Agriculture in Paraguay is building on its core strengths
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Paraguay excels in the production of food products. The government plans to reduce the impact of volatile prices on the agricultural sector through improved transport links, technology and increased processing capacities.
Developing infrastructure projects nationwide will help diversify Paraguay’s economy and strengthen its core strength, agricultural production. While the country has a consensus regarding the need to diversify income streams, this consensus also extends to the belief that Paraguay needs to aggressively expand its agricultural production. Paraguay is a country that excels in food commodities.
Government policy aims to reduce the impact of climate change on agricultural production. Better use of technology could, for instance, even out the annual yield fluctuations – mainly if it can be implemented on many small farms. “
Rating agencies have been right to emphasize the economy’s dependency on agriculture. However, it is also essential to focus on the positive. “We agree they are correct, but people must understand that Paraguay is naturally competitive in this sector. If you compare Paraguay to other agricultural producers, there are several areas where we have a competitive advantage. 97% of Paraguay’s land is suitable for the production of food. This country’s terrain’s sunlight, temperature and hydrology make it ideal for food production. Paraguay is one of three major areas in the world with land that can be used for biomass production. The other two are parts of the now-disrupted Ukraine and the centre-west Brazil/northern Argentina.
Natural Advantages
Paraguay is blessed with natural advantages in producing food. We have therefore decided to develop into a vertically integrated food producer. Paraguay wants to bring in foreign expertise and capital to help it move up the value chain.
Analysts have predicted that commodity prices will decline over time and cautioned against Paraguay’s emphasis on food commodities. Most dismiss this as an unlikely long-term trend. “Can you imagine if China, which is still developing and producing a large middle class, increased its annual beef consumption per capita by one kilogram?”. “That additional demand would be equal to Brazil’s beef exports.”
Other people say the industry benefits from its lack of bureaucracy and has ambitious growth plans. “In Paraguay, only three people sit at the table when discussing beef policy: the presidents of the CPC (national meatpackers’ Chamber), the Senacsa (national veterinary authority), and the presidents of the National Cattlemen’s Association, which represents the entire cattlemen. This is a huge advantage for foreign investors interested in Paraguay’s meat industry. Other countries involve up to ten parties, including industry groups, federal, state, and local regulators and governments.
The beef industry wants to grow its herd size and increase revenues by producing high-value, high-margin meat for new markets with growing middle classes who consume higher-quality beef products.
Paraguay, the eighth-largest beef exporter in the world, expects its growth to continue at a rate greater than 5% annually until 2020. This will propel it to the projected fifth place, behind beef “superpowers” Brazil, India, Australia and the US. The industry has shifted from exporting commodity meats to Russia and China to premium products to Latin America and new markets. “Demand increases for commodity meat products in direct proportion to global GDP. Premium products, however, always grow above GDP and have much better margins.
Unparalleled Opportunities
Paraguay has already established itself as a significant exporter of corn, wheat, and soybeans. It is also a leader in the exportation of organic sugar. The agricultural sector offers unparalleled opportunities both within and outside of Paraguay. “If Asuncion is growing at 5%, then the rest should be growing about 12% based on the agricultural production.” This growth, however, will need many rural infrastructure projects to achieve its full potential. This will stabilize the macroeconomy. If this industry is to grow, it will need to have access to a Chilean Port to facilitate exports into the growing Asian food markets.
The development of rural roads is crucial to strengthening this export basis. They plan to invest more than $2 billion in rural roads supporting the agricultural and meat sectors over the next few years. This investment is crucial for our strategy of reducing poverty.
The government also supported the development of the capability to process grains and meat, adding jobs to the local economies and reducing exposure to volatile raw commodity prices.
Paraguay used to export soybeans, the grain. Now it’s the refined oil. Cattle used to be a significant export. Now it’s the processed meats. Here are some ways to add value to the agriculture sector. “While you may not be able to reduce or eliminate the market’s volatility, the value created in the export products will compensate for this volatility.”
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