For most of the last century, Paraguay was isolated and forgotten. Its capital, Asunción, was a quiet Latin American backwater with the feel of a sleepy and quaint provincial city. Its second city, Ciudad del Este, became known to those in neighboring countries as a haven for cigarette and electronics smugglers.
The main reason for Paraguay’s isolation was undoubtedly geography. Put simply, it was hard to get to, and there was not much reason to go there—no significant business, no natural resources, and no tourist industry worth speaking of. Its population, small by Latin American standards, is concentrated in a tiny area in the south of the country, near the border with Argentina. The biggest part of the country consists of low, marshy plains: the huge, uninhabited Chaco region. Even today, the Chaco is really only explorable by air or on horseback, but it has huge potential for agriculture, mining, and gas production.
Today, things are changing fast. Major exports are beef (great steaks) and soybean. However, it’s the service and light manufacturing sectors that are really booming. Paraguay’s economy has always been the freest in the region—it’s just that nobody really noticed before. Now, the country is finally benefitting big-time from globalization.
Safe Haven for Business
Those in the know see Paraguay as a safe haven for capital and a low-cost base to carry on business without excessive regulation.
Paraguay isn’t a banking haven, per se, but the country does offer interesting banking options. It isn’t a tax haven, per se, but its corporate tax rates are low, and residents in the country pay tax only on money earned in the country. The country isn’t an agricultural hot spot compared with neighbors Uruguay, Argentina, and Chile, but land in Paraguay is as productive and cheaper.
All of these positive aspects are conspiring to help bring this country out of more than 100 years of economic doldrums. The financial woes started thanks to a misguided war Paraguay started against its bigger neighbors just after independence from Spain.
Avoiding generations of more recent turmoil of the kind Argentina and Brazil and, to a lesser extent, Chile and Uruguay have experienced, Paraguay seems ready to get its economic act together.
Paraguay is also one of the safest countries in Latin America.