on the border with Brazil

Agriculture accounts for about 20 percent of Paraguay's annual gross domestic product
(25 percent in 2004) and virtually all of the country's export earnings. It is Paraguay's
largest and most consistent source of employment, employing about 45 percent of the
working population. In addition to those engaged in the formal agricultural sector,
thousands of Paraguayan families survive through subsistence farming. [17]
Paraguay produces enough basic food to be largely self-sufficient. Corn, cassava, and
wheat are the main food crops for local consumption. The global surge in grain prices
2007/2008 was a major impulse for the agricultural sector. Wheat cultivation expanded,
so did rice. Most significant was the increase of soy production. In 2004 Paraguay had
about 1.6 million hectares dedicated to genetically modified (GM) crops. [17] Export value
of soy and its derivates increased from US$1,25 billion in 2007 to US$2,54billion in
2008
Paraguay's eastern plains as well as the Chaco support the country's dairy and
ranching industry. Behind soybeans, beef exports make up a significant part of
Paraguay's agriculture sector. Additionally, Paraguay produces an adequate supply of
beef, pork, and dairy products to meet domestic needs. The discovery of cases of foot-
and-mouth disease in 2002 and 2003 led to a ban on Paraguayan beef in many
countries. However, in 2004 Paraguay's meat production and exports rebounded. As a
result of rising international prices and the recovery of important markets like Chile or
Russia, Paraguay's meat exports rose to US$143 million in 2004. They reached
US$353 million in 2007 and US$597 million in 2008. Presently, Paraguay has a national
herd numbering between 9 and 10 million head of cattle.
Paraguay's forests adequately meet domestic needs for lumber and fuelwood. However,
logging for export, both legally and illegally, has thinned Paraguay's once abundant
forests, resulting in a ban on the export of logs since the 1970s. More than 90% of the
native rainforest of Paraguay's eastern half have been lost between 1975 and 2008. In
the western half, the Chaco, virgin forest is lost to cattle ranching at an annual rate of
more than 200.000 hectare (2008).[21] Sustainable wood cultivation is now on the
increase.[17]
The fishing industry in Paraguay exists almost solely to meet domestic demand. [17]
Mining and minerals[edit]
Main article: Mineral industry of Paraguay
Unlike many South American countries, Paraguay has few mineral resources and very
little history of mining success. Foreign companies have explored Paraguay in recent
years, searching for overlooked mineral deposits. Small extraction projects exist,
seeking lime, clay, and the raw materials necessary to make cement, but the country's
iron and steel manufacturers must import raw materials from neighboring countries. [17]
In 2010 CIC Resources Inc., the same company that discovered the copper deposits in
Chile, claims to have discovered 21 billion metric tons of titanium, which could be the
biggest titanium deposit in the world, in Alto Parana near frontier with Brazil.
Industry and manufacturing[edit]
The industrial sector produces about 25 percent of Paraguay's gross domestic product
(GDP) and employs about 31 percent of the labor force. Output grew by 2.9 percent in
2004, after five years of declining production. Traditionally an agricultural economy,
Paraguay is showing some signs of long-term industrial growth. The pharmaceutical
industry is quickly supplanting foreign suppliers in meeting the country's drug needs.
Paraguayan companies now meet 70 percent of domestic consumption and also have
begun exporting drugs. Strong growth also is evident in the production of edible oils,
garments, organic sugar, meat processing, and steel. Nevertheless, capital for further
investment in the industrial sector of the economy is scarce. Following the revelation of
widespread financial corruption in the 1990s, the government is still working to improve
credit options for Paraguayan businesses.[17]
In 2003 manufacturing made up 13.6 percent of the GDP, and the sector employed
about 11 percent of the working population in 2000. Paraguay's primary manufacturing
focus is on food and beverages. Wood products, paper products, hides and furs, and
non-metallic mineral products also contribute to manufacturing totals. Steady growth in
the manufacturing GDP during the 1990s (1.2 percent annually) laid the foundation for
2002 and 2003, when the annual growth rate rose to 2.5 percent. [17]
Energy[edit]
See also: Energy in Paraguay and Electricity sector in Paraguay

The Itaipú Dam; a hydroelectric dam on the Paraná River

Paraguay relies almost solely on hydroelectric power to meet its energy needs. The
Itaipú Dam, completed in 1984, has the world's second largest power-generating
capacity: 13.3 gigawatts. The dam is located on the Paraguay River, and Paraguay and
Brazil evenly share the ownership, operation, and electricity generated. Additionally,
Paraguay co-owns another major hydropower plant, Yacyretá, with Argentina. Paraguay
uses only a small portion of the energy it generates through Itaipú and Yacyretá. In
2002 Paraguay generated more than 48 billion kilowatt-hours of energy. It consumed
only 2.5 billion kilowatt-hours while exporting 45.9 billion kilowatt-hours. Paraguay will
have even more hydroelectricity to export when planned new turbines are installed at
Itaipú and the Yacyretá dam is fully completed. [17] In 2007 electricity production rose to
70 TWh, and exports reached 64 TWh which put Paraguay in second place worldwide
as an exporter of electrical power (And in the first place as a net exporter since France,
the Number one exporter in the World with 67 TWh, also imports 10 TWh, while
Paraguay does not import any).
Paraguay has no oil reserves; it relies on imported oil to meet its limited need for oil-
produced energy. The Paraguayan government owns Petróleos Paraguayos, which is
responsible for all distribution of oil products. The state accepts bids from international
oil companies, selecting a few companies annually to meet the country's demand.
Presently, Paraguay does not produce or consume natural gas, but consumes LPG
imported mainly from Argentina.[17]
Services[edit]
The services sector made up nearly 50 percent of Paraguay's gross domestic product in
2004 and employed about 19 percent of Paraguay's working population. The
importation of goods, especially from Argentina and Brazil, for sale and illegal
reexportation creates service industry jobs. The services sector had a moderate growth
rate of 0.9 percent from 1990 to 2003. The sector decreased by 7.8 percent in 2002,
before rebounding in 2003 with a 1.6 percent growth rate. Instability in the economy and
a large black market have hampered development of the formal services sector in
Paraguay.[17]
Tourism[edit]
See also: Rural tourism of Paraguay

Tourism

Paraguay has a small tourism industry. Total tourism receipts declined annually from
2000 through 2002. In 2003 Paraguay's hotel occupancy rate was 38 percent. It
increased by 15 percent in 2004. Small gains in tourism have come from business
rather than leisure travellers. For many years, Paraguay served as a central market for
trafficable, duty-free goods. However, crackdowns by the governments of Brazil and
Argentina have stemmed the flow of shoppers travelling to Paraguay looking for
trafficable items.[17]
Paraguay is a country that has a lot of different activities for tourism, due to privileged
weather and location conditions condensed into a varied geography, an inviting "warm"
tropical climate and an interesting history and unmatched folk art that adorn its streets
with an identity that enchants anyone who visits the country. As an example, for less
than 80 US dollars a visitor can have a personalized trip to a nature reserve area called
Eco-Reserva Mbatovi which is located in the Paraguari department, about an hour away
from the capital. The trip includes various outdoor activities, water, and complete
professional guidance during the whole trip.[22]

Banking and finance[edit]

Paraguay's banking and financial services industry is still recovering from the liquidity
crisis of 1995, when news of widespread corruption resulted in the closure of several
significant banks. Reform efforts spurred by the International Monetary Fund (IMF) and
World Bank helped restore some credibility to Paraguay's banking industry. Still, a
paucity of credit options hinders the overall economy. Paraguay has a long history as a
money-laundering center. The government has taken steps to curb the problem, but
enforcement of anti-laundering legislation remains inconsistent. [17]
Foreign companies either partially or wholly own most banks and financial institutions in
Paraguay. Paraguayan banks hold less than 10 percent of deposits. Of the 16 banks
operating in Paraguay in 2003, 50 percent were wholly foreign-owned and 25 percent
were partially owned by foreign companies. Paraguay's Central Bank exists to stabilize
the financial sector, making sure that another run on banks, such as the one that
occurred in 1995, does not recur. The Superintendencia de Bancos regulates the
banking system, monitoring the percentage of non-performing loans in the banking
system. Bank deposits rose significantly in 2004, along with the percentage of local
currency in total deposits. Local currency deposits increased by 26 percent in 2004, a
sign that Paraguayans are gaining confidence in the stability of Paraguayan currency. In
another promising development, interest rates dropped dramatically in 2004, from 50
percent in 2003 to 27 percent in 2004.[17]
Paraguay's stock market, the Bolsa de Valores y Productos de Asunción, began trading
in October 1993. The tradition of family-owned companies and economic instability kept
investment low throughout the 1990s. The value of shares on the Asunción stock
exchange rose by 390 percent in 2004, reaching US$17.5 million. [17]

Labor[edit]
Paraguay's formal labour force was estimated to total about 2.7 million workers in 2004.
About 45 percent worked in the agricultural sector, 31 percent in the industrial sector,
and 19 percent in the services sector. Unemployment was estimated at 15 percent.
Paraguay's constitution guarantees the right of workers to unionize and bargain
collectively. About 15 percent of workers are members of one of Paraguay's 1,600
unions. Strikes are legal and not uncommon.[17]
The 2001 census found that 5 percent of Paraguay's workforce was under the age of
14. Although Paraguay ratified the International Labour Organization's Minimum Age
Convention in 2004, child labour continues to be prevalent. Nearly 14 percent of
children between the ages of 5 and 17 are employed, many in poor conditions and for
negligible pay. The government has mandated a minimum wage of approximately
US$158 per month for private-sector employees. Government employees have no
minimum wage. The standard workweek is 48 hours. In 2004 Paraguay's
unemployment rate stood at 15 percent. [17]

Currency, exchange rate, and inflation[edit]

Paraguay's currency is the guarani (PYG). In mid-October 2005, US$1 equaled about
PYG6155.[17]
Price inflation fell dramatically between 2003 and 2004, from 14.2 percent to a 30-year
low of 4.3 percent. President's Duarte's economic reforms and austerity programs have
produced results more rapidly than many expected. As of 2005, experts forecast that
the inflation rate in Paraguay likely would rise in coming years but has remained below
10 percent.[17]

Foreign economic relations[edit]

Paraguay's main export goods 2007-2008 Source: Paraguay Ministry of Industry and Commerce / REDIEX

Paraguay is a member of the Common Market of the South (Mercado Común del Sur
or Mercosur). Most of Paraguay's trade takes place with Uruguay, Brazil and Argentina.
[23]
 In 2002 Paraguay conducted more than US$400 million in trade with Argentina and
nearly US$800 million with Brazil. Paraguay is also a member of the Inter-American
Development Bank, Latin American Integration Association, and Latin American
Economic System and a signatory to the agreement creating the South American
Community of Nations. In 2004 Paraguay signed an energy cooperation agreement with
Venezuela to purchase oil and petroleum. Venezuela agreed to concessional financing
that allowed Paraguay to pay over a 15-year period at a nominal interest rate. [17]
Imports totaled US$3.3 billion in 2004. Principal import commodities included
automobiles, chemical products, consumer goods, tobacco, petroleum, and machinery.
Brazil was the leading source of imports to Paraguay (24.3 percent), followed by the
United States (22.3 percent), Argentina (16.2 percent), China (9.9 percent), and Hong
Kong (5 percent). Experts note that import statistics are difficult to confirm for Paraguay
because as much as half of all imports are illegally re-exported to Argentina or Brazil.
Imports from Mercosur countries continue to rise, up to 57 percent in 2003. [17]
Paraguay's export revenues totaled about US$2.9 billion in 2004. Agricultural
commodities continue to drive Paraguay's export totals. Soybeans are particularly vital,
accounting for 35 percent of total export revenues in 2003. Other agricultural cash crops
include cotton, sugarcane, cassava, sunflowers, wheat, and corn. Other significant
exports include feed, meat, edible oils, electricity, wood, and leather. Even as
Paraguayan export revenue has fluctuated, Brazil remained Paraguay's principal export
destination (27.8 percent in 2004), followed by Uruguay (15.9 percent), Italy (7.1
percent), Switzerland (5.6 percent), Argentina (4.3 percent), and the Netherlands (4.2
percent). In 2003 nearly 60 percent of Paraguayan exports went to Mercosur countries.
[17]

Paraguay had a negative trade balance of about US$400 million in 2004. Higher
earnings from soybeans and cotton could not offset the surge in imported consumer
goods and petroleum products.[17]
After years of negative balances, Paraguay achieved a positive balance of payments
totaling US$234 million in 2003. In 2004, however, the current account had an
estimated deficit of US$35.1 million.[17]
Paraguay has a sustainable debt level according to the International Monetary Fund
(IMF). External debt totaled about US$3.4 billion in 2004, low compared to most Latin
American countries. Continued reductions in Paraguay's debt to gross domestic product
ratio are expected in coming years. Paraguay paid US$412 million in debt service to the
IMF in 2004.[17]
Foreign investment in Paraguay nearly disappeared in 2002. After direct foreign
investment of US$84 million in 2001, only US$9 million in investment came from abroad
in 2002. This drop was largely the result of the financial crisis in Argentina and the
banking collapse in Paraguay. Direct foreign investment rebounded in 2003, reaching
US$90.8 million for the year.[17]
Paraguay has depended on the International Monetary Fund (IMF) and World Bank for
economic development assistance. The World Bank has promised Paraguay assistance
totaling US$325 million between 2003 and 2007. Projects currently underway in
Paraguay aim to improve education, transportation, and rural development. [17]

Transport[edit]
Main article: Transport in Paraguay
The Paraguayan road network includes almost 4,500 kilometers of paved roads and
nearly 60,000 kilometers of secondary roads. The density of the road network is higher
in the oriental region, and lower in the Chaco area. However, in 2007 a paved
connection to the Bolivian border was completed across the Chaco region.
The Paraguay-Paraná waterway constitutes an essential route for the transport of
exported and imported goods.
The railway which connects Asunción to Encarnación actually doesn't operate, but there
is still a connection between Encarnación and Posadas (Argentina) for the transport of
agricultural goods.
Paraguay has two international airports, Silvio Pettirossi International Airport,
in Asunción, and Guarani International Airport, in Ciudad del Este, and several
secondary airports in other parts of the country.

Media and communications[edit]

Main articles: Media of Paraguay and Telecommunications in Paraguay
There are five national newspapers and a larger number of local publications. There are
five Paraguayan TV stations. Additionally, essential international stations can be
received by cable in the main urban areas.
The fixed line network is controlled by the state-owned COPACO Company. The cell
phone network is open to private operators. There are four competing mobile phone
operators in Paraguay. During the last few years mobile phone coverage of the
population has been far more extensive than fixed line coverage.

Statistics[edit]
The following table shows the main economic indicators in 1980–2019 (with FMI
estimates for 2020-2026).[24]

GDP GDP
GDP Inflation Unemploymen Government
GDP per GDP per
Year growth rate t debt
(in Bil. capita (in Bil. capita (in
US$PPP) (in US$ US$nominal) (in US$ (real) (in Percent) (in % of GDP)
Percent)
PPP) nominal)

1980 11.1 3,536.7 4.1 1,299.7 11.7% 22.5% n/a n/a

4,103. 1,608.
1981 13.3 5.2 9.2% 13.8% n/a n/a
4 5

4,171. 1,636.
1982 13.9 5.5 -1.4% 5.4% n/a n/a
1 5

4,080. 1,763.
1983 14.0 6.1 -3.0% 12.8% 8.3% n/a
4 0

4,220. 1,390.
1984 15.0 4.9 2.8% 20.9% 7.3% n/a
3 9

4,390. 1,154.
1985 16.0 4.2 3.9% 24.8% 5.1% n/a
9 1

4,352. 1,335.
1986 16.4 5.0 0.3% 31.7% 6.1% n/a
9 8

4,499. 1,084.
1987 17.5 4.2 4.1% 21.7% 5.5% n/a
5 7

1988 19.2 4,780. 5.6 1,392. 5.9% 22.6% 4.7% n/a

 5 4

5,095.
1989 21.1 4.0 977.8 5.8% 25.6% 6.1% n/a
2

5,503. 1,185.
1990 22.8 4.9 4.1% 38.2% 6.6% 67.0%
7 3

5,529. 1,585.
1991 24.4 7.0 3.5% 24.3% 5.1% 49.4%
7 2

5,636. 1,592.
1992 25.3 7.2 1.7% 15.1% 5.3% 34.4%
6 1

5,933. 1,580.
1993 27.2 7.2 4.9% 18.3% 5.1% 26.6%
9 2

6,255. 1,681.
1994 29.3 7.9 5.3% 20.6% 4.4% 18.7%
3 4

6,685. 1,897.
1995 31.9 9.1 6.8% 13.4% 3.3% 17.6%
7 1

6,777. 2,008.
1996 33.0 9.8 1.6% 9.8% 8.2% 16.8%
0 2

7,042. 2,003.
1997 35.0 10.0 4.2% 7.0% 5.0% 18.0%
6 6

6,984. 1,824.
1998 35.4 9.3 0.1% 11.6% 5.8% 22.1%
2 6

1999 35.5 6,848. 8.8 1,706. -1.4% 6.8% 6.8% 32.0%

 5 4

6,702. 1,675.
2000 35.4 8.9 -2.3% 9.0% 7.3% 33.6%
7 8

6,665. 1,577.
2001 35.9 8.5 -0.8% 7.3% 7.6% 40.3%
8 7

6,646. 1,312.
2002 36.5 7.2 0.0% 10.5% 10.8% 54.5%
9 1

6,937. 1,377.
2003 38.7 7.7 4.3% 14.2% 8.1% 40.3%
8 5

7,285. 1,693.
2004 41.4 9.6 4.1% 4.3% 7.3% 30.3%
2 9

7,542. 1,857.
2005 43.6 10.7 2.1% 6.8% 5.8% 24.1%
5 8

8,009. 2,285.
2006 47.1 13.4 4.8% 9.6% 6.7% 18.2%
1 1

8,528. 2,988.
2007 51.0 17.9 5.4% 8.1% 5.6% 14.9%
9 7

9,099. 4,047.
2008 55.3 24.6 6.4% 10.2% 5.7% 14.5%
8 7

9,001. 3,621.
2009 55.5 22.3 -0.3% 2.6% 6.4% 13.7%
7 7

2010 62.4 9,964. 27.1 4,326. 11.1 4.7% 5.7% 12.1%

 5 2 %

10,442 5,295.
2011 66.4 33.7 4.2% 8.3% 5.6% 10.3%
.6 4

9,960. 5,155.
2012 64.4 33.3 -0.5% 3.7% 4.6% 12.3%
8 2

11,004 5,905.
2013 72.2 38.7 8.4% 2.7% 5.0% 13.5%
.3 7

11,326 6,050.
2014 75.4 40.3 4.9% 5.0% 6.0% 15.6%
.6 1

11,357 5,353.
2015 76.7 36.2 3.1% 3.1% 5.4% 18.6%
.7 1

11,895 5,259.
2016 81.5 36.1 4.3% 4.1% 6.0% 19.4%
.4 9

12,437 5,609.
2017 86.5 39.0 5.0% 3.6% 6.1% 19.8%
.5 8

12,978 5,725.
2018 91.5 40.4 3.4% 4.0% 6.2% 22.2%
.2 9

13,021 5,333.
2019 93.1 38.1 0.0% 2.8% 6.1% 25.6%
.8 0

12,881 4,946.
2020 93.4 35.9 -0.9% 1.8% 6.6% 34.8%
.0 5

2021 98.9 13,454 37.8 5,145. 4.0% 2.7% 6.1% 35.7%

 .2 6

14,115 5,391.
2022 105.2 40.2 4.0% 3.2% 5.9% 36.5%
.9 0

14,811 5,685.
2023 111.9 43.0 4.0% 3.2% 5.9% 36.4%
.6 5

15,441 5,935.
2024 118.2 45.4 3.5% 3.2% 5.9% 36.2%
.5 3

16,078 6,178.
2025 124.8 47.9 3.5% 3.2% 5.9% 35.8%
.0 1

16,726 6,430.
2026 131.6 50.6 3.5% 3.2% 5.9% 35.2%
.1 6

GDP - composition by sector:

 agriculture: 17.9%
 industry: 27.7%
 services: 54.5% (2017 est.)
Labor force: 3.428 million (2017 est.)
Labor force - by occupation:

 agriculture: 26.5%
 industry: 18.5%
 services: 55% (2008 est.)
Unemployment rate: 6.5% (2017 est.)
Population below poverty line: 22.2% (2015 est.)
Household income or consumption by percentage share:

 lowest 10%: 1.5%
 highest 10%: 37.6% (2015)
Distribution of family income - Gini index: 51.7 (2015)
Inflation rate (consumer prices): 3.6% (2017 est.)
Investment (gross fixed): 21.2% of GDP (2005 est.)
Budget:

 revenues: $5.366 billion
 expenditures: $5.876 billion, including capital expenditures of $700 million (2017
est.)
Public debt: 25.6% of GDP (2017 est.)
Agriculture - products: cotton, sugarcane, soybeans, corn, wheat, tobacco, cassava
(tapioca), fruits, vegetables; beef, pork, eggs, milk; timber
Industries: sugar, cement, textiles, beverages, wood products, steel, metallurgic,
electric power
Industrial production growth rate: 6% (2017 est.)
Electricity:

 production: 51.29 billion kWh (2003)

 consumption: 3.528 billion kWh (2003)
 exports: 44.17 billion kWh (2003)
 imports: 0 kWh (2003)
Electricity - production by source:

 fossil fuel: 0%
 hydro: 99.9%
 nuclear: 0%
 other: 0.1% (2001)
Oil:

 production: 0 bbl/d (0 m3/d) (2003 est.)

 consumption: 25,000 bbl/d (4,000 m3/d) (2003 est.)
 exports: NA (2001)
 imports: NA (2001)
Current account balance: $543 million (2017 est.)
Exports: $11.53 billion f.o.b. (2017 est.)
Exports - partners: Brazil 31.9%, Argentina 15.9%, Chile 6.9%, Russia 5.9% (2017)
Imports: $10.37 billion f.o.b. (2017 est.)
Imports - partners: China 31.3%, Brazil 23.4%, Argentina 12.9%, US 7.4% (2017)
Reserves of foreign exchange and gold: $7.504 billion (2017 est.)
Debt - external: $17.35 billion (2017 est.)
Economic aid - recipient: NA
Currency: 1 guarani (G) = 100 centimos
Exchange rates: guarani (G) per US$ - 5,628.1 (2017) 4,555.00 (2011), 6,158.47
(2005), 5,974.6 (2004), 6,424.34 (2003), 5,716.26 (2002), 4,105.92 (2001), 3,332.0
(January 2000), 3,119.1 (1999), 2,726.5 (1998), 2,177.9 (1997), 2,056.8 (1996), 1,963.0
(1995); note - since early 1998, the exchange rate has operated as a managed float;
prior to that, the exchange rate was determined freely in the market
Fiscal year: calendar year

See also[edit]
 List of Latin American and Caribbean countries by GDP growth
 List of Latin American and Caribbean countries by GDP (nominal)
 List of Latin American and Caribbean countries by GDP (PPP)