Steven Wyble is online content editor at Scotsman Guide Media.
Reach him at (800) 297-6061 or email@example.com.
Landlocked and bordered by Argentina, Brazil and Bolivia, Paraguay is a fast-growing
South American country with little debt — but that could soon change as the country’s
leaders look to invest in infrastructure to speed up economic growth.
Paraguay has a large informal economic sector — which is economic activity operating
with no government regulation or oversight. It is comprised largely of the re-export
of imported consumer goods to neighboring countries as well as thousands of
micro-enterprises and urban street vendors, according to the CIA World Factbook.
The country also is a major agricultural producer. Paraguay is the world’s fourth-largest
exporter of soybeans and exports a significant volume of other crops, such as cotton,
corn and wheat. Agriculture traditionally accounted for nearly one quarter of the
country’s gross domestic product (GDP). Recent efforts to diversify the economy,
however, have shrunk agriculture’s share of GDP to 15 percent.
The country has low tax rates and relies heavily on indirect taxes, such as value-added taxes, given the low yields from personal income taxes, according to the
International Monetary Fund (IMF).
IMF economists Hamid Faruqee and Antonio C. David argue that the country should
pass tax reform to broaden the tax base while maintaining competitive tax rates.
They also contend Paraguay should reduce income tax allowances and exemptions
to expand tax progressivity and curtail income inequality.
Such tax reform may prove unlikely. In April 2018, Mario Abdo of Paraguay’s business-friendly Colorado Party was elected the country’s president. Abdo champions low-tax
policies aimed at stimulating foreign investment and agricultural production.
The country’s recent economic successes have already made it attractive to investors.
A Brazilian think tank, the Getulio Vargas Foundation, ranked Paraguay as having the
“Best Investment Climate in South America” in 2016 and 2017.
The World Bank paints a positive picture of Paraguay’s economic future, noting
that the country is “moving toward better performance in key indicators, such as
the development of the financial market, subscriptions to cellular telephony and
transparency of government policies.”
The country saw a significant decrease in poverty in recent years. The nation’s poverty
rate dropped from 32 percent in 2011 to 22 percent in 2015.
Paraguay is still, however, one of the poorest countries in Latin America, ranking as
the fourth-poorest country after Honduras, Guatemala and Nicaragua, according to
a 2016 report from the Economic Commission for Latin America and the Caribbean.
Underemployment in Paraguay hovers around 19 percent. n
By Steven Wyble
Paraguay’s unemployment rate
as of third-quarter 2017
Paraguay’s annual inflation rate
as of May 2018
Paraguay’s annual GDP growth
rate as of fourth-quarter 2017