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PARAGUAY
Economy

Economy

General

Paraguay has a market economy that stands out because of its large informal sector. This includes the export (also smuggling) of imported goods to neighbouring countries and the thousands of one-man businesses and street trading. All these activities make it difficult to give an exact picture of Paraguay's economy.

A high percentage of the population derives its income from agricultural activities, but often people live off the proceeds of their own piece of land without further income. The formal economy grew at an average annual rate of 3% between 1995 and 2009. Paraguay then entered a recession, but in 2013 the country recovered with a record growth of 12%, mainly due to strongly increased exports. In 2017, the economy will grow by 4.8%. The GNP per capita will then be $12,800 per year. Paraguay's economy still suffers greatly from political instability, corruption, lack of structural change and poor infrastructure. In 2017, 22% of the population lived below the poverty line.

Industry is poorly developed, mainly due to the massive supply of consumer goods smuggled into the country. The share of different economic sectors in GDP in 2017 was: agriculture and livestock 17.9%, industry and construction 27.7%, trade and services 54.5%. The government announced to reduce public spending, privatise some state-owned enterprises and introduce an income tax. According to official figures, 5.7% of the labour force was unemployed in 2017.

Paraguay will benefit in the long term from growing investment. The service sector is taking off. The tourism sector is growing, but this industry has much more capacity than has been utilised so far.

Paraguay's economy is partly determined by the existence of the informal sector and its links to the formal economy. The informal economy includes not only the distribution and transit of goods produced elsewhere (smuggling), but also illegal production of CDs and software, which is mainly in the hands of Chinese and refugees from Lebanon and Syria. Brazil and the US have decided to clamp down on these activities and are urging Paraguay to take effective action against them.

Agriculture and livestock

Traditionally, exports of agricultural and livestock products have formed the basis of Paraguay's economy. Almost all agricultural production is concentrated in the Oriental region where, apart from the new important products such as soya beans and cotton, the cultivation of maize, tobacco, sugar cane, wheat, rice and bananas is particularly important. An important part of the cotton is grown in the Mennonite colonies in the Chaco.

Of the economically active population in 2013, 26.5% are employed in agriculture and livestock, 18.5% in industry and 55% in trade and services. Only a small part (6%) of the land is used as agricultural land. About 10 million ha of uncultivated land is highly suitable for agriculture, especially in the eastern part of Paraguay. For some years now, multinational agro-industrial companies and Brazilian entrepreneurs have been clearing land here on a large scale.

Livestock farming is traditionally an important sector; cattle and pig farming produce mainly for export, while intensive livestock and poultry farming produce mainly for the domestic market.

The forest area, especially in the Región Oriental, is increasingly exploited commercially; apart from cedar and some hardwoods, logging produces large quantities of firewood and is the only source of energy in large parts of Paraguay. Rapid deforestation (approx. 125,000 ha per year) is causing environmental problems. With the advent of synthetic substitutes, forest products such as tannin, a product of the quebracho tree, tung oil and caranday wax are becoming less important as an export commodity.

Fishing is still not very important, given that there is only river fishing.

Mining and energy

Paraguay is poor in minerals. There are reserves of natural gas, oil, marble and quartz sand, but they cannot yet be profitably exploited. The enormous hydroelectric reserve of the Río Paraná is very important for the energy supply. In cooperation with Brazil, the world's largest hydroelectric power station, the Itaipú power station, was built there, 17 km from the border with Argentina.

There are also plans for a power station near Corpus and, together with Argentina, a power station near Yacyretá has been in operation since 1995. Most of the energy generated here is exported to Brazil. This makes Paraguay the world's leading exporter of electricity.

Industry and trade

The weakly developed industry is still mainly focused on the processing of agricultural products and wood. The predominantly small companies are concentrated in and around Asunción and some cities in the Región Oriental. Produced are canned meat, frozen meat and meat extracts, sawn wood and plywood, furniture, food, beverages, tobacco products, leather, textiles, cement, sugar and tannin.

Of the total recorded exports, the main products are cotton, soybeans, followed by wood, vegetable oils and meat; weapons, narcotics, liquor, cigarettes and livestock are smuggled on a large scale. The main export partners are Brazil, Argentina. Russia and Chile. In 2017, exports amounted to $11.7 billion.

Of the recorded imports, consumer goods, petroleum, raw materials, machinery and transport equipment are the main items. The main import partners are Brazil, the United States, Argentina, and China. In 2017, imports amounted to $11.4 billion. Paraguay has free port facilities in Argentina (Buenos Aires), Chile (Antofagasta), Brazil (Santos and Paranagua).

Traffic

Transport problems are a major obstacle to the development of large parts of Paraguay. A positive development is the construction of the Trans Chaco Highway between Asunción and the border with Bolivia, which finally opens up the Chaco region. The road network is about 35,000 km long, half of which is asphalted.

The only state-owned railway since 1961 is only about 400 km long. These wood-fired locomotives pull a kind of museum train.

Inland navigation is important for the economy: the port of Asunción is accessible for large ships via the Río Paraguay and the Río Paraná (as much as 950 miles from the ocean) and the same rivers are important for inland navigation with smaller ships. The Flota Mercante del Estado is the state-owned shipping company, but partial privatisation of that company is being considered.

The national airline is the Lineas Aéreas Paraguayas (LAP) and Asunción and Ciudad del Este have an international airport. Domestic flights are operated by the TAM, which has a large number of small airports and landing strips.


Sources

Bernhardson, W. / Argentina, Uruguay & Paraguay
Lonely Planet

Kleinpenning, J. / Paraguay
Koninklijk Instituut voor de Tropen

CIA - World Factbook

BBC - Country Profiles

Last updated May 2024
Copyright: Team The World of Info