Tragic Past, Promising Future: The Economy in Paraguay
Paraguay’s economic development has been dictated by its unique, if tragic, history. The entire country was entirely devastated by a war in the 19th century that it took more than a century to recover from. Only in the past 50 years or so has the country begun to pull itself from economic stagnation.
Between 1864 and 1870, little Paraguay, recently became independent from Spain. Then, went to war against Brazil, Argentina, and Uruguay all at the same time. Paraguay was overwhelmingly defeated after the bloodiest war in South America. Of the then population of about 500,000, only 220,000 survived the war, of whom only 28,000 were adult males. Paraguay kept some of its territory, but it took the country about a century to recover from this devastation.
The Economy of Paraguay Today
This is one of the main reasons why there was so little economic activity in Paraguay at that time and why the country remained isolated. It is generally accepted that recovery from the war finally came in the 1970s. Paraguay had the highest economic growth rate in Latin America, even without taking into account the enormous black-market economy.
Nowadays, the economy in Paraguay is improving and drawing attention as an offshore jurisdiction. Funds are pouring in mainly from Latin America (from as far away as Mexico) but also from Russia, China, and the Middle East.
While still being an economy reliant on agriculture, Paraguay’s economy keeps expanding. A small but strong manufacturing sector is the main player. This expansion is also aided by business friendly tax rates and low wages.
All this while still becoming more diverse.
Over past years Paraguay has made great strides over its macro economy. Led by significant economic reforms like the Fiscal Responsibility Law, and Inflation Targeting. The creation of the Fiscal Advisory Council has led to further economic growth, as well.
The FRL, contributed in the consolidation of public debt, which is one of the lowest in the region as of now, around 20% GDP. This has led agencies to rate Paraguay higher in sovereign risk. This solvency facilitated access of Paraguay to international capital markets. Thus, making it an attractive options for investors.
Exports in Paraguay
Paraguay is the 93rd exporter in the world. Closing 2015, Paraguay exported a total of $8.33 Billion. The exports of Paraguay have increased 6.5% annually, led by electricity exports, representing 24.1%. Paraguay’s economy relies heavily on the Brazilian economy. Direct changes (for good or bad) that happen in Brazil affect Paraguayan economy in turn.
Here’s a list of main exports in Paraguay:
- Electricity: 24% Of total exports ($2.01B)
- Soybean: 19% Of total exports ($1.57B)
- Soybean Meal: 10% Of total exports ($846M)
- Frozen Bovine Meat: 7.8% Of total exports ($654M)
- Corn: 5.5% Of total exports ($460M)
Top destinations of exports of Paraguay are:
- Brazil: ($2.62B Of total Exports)
- Russia: ($760M Of total Exports)
- Chile: ($638M Of total Exports)
- Argentina ($540M Of total Exports)
- Italy ($314M Of total Exports)
Places Of Interest In Paraguay’s Economy
The most populous city in the country and Paraguay’s economic hotspot. It characterizes itself for its business and trading centers, as well as a hub for transportation. Sports, tourism, and also education are the main working activities for its citizens.
Ciudad del Este
The second and most populous city in Paraguay. A rich, diverse culture attracts a great number of tourists each year. Ciudad del Este is also the world’s third-largest retail center. Paraguay relies a lot on Ciudad del Este, even when this can be cataloged as an unsafe city to live.