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Paraguay
Republica del Paraguay
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Economy - Paraguay

Paraguay has a predominantly agricultural economy, with a struggling commercial sector. There is a large subsistence sector, including sizable urban unemployment and underemployment, and a large underground re-export sector. The country has vast hydroelectric resources, including the world's largest hydroelectric generation facility built and operated jointly with Brazil (Itaip™ Dam), but it lacks significant mineral or petroleum resources. The government welcomes foreign investment in principle and accords national treatment to foreign investors, but widespread corruption is a deterrent. The economy is dependent on exports of soybeans, cotton, grains, cattle, timber, and sugar; electricity generation, and to a decreasing degree on re-exporting to Brazil and Argentina products made elsewhere. It is, therefore, vulnerable to the vagaries of weather and to the fortunes of the Argentine and Brazilian economies.

According to Paraguayan Central Bank (BCP) data, Paraguay's real GDP in 2004 of $7.98 billion (in 1994 dollars) represented an increase of 3.9% from 2003. Data with the new base year was released in 2005. IMF data using the prior base year of 1982 shows real GDP growth of 2.9% in 2004. The per capita GDP rose to $1,173 in current U.S. dollar terms in 2004, but has fallen by more than a third since the peak of $1,793 in 1996. Given the importance of the informal sector, accurate economic measures are difficult to obtain. Paraguay presently maintains a balance-of-payments surplus. It runs a deficit in the trade of goods, but a large surplus in services, reflecting large exports of electricity from Paraguayís two large hydroelectric dams shared with Brazil and Argentina. In 2004, official foreign exchange reserves rose to $1.17 billion, an increase of $184.2 million over 2003, and an increase of almost 50% from 2002 ($582.8 million). Foreign official debt rose slightly to $2.35 billion. Inflation in 2004 dropped to 2.8%, down from 9.3% in 2003 and the lowest rate since 1970.

Agriculture and Commerce

Agricultural activities, most of which are for export, represent about 21.1% of GDP. More than 200,000 families depend on subsistence farming activities and maintain marginal ties to the larger productive sector of the economy. The commercial sector is primarily engaged in the import of goods from Asia and the United States for re-export to neighboring countries. The recorded activities of this sector have declined significantly in recent years, placing a strain on government finances, which depend heavily on taxes on this trade. In general, Paraguayans prefer imported goods, and local industry relies on imported capital goods. The underground economy, which is not included in the national accounts, may equal the formal economy in size. The bulk of underground activity centers on the unregistered sale of imported goods--including computers, sound equipment, cameras, liquor, and cigarettes--to Argentina and Brazil.


This page was last updated on 20 June, 2009

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