Paraguay, Land of new Opportunities

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Land of new  Opportunities: Paraguay’s sovereign rating has been raised from BB to BB, keeping a stable outlook. This improvement is an important development, which reflects the success of measures implemented at government level, its strong external financial position, low debt levels. The international financial community increasingly looks more favorably the auspicious process that is being developed in the country, creating a virtuous circle of development and investment, creating an excellent business climate that is reflected in a sustained level of growth.

Land of new OpportunitiesThe impetus of activity that gives the “Law on Public-Private Partnerships” improved levels of investment and employment. The infrastructure improvements is the key to economic diversification, reducing volatility and strengthening the country’s economic progress.

Paraguay plans to issue debt in international markets in the second half of the year, after successfully start with a bond of $ 500 USD million for 10 years in January 2013, managing to break the world record for lowest rate financing the inaugural issue of a bond, raising funds at 4.625% per annum. Market demand was twelve times the volume actually placed. The next issue will be for 750 USD million, which will be used for infrastructure projects, in a country which is now the fourth largest exporter of soybeans and beef producer eighth in the world.

S & P expects growth of Gross Domestic Product (GDP) of Paraguay to average between 4.5 and 4.8 percent in the next three years.

For ECLAC, in 2014 will double the average regional growth.

See the official Government video below
The video lasts nearly nine minutes and displays images and some information about the country’s economy. “Paraguay, land of opportunity” , which is already available on YouTube.
Inside the video they comment on the conditions for investment in the nation led by Horacio Cartes, and includes specific plans.

The video was initially uploaded to various social networks by the Ministry of Public Works and Communications (MOPC), as published by the ABC newspaper, Paraguay.

According to the government agency, “the material was able to capture the interest and admiration of meeting participants called Global Square Project 2014”, held this week in South Korea, which the minister Ramón Jiménez Gaona and other state officials participated.

This ambitious initiative adds to the prediction of the Economic Commission for Latin America and the Caribbean (ECLAC) released in late April when the Paraguayan estimated that GDP will expand 4.5% this year, above the 2.7% projected for Latin America.

According to the Updated Economic Balance Latin America and the Caribbean 2013, conducted by the agency of the UN, the Paraguayan growth rate would be slightly higher than in 2013, 2.5 percent.

These figures are the result of even marked by uncertainty and lower than expected for the larger economies in the region such as Brazil and Mexico, which will grow 2.3% and 3% respectively growing external context.
Although the forecast increase in Gross Domestic Product (GDP) for Latin America fell 0.5%, that of Paraguay remained, compared to the estimate in December last year.

“Estimates are based on criteria of each institution, for which the figure is a little lower at the Central Bank of Paraguay. Nevertheless, we believe that we have varieties of data, therefore reaffirm our estimates,” said Rafael Lara, interim president of BCP.

The economist added that it should be noted that the projections of the entity that regulates the Paraguayan monetary policy are always cautious and rather conservative. “So we reaffirm our estimates of 4.8%, demonstrating our accuracy, which is good news,” Lara said.

His colleague John Cresta said the ECLAC estimated figure is almost close to the other agencies. “I think that the BCP is increasingly positive, why would they have much more knowledge of what the local economy than other agencies,” he said.

“However, ECLAC, as well as the IMF and World Bank, they do know more about Latin America,” said Cresta, according to a report published by the daily La Nación, of Paraguay.

With respect to growth in the region, said Lara depends on the variability of the member countries, for example, scenarios in which many countries, maybe other not unfold.

“It is clear that we, with a growth rate of between 4.5 to 4.8% to bring the trend go up. While others, such as Brazil and Argentina, which grow less, bring down” concluded the interim head of the Paraguayan Central Bank.
araguay is in the middle of two powers of South America (Brazil and Argentina), is a landlocked country and is considered small in terms of size. While neighbors suffer external shocks and have major structural problems, the Paraguay continues to grow and suffer less having less volatility than other countries, such as the value of its currency.

Agents do not know that this country is considered one of the most stable at the macro level is developing very well because their economic policies as well as being a reliable and predictable economy. The country has a clear policy of inflation targeting as the sole objective of the Central Bank, and has made several reforms in the financial sector to give solvency and liquidity to this sector and has advanced several initiatives to develop sustainable policies in the tax area.

According to reports issued by the Central Bank of Paraguay, the country has had strong growth over the last decade supported by the production and export of raw materials. An important point to consider is that strong policies and structural reforms allowed resulted in growth rates that are among the highest in the region.
The Paraguay is divided into two regions separated by the Paraguay river, the eastern region has 40% of the territory in which 97% of the population is concentrated. The other region is known as the western Paraguayan Chaco which owns 60% of the territory and has 3% of the population.

The large agricultural area whose production is intensive in the eastern region where the climatic conditions are more favorable and the soil allows better development of soybean, corn, wheat, rice and cotton.
Agricultural production accounts for 20% of GDP share, and adding items livestock, agricultural and forest industries chain get to participate in 40% of the total. The development of these sectors are given mainly by the development of new technologies, good climatic and soil conditions in addition to the tailwinds in commodity prices.

The agricultural frontier continues to expand reaching areas of the north eastern region allowing argue that agricultural production has not peaked. Recent studies mention that in the western region of Chaco 2,000,000 hectares. suitable for agricultural development unexploited, which could represent between 30% and 40% more volume of grain. This will require a significant investment on the land involving a cost of $ 1,000 per hectare.
The culture that has had a great development and whose growth potential is still interesting is rice. This is due to weather conditions and river strengths of the country. The increase in production between the last two harvests meant a 40% by volume. This culture can also be expanded both in area and yields, subject to the new technologies used and the increase in production fields with livestock characteristics with low levels of profitability.

As seen in the above table, the two crops that have higher return are soybeans and rice, provided the same are made with advanced technology and intensively. Given that the crops are profitable and which have not yet peaked, we can conclude that they have room to remain an important engine for the Paraguayan economy.
In fiscal matters it is important to comment on the current tax burden. In Paraguay the agricultural category has no withholding and value added tax is 5%. The tax on corporate income is 10%, the same percentage for the income of individuals.

The tax burden is nearly 12%. In Argentina, however, the tax rate of VAT is 21%, 35% corporate income tax rate and the people is very variable. As for Brazil, the VAT is 25% and businesswoman income tax of 34%. If we compare with a country of similar size we can do with Uruguay, which has a VAT of 23% and a tax on business income of 25%.
Given all the comments, the Paraguayan economy every day becomes more attractive. Paraguay has a lot to offer and grow, it’s just a matter of discovering and trusting in an economy with strong, sustainable basis and with a great future projection.


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