- Paraguay’s politics have been dominated by the Colorado Party which had been in power since the 1940s.
- However, the Colorado Party’s grip on power has weakened in recent years.
- Paraguay is one of South America’s poorest countries and unemployment is among the highest in the Western Hemisphere.
- Agriculture continues to dominate the country’s economy.
- Paraguay has seen some of the world’s highest deforestation rates as forests are cleared in order to expand agricultural land.
Key facts and Data
- Official Name – Republic of Paraguay
- Capital – Asuncion
- Government Type – Constitutional republic
- Head of State and Government – President Horacio Cartes (since 2013)
- Population – 6,863,000
- Land Area – 397,300 sq. km
- Total GDP (US$) – $27 billion
- Per Capita GDP at PPP (US$) – $9,762
- Currency – Paraguayan guarani
Table of Contents
- Recent Political Events
- Recent Economic Events
- Other Recent Events
- Overview of the Current Government
- Leadership Profile
- Summary of the Most Recent Elections
- Leading Political Parties
- Forecast for the Next Elections
- International Relations Outlook
- Potential Conflicts
- Military Capabilities
- Key Political Issue
- Political Risk Outlook
- Economic Overview
- GDP Growth Forecasts
- Key Sector Forecasts
- Inflation Forecasts
- Foreign Trade Forecasts
- Foreign Investment Forecasts
- Exchange Rate Forecasts
- Outlook for Key Sector
- Key Economic Issues
- Economic Risk Outlook
Demographic and Environmental Outlook
- Population Overview
- Population Characteristics
- Development of Leading Urban Centers
- Key Demographic Issue
- Topography and Climate Overview
- Environmental Threat Summary
- Key Environmental Issues
- Demographic and Environmental Risk Outlook
Current Events and Recent Changes Overview
Paraguay: Recent Political Events and Changes
Key Political Events and Changes
- In December 2017, Senator Mario Abdo Benitez, the son of former dictator Alfredo Stroessner, won the nomination of the ruling Colorado Party for 2018’s presidential election. He defeated President Cartes’ choice for the nomination, former Finance Minister Santiago Pena.
- The opposition Liberal Party nominated the lawyer Efrain Alegre to be its candidate in April 2018’s presidential election.
Key Economic Events and Changes
- Paraguay’s GDP growth rate rose to 3.0% on a year-on-year basis in the third quarter of 2017. All sectors of the Paraguayan economy recorded higher levels of growth in the third quarter.
- Paraguay’s inflation rate fell slightly to 4.6% year-on-year in November 2017.
- The country’s unemployment rate rose sharply to 8.9% in the second quarter of this year.
Other Key Events and Changes:
- Paraguay announced that it would join with Argentina and Uruguay to bid to host the 2030 FIFA World Cup.
Paraguay Political Outlook
Paraguay: Current Government
- Businessman Horacio Cartes won April 2013’s presidential election, bringing the once-dominant right-wing Colorado Party back to power after five years being out of power. Mr. Cartes won 45.9% while his nearest challenger, the ruling Liberal Party’s Efrain Alegre, won 36.8% of the vote.
- In January 2015, Finance Minister German Rojas resigned and was replaced by a 36-year-old director of the country’s central bank, Santiago Pena.
- After the riots that hit Paraguay in April 2017, President Cartes sacked Interior Minister Miguel Tadeo Rojas and police chief Crispulo Sotelo.
- In May 2017, Finance Minister Santiago Pena resigned and announced that he would run for the presidency in 2018. He received the backing of President Cartes and the ruling Colorado Party
Key Members of the Government:
- Head of State and Government – President Horacio Cartes
- Vice President – Juan Afara Maciel
- Minister of Foreign Affairs – Eladio Loizaga
- Minister of Finance – Lea Gimenez
- Minister of the Interior – Lorenzo Dario Lezcano
- Minister of Justice – Carla Bacigalupo
- Minister of Defense – Diogenes Martinez
- Minister of Agriculture – Juan Carlos Baruja
Profile of Former President Fernando Lugo
Fernando Lugo was elected president in 2008, breaking the six decade grip on power by the Colorado Party and ushering in a new political era in Paraguay.
- Prior to entering politics in 2006, President Lugo had been a Roman Catholic bishop and he needed special permission from the Vatican to give up his position as bishop.
- While a bishop, he gained national attention by becoming the leading supporter of the rights of the poor in Paraguay, and this helped him to launch his political career.
- He was impeached by the opposition-dominated parliament in 2012.
Key Policies and Stances:
Former President Lugo made the fight against poverty his leading cause during his time in office.
- He was the leading supporter for the large number of landless peasants living in Paraguay.
Another cause taken up by the former president was the call for a renegotiation of the deal with Brazil over the jointly-held Itaipu Dam.
- Ex-President Lugo wanted Brazil to pay more for the electricity that is created by the dam.
Paraguay: Most Recent Elections Presidential Elections – April 2013
Wealthy businessman Horacio Cartes
won a clear victory in April 2013’s presidential election, returning the once dominant Colorado Party to the presidency after a five year interruption.
- Mr. Cartes won 45.8% of the vote, more than had been predicted by pre-election polls.
- The Liberal Party’s Efrain Alegre finished in second-place in this election with 36.9% of the vote.
The 2013 presidential election was a clear change of direction for Paraguayan politics after five years of leftist rule.
- Among the changes that he proposed were greater independence for businesses in Paraguay and more for socially conservative policies.
- Moreover, he vowed to restore relations with Paraguay’s neighbors that had been damaged by the impeachment of former President Fernando Lugo in 2012.
Presidential Election Results:
Paraguay’s Leading Political Forces: Colorado Party (PC)
The Colorado Party had been the dominant force in Paraguayan politics for most of its history.
- Until 2008, it has ruled alone or together in a partnership with former dictator General Alfredo Stroessner for more than 60 years.
- After a five-year interruption, the Colorado Party returned to power in 2013.
Key Policies and Stances:
- The party appeals to Paraguayan nationalism.
- The party favors free market economic policies, but has recently made concessions to labor unions.
- The number of factions within the party have resulted in few clear policies emerging in recent years.
The 2008 elections marked a major turning point in the history of the Colorado Party.
- Although the party returned to power in 2013, it has yet to regain the level of support that it enjoyed before it was first ousted from power.
Paraguay’s Leading Political Forces: Authentic Radical Liberal Party (PLRA)
The Liberals are the second political party in Paraguay and are the main rivals of the Colorado Party
- The party won power for the first time in more than six decades in 2008, but Fernando President Lugo was ousted from power by the parliament in 2012.
- The party failed to retain power in the 2013 national elections.
Key Policies and Stances:
- The Liberals derive much of their support from Paraguay’s rural population and the country’s main labor unions.
- The party supports a redistribution of Paraguay’s wealth to its poorer citizens.
The Liberals will face a difficult time retaining their popular support and their unity after the ouster of President Lugo in mid-2012 and their election defeat in 2013.
- Furthermore, the disparate nature of the party could lead to growing friction and weaken the Liberals’ cohesiveness in the coming years.
Paraguay: International Relations Outlook
Key International Disputes:
- Paraguay’s devastating wars in the 19th and 20th centuries with each of its neighbors continues to influence the country today.
International Relations Outlook:
- Regional integration is pushing Paraguay away from its former isolation and into more constructive ties with the region.
Paraguay: Political Risk Outlook
- The potential for a coup remains high and this would further raise political risk levels.
- Moreover, the government has struggled to maintain control over all areas of the country in recent years.
Paraguay Economic Outlook
Paraguay’s economy is still dominated by agriculture and forestry.
- Cattle and various crops such as sugarcane, cotton and cassava make up the largest part of agricultural exports.
- Forestry remains a major source of export revenues, but deforestation threatens the future of the industry in Paraguay.
Paraguay receives relatively little foreign investment.
- The country’s isolated location and poor transportation links make it undesirable for companies planning to export.
- As a result, the country’s manufacturing sector remains small.
The uncertain economic outlook for Argentina and Brazil place the long-term economic expansion of Paraguay is jeopardy, as the country’s best long-term hope would be to become a low-cost export center for products to these markets.
- Instead, agriculture will remain the biggest earner for the Paraguayan economy
Paraguay has little hope of attracting major foreign investments that are needed to diversify the economy and create new industrial or service sectors. This will continue to hold back economic growth for the foreseeable future.
Paraguay: GDP Growth Outlook
- Paraguay’s economic growth has fluctuated wildly in recent years as a result of uneven export demand and a mixed performance by the country’s vast agriculture sector.
- Economic growth soared in 2013 as a result of the recovery of the country’s agricultural sector, but fell back to more much lower levels in recent years.
- Looking ahead, an overall lack of economic diversification will result in relatively slower growth rates for most of the forecast period.
Paraguay: Key Economic Sector Agriculture
Paraguay’s economy is still dependent upon agriculture.
- Soybean exports remain a vital export commodity.
- As a result, Paraguay is exposed to changes in global soybean prices as well as climatic variances.
Agriculture also remains a leading source of employment in Paraguay.
- However, the sector will not create the large numbers of new jobs needed to reduce the unemployment rate.
With little foreign investment in the manufacturing and service sectors, agriculture will continue to lead the economy forward.
Paraguay’s agricultural export growth will be slowed by the need to continuously increase food crop output in order to feed the country’s rapidly growing population.
Paraguay: Inflation Outlook
- Inflation rates have fluctuated greatly in Paraguay over the past decade.
- Inflationary pressures will remain under control over the near-term, but a sharp increase in inflationary pressures cannot be ruled out in the coming years.
Paraguay: Foreign Trade Overview
Foreign trade will remain relatively small in comparison to its neighbors. Agricultural exports will grow, as will imports from neighboring countries. Paraguay’s current account deficit will remain in place over the near-term.
Paraguay: Foreign Investment
Foreign Investment Climate:
Paraguay’s relative isolation and past political unrest have kept most foreign investors away.
- Furthermore, the government has delayed many privatization programs in recent years.
- Widespread corruption is also a major deterrent to foreign investors.
Paraguay does have the potential for growth in certain areas of investment.
- The country has the lowest tax burden in Mercosur.
- Paraguay’s agricultural sector has also begun to attract larger levels of foreign investment.
Outlook For Future Foreign Investment:
Paraguay is unlikely to become any more attractive for major foreign investment in the coming decade.
- With economic growth forecast to be slow, the domestic market will not offer significant opportunities, while Paraguay is also not a leading candidate for export oriented investments.
Regional Foreign Investment
Brazil is easily the largest recipient of foreign investment in South America, although its per capita FDI inflows are far below those of most other major emerging markets. Chile is the region’s second-largest recipient of foreign investment and leads the region by a wide margin in terms of per capita FDI inflows.
Paraguay: Exchange Rates
The Paraguayan guaraní depreciated sharply in 2015 after a long period of stability against other major currencies. In recent years, the currency has stabilized and an improving economic outlook should allow for a period of exchange rate stability.
Paraguay: Labor Force
Labor Force Overview
Paraguay’s labor force is largely unskilled and lacking higher education.
- Most of the labor force remains involved in the agricultural and logging sectors.
Labor unions in Paraguay have very little influence.
- The government retains a significant amount of control over the unions.
Paraguay’s workforce will be among the fastest growing in South America.
- However, Paraguay’s actual unemployment rate may be as high as 20% today.
- Job creation will continue to lag behind population growth in Paraguay
Outlook For the Labor Force:
Unemployment will hold steady in the coming years between six and seven percent.
- As the government already employs more than 200,000 people, job creation will have to come from the private sector, especially foreign investment.
Mercosur Trade Agreement
The Mercosur Trade Agreement is the pre-eminent trading group in South America and has four permanent members (Brazil, Argentina, Uruguay, and Paraguay).
- Mercosur was created in 1991 by the Treaty of Asuncion.
- Mercosur’s first expansion has come about through the membership of Venezuela in 2012. • In addition, an associate member status was created for Chile, Bolivia, Colombia, Ecuador, and Peru.
Mercosur is designed to boost free trade between member states, with the ultimate goal of full South American economic integration.
- Mercosur has aimed economically to reduce the high tariffs of member countries as well as the income inequalities between the countries.
- The agreement also tries to eliminate the technological obstacles limiting member countries from bringing products to the market.
- The introduction of Venezuela has increased speculation that Mercosur may begin to act increasingly as a political body rather than exclusively as an economic grouping of countries.
Mercosur’s future remains highly uncertain due to uncertainty over future expansion. Moreover, the group’s two leading economies, Brazil and Argentina, have widely divergent views of the objectives of the organization and this could lead to a weakening of Mercosur in the coming years.
Paraguay: Economic Risk Outlook
Economic Risk Outlook
- Paraguay’s economic risk levels are among the highest in Latin America.
- Moreover, these risk levels could increase further with a prolonged downturn in agricultural exports or higher levels of political stability to defers foreign investments.
Paraguay Demographic and Environmental Outlook
Paraguay: Population Overview
Always a relatively “empty” country, Paraguay today is confronted with a rapidly growing population. Furthermore, the economy has stagnated, offering few opportunities for jobs for the growing working-age population in the country, threatening Paraguay’s future stability
Population Growth By Ten-Year Age Increments
Paraguay continues to have one of the highest birth rates in Latin America. This has resulted in nearly half of the country being below the age of twenty. Moreover, as this high birth rate persists, Paraguay’s share of young people will remain well above the regional average.
Composition of Paraguay’s Population
An overwhelming majority of Paraguay’s population has a mixed Spanish and Guarani ancestry. • The Guarani are an Amerindian group from eastern Paraguay.
- Minority groups include Italians, Japanese, German Mennonites and other Amerindian groups.
Paraguay has two primary languages, Spanish and Guarani.
- Spanish is the country’s official language.
- Guarani is spoken by much of the population at home and in daily communication.
Roman Catholicism is the official religion of Paraguay.
- A number of large Protestant denominations also are present in Paraguay.
- The Mennonites are the largest of these groups
South America Population Trends by Country
Brazil will continue to dominate South America in terms of population, accounting for nearly half of the continent’s people. However, it will be the countries of north-western South America that provide half of the continent’s population growth by the middle of this century.
- Asuncion is Paraguay’s leading urban center although it is one of the smallest capital cities in South America.
- All of the major cities in Paraguay are located in the eastern half of the country, with most of them in the vicinity of the capital.
Paraguay: Topography and Climate
- Paraguay is divided into two distinct regions, separated by the Paraguay River.
- West of the river is the Gran Chaco, a flat arid plain that turns into a swamp during the rainy season.
- East of the river is the Paraná Plateau which descends to the rivers which frame it.
- All of Paraguay has a subtropical climate.
- The wettest time of the year is winter, whereas the summer months can go with little or no rain.
- Rainfall is much heavier in the eastern half of Paraguay, whereas the Gran Chaco is relatively dry.
Key Environmental Issues:
Paraguay’s expanding population has resulted in an increasing use of land for agriculture.
- As a result, much of Paraguay’s forests are in danger of being cleared.
- The government has made some progress in slowing this trend.
Paraguay’s forests are also threatened by the logging industry.
- The government has protected much of Paraguay’s forests, but it has been unable to stop illegal logging.
- Paraguay’s forests are rapidly dwindling and may be gone sometime in the next two decades without significant change.
Only 60% of Paraguay’s population has access to safe drinking water.
- Industrial pollution has damaged many of Paraguay’s key sources of freshwater.
- Poor sanitation is another cause of water pollution.
Paraguay: Demographic and Environmental Risk Outlook
- Without economic expansion, Paraguay’s fast-expanding population could be without enough jobs, leading to more social unrest.
- Deforestation is a major risk for Paraguay’s environment and its economy.
Paraguay: Leading Urban Centers