What can Argentines learn from Paraguay
What can Argentines learn from Paraguay
Paraguay has never had a good reputation in Argentina. Often forgotten, was only associated with poverty and crime. But today the reality may be changing. Paraguay is the fastest growing country in the region and one of the highest growth rates in the world. What can Argentines learn from them?
The world is dynamic. All countries change over time. Some other forward and then backwards like Argentina.
And the categories and prejudices of the past, slowly, falling behind can go.
This is seen very clearly with what is happening today in Paraguay. The country that was backward and poor in our region, but is today a totally different reality. A reality that many people are not aware of. What is going on Guarani land?
It is in a process of overwhelming economic growth and progress. The Paraguayan economy is the fastest growing in Latin America and one of the fastest growing in the world. And all this is happening in a context of excellent public accounts and with order and stability.
Here are some figures to show how this country can be even more attractive than some of pampered neighbors:
Paraguay is three times the size of Uruguay.
It has three times the population of Uruguay.
Inflation does not exceed one digit.
It has three times more reserves than debt.
Its currency has had the same number of zeros for decades. ie low inflation.
Banks give 20-year loans.
For every 5kg of meat that is exported to Russia, one comes from Paraguay.
It is ranked the seventh leading exporter of beef worldwide.
During the first 8 months of 2013 the economy grew by 14.7%.
GDP tripled between 2003 and 2010.
The rate of foreign investment grew 12.7% in the first half of 2013.
What was the recipe for Paraguay to break with decades of stagnation?
Simple, this is a country were investors were encouraged rather than discouraged to take advantage of a historically positive trend for commodity producing countries like Argentina, Paraguay, Uruguay, Australia and New Zealand in a global context.
It is a story we all know. China, among other emerging high growth multiplied the demand for products like meat or soybean so demand for these products multiplied.
Some countries were encouraged to take advantage of this trend are experiencing a golden decade. What are the differences between Paraguay and Argentina, for example?
One of the most important is the tax system of the two countries. Taxes are very low in Paraguay. The tax burden is extremely low, only 12% of GDP, the level of ultra open regions such as Hong Kong or Singapore.
So you can compare these figures, in the United States know that the tax burden is 28% in developed countries the average is 35% of GDP. According IERAL of the Mediterranean Foundation, the tax burden of Argentina for 2013 will reach 40% of GDP if you count inflation.
The first difference is clear. The Paraguayan state burden its citizens with taxes reaching 12% of total production, while the Argentine government takes 40%.
This is clear in the income tax rates . In Paraguay it is only 10% and only affects those who actually are high earners. In Argentina it is above 30% and affects a very significant part of the population.
But the tax issue is not unique. The financial system is another key. Paraguay reserves are three times its debt. This, of course, gives stability to the currency does not change zeros for two decades. Argentina’s reserves are so low the country in Default. Not just once but twice in the past decade Argentina’s Peronist policies have led it to default. A disgrace in any country.
And we can go on with many more differences as inflation, the stability of the financial system. But let’s close with a shocking number: Paraguay today exports more meat than Argentina.
Yes, you read that right …, according to the Institute of Economic Studies of the Sociedad Rural Argentina (SRA), first place in Latin America in 2012 went to Brazil, with 1.3 million tons of beef on the bone; secondly, Uruguay (350,000 tons); third, Paraguay (210,000), and Argentina appears relegated to fourth (183,000 tonnes). A true but sad reality … but a major plus for a small country like Paraguay.
It is a context of low taxes and stability, inevitably ends in thriving and growing businesses …
In conclusion, a country that was once synonymous with stagnation, today is becoming the example to others in the region. And also a country that is exposed to the same global agricultural opportunity, Argentina is an example of stagnation and disorder.
As always, we have two ways of seeing the glass half full or half empty.
Let’s not depress ourselves with the bad news as it is all around us.
But the good news is twofold.
On the one, hand Paraguay implies a unique opportunity to invest. Paraguay Investments
On the other hand, the other good news is that the case of Paraguay is living proof that would be easy for Argentina return to the path of sustainable long-term growth with a change of government.
It’s just a matter of lowering taxes …, lower public spending … and leave the Argentine entrepreneurs seize the opportunity that the world gives us one more time …
Simple as that. This “secret” plan does not include political saviors, no grand speeches, no wars against the world. It just requires more freedom, more integration, more rationality …
Part of an article from Federico Tessore
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