Two sides of the Paraguay economy

by moveforward on May 11, 2013

Two sides of the Paraguay economy

Two sides of the Paraguay economy

If you look at the economic statistics there is no doubt that Paraguay, at least on paper, is one of the strongest economies in Latin America. Recent economic growth has come in at around 13% which is well above the average of Latin America and leaves many European and North American counterparts in its wake. However, there is growing concern that Paraguay is very much an economy of two groups, the haves and have-nots.

We will now take a look at the flipside of the Paraguay economy and why so many people are still living in abject poverty despite the fact that many businesses are booming.

The commodities dream

The headline figures with regards to the Paraguay economy are certainly driven by the commodities market with plentiful exports of soya beans and corn bringing many businesses riches they could only have dreamed of in years gone by. However, just yards from the sprawling Porsche garages, which are selling out on a regular basis, there are individuals rummaging in raw sewage taking home four dollars a day in earnings.

Yes, this is the flipside of Paraguay, the fact that more than 30% of the population are still living in abject poverty although they very rarely make the headlines. Will ongoing economic growth across the country filter down to those on the bottom rung of the ladder? If so how long will it take?

Quote from Gringos.com : “If you are careful with your money, U$S 1,000 a month will work. If you hook up with a Paraguayan, make sure that person is wealthy, or it will be $2,000 or more a month. That is because you will end up taking care of the local and much of their family as well. If you are really careful with your money, you could live on $600 or $700 a month, but that means no car and few vices.”

International investment continues to grow

The problem with Paraguay is the fact that while international investors are still looking towards the country, the focus of their investment funding is very narrow. The commodities market is the main arena in which Paraguay excels and quite rightly the government is looking to make as much money as possible for the country, businesses and individuals while this Indian summer last.

Whether or not government income from the commodities market is being spread across the whole population is a matter for debate because many areas of Paraguay have very little if anything in the way of infrastructure. Without this infrastructure the ongoing business expansion and economic growth will never even come anywhere close to those most in need.

Government taxes

If we tell you that it was only in 2013 that the Paraguay government introduced income tax, currently around 10%, it will soon dawn on you how difficult it will be for the rest of the population to benefit from this economic growth. The fact that the political arena has been and continues to be relatively unstable in Paraguay is not a perfect background against which the government finally begins to draw income from the ever-growing economy.

According to official statistics Paraguay has a population of around 6.5 million people and nearly 80% of the land is arable although amazingly this land is controlled by 1% of the nation’s population. This perfectly illustrates how unequal income and economic growth is across Paraguay and the fact that the ongoing mechanisation of the agricultural industry is making it more efficient, but also creating fewer jobs.

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