5 reasons for Paraguay's economic boom (and its effects on the country)

Paraguay leads regional growth in South America, behind only Guyana
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In the 2026 FIFA Men's Football World Cup, the Paraguay team is not among the favorites in Latin America.
But, in another sector, the country has been scoring goals non-stop: the economy.
In the last three years, Paraguay has grown, on average, 5.5% per year, well above the average of its neighbors and South America as a whole.
World Bank figures indicate that around 300,000 Paraguayans have been lifted out of poverty in the last two years. And 2025 recorded the lowest unemployment rate in the last 13 years.
Economists agree that the country is experiencing an economic boom. They cite reasons such as a relatively simple and competitive tax system, moderate public debt, low inflation, young population and availability of cheap renewable energy.
Paraguay's geographic location, in the center of the continent, also offers certain advantages. The experts' doubt is whether this is a one-off growth or whether it is part of a long-term trend.
"At this moment, Paraguay is moving from a stage of very accelerated growth, driven by agriculture and other factors, to another phase, perhaps of more stability, but with high levels of growth", explains to BBC News Mundo (the BBC's Spanish-language service) the main analyst for the Americas at the risk intelligence company Verisk Maplecroft, Mariano Machado.
In fact, according to him, the projections of the International Monetary Fund (IMF) calculate Paraguay's growth in 2026 at around 3.7% - down from 6.6% last year.
In other words, Paraguay's boom is real, but its economy is moving from exceptional growth to a more stable implementation phase.
In this new stage, the conservative government of President Santiago Peña will need to try to convince an important part of the Paraguayan population, who continue to realize that the benefits of growth are not enough equally for everyone.
In 2025, Paraguay's GDP grew by 6.6%, according to the country's Central Bank
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"Generally, a growing economy generates more jobs and income", explains Humberto A. Colman, chief economist at the Paraguayan Development in Democracy foundation (Dende, by its acronym in Spanish).
"In fact, in the last three years, more than 260 thousand jobs have been created, a considerable number for a force of around 3.4 million people," he continues.
"But lower quality jobs still predominate. Six out of 10 workers are in the informal economy, which limits their access to social security." in income distribution. It is an abyss that cannot be closed, despite the country's growth, and will be the biggest challenge to be faced by Paraguayans in the coming years.
Poverty reduction
For Susana Cordeiro Guerra, vice-president of the World Bank for Latin America and the Caribbean, Paraguay's economic growth has had an impact on the population, especially in relation to poverty reduction.
"In the last two decades, poverty has fallen by more than half, to 16%, while extreme poverty has reached historic minimum of 2.4%", she explains. "Much of this progress came from improvements in agricultural productivity, which helped to increase rural income."
"The results were recognized abroad by credit rating agencies", continues Guerra.
"Moody's promoted Paraguay to investment grade, citing its solid growth and the reforms carried out in the country. S&P followed suit, raising the rating to BBB in December 2025. And Fitch also improved its outlook to positive, in October 2025."
The Itaipu hydroelectric plant, one of the largest engineering works in the world, is jointly managed by Brazil and Paraguay
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The increase in the credit rating reduces the country's financing cost, as it transmits less risk to investors.
As a result, more foreign investments emerge, access to international capital markets is facilitated and the national currency can leave strengthened.
But Machado believes that, although the better credit rating has strengthened the country's attractiveness for investors, "the government now needs to transform this confidence into financeable projects, export capacity and better infrastructure."
What factors helped the Paraguayan economy reach this sweet moment?
There are three pillars that support this takeoff: the strength of the agricultural sector, the country's energy potential and low taxes.
But infrastructure development also played a important role, in addition to foreign capital investment.
1. Cheap energy
Energy potential is beginning to become one of the country's most valued assets.
Paraguay is the world's largest exporter of clean electricity per capita, thanks to the Itaipu dam. the central axis of the Paraguayan proposal, in terms of artificial intelligence, data centers, fertilizers and industrial growth."
For him, "the boost to data centers could transform Paraguay's development model." Paraguay
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"Taking advantage of green energy and digital energy, Paraguay is not just building roads, but a digital future backed by 100% renewable energy", agrees economist Lucas Mendes Teixeira, president of the LatAm Future think tank.
But Paraguay doesn't just export electricity. The country is also advancing in the biofuels market.
The country follows in the footsteps of Brazil, which has developed a leading industry in the production of electricity. ethanol and biodiesel, based on agricultural crops. Now, Paraguay has been boosting the production of renewable fuels, to diversify its energy matrix and generate new exports.
2. Agriculture and exports
Agriculture represents almost two thirds of Paraguay's economic activity. It includes not only crops, but also local industries that depend on the sector.
Soy is one of the main products, but there are other subsectors with a very important role, such as livestock farming and exports. meat, especially pork. And there is an increasing participation of the industry related to forestry activities.
"In 2022, Paraguay suffered an intense drought, which led the country to a serious crisis in the sector. The economy contracted, dragged down by a season of low harvest and decline in the agricultural sector", explains Marcos Lascurain Rodrigo, economist in charge of Paraguay at the company FocusEconomics.
"As of 2023, we have seen a recovery, with good harvests, which once again bring good income to farmers and resume the growth of agricultural exports."
For Machado, the difference of this government is the work of diversifying the country's export destination.
"At a level internationally, Paraguay is one of the few countries that recognize Taiwan and the island is one of the main destinations for Guarani exports, especially beef and pork", he explains. "But the country is also actively seeking other Asian markets, which allow for even greater expansion."
Asunción, capital of Paraguay, on a sunny day with blue skiesCredit, Getty Images
Photo caption,The metropolitan region of the capital, Asunción, concentrates around a third of Paraguay's population
The metropolitan region of the capital, Asunción, concentrates around a third of Paraguay's population
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3 . Foreign direct investment
Foreign direct investment (FDI) in Paraguay has soared in the last two decades, reaching record levels. It was the result of the country's relative political and economic stability, compared to neighbors such as Argentina and Bolivia.
"Since 2023, President Santiago Peña's government has created a series of reforms, aimed at improving the business environment and creating a more stable business and investment environment, with a very orthodox economic agenda favorable to private investments", explains Lascurain.
"From that year on, we observed the resumption of investments, which would become the main engine of Paraguayan economic growth at the moment. The most important private infrastructure in the region is the cellulose factory of the multinational Paracel.
"With investments of more than US$4 billion [around R$20.8 billion] over several years, this facility, near Concepción, represents the largest single private investment in the history of Paraguay", explains Mendes Teixeira.
In addition to the factory itself, the project includes the construction of a private river port and a considerable expansion of the regional road network, generating more than 40 thousand indirect jobs.
"The country has a window of opportunity to transform stability into investment, investment in productivity and productivity into better jobs and well-being for its citizens. The country has demonstrated that it can grow and reduce poverty", highlights the representative of the Inter-American Development Bank (IDB) in Paraguay, Alonso Chaverri-Suárez.
For him, the task in the coming years will be to sustain the advances and ensure that more families can transform these cyclical improvements into a stable trajectory of well-being.
Man counts guarani notes on a street in AsunciónCrédito, Getty Images
Photo caption,In Paraguay, poverty is clearly rural. It affects around 40% of the population in the countryside, compared to 15% in urban areas
In Paraguay, poverty is clearly rural. It affects around 40% of the population in the countryside, compared to 15% in urban areas
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4. Low taxes
Paraguay's tax burden, one of the lowest in Latin America, also attracted companies.
The country maintains fixed rates of 10% for income tax, VAT and corporate taxes. In terms of comparison, the effective corporate tax rate in Brazil is 34%.
"For this reason, international promoters invest billions in the country", explains Mendes Teixeira.
"Paraguay's macroeconomic discipline allows it to reduce taxes, offer tax exemptions and better conditions", highlights Machado.
Paraguay does not have the scale of the Brazilian economy. But, as it is in the center of the Southern Cone, the country acts as an interconnection point between all economies in the region.
But such low fiscal pressure tends to spark discussions. After all, with low taxes, the State collects less, which limits its ability to finance public services such as education, health, infrastructure, social security and justice.
Fiscal pressure is defined as the relationship between taxes and the country's GDP. In Paraguay, this rate is 14%, the second lowest in Latin America, second only to Panama.
The number is below the Latin American average (22%) and developed countries (34%), according to the Organization for Economic Co-operation and Development (OECD).
Paraguay has one of the highest inequality rates in Latin America.
The Gini coefficient is used by the World Bank to assess inequality. In it, 0 is perfect equality and 1, maximum inequality.
Paraguay's Gini index is around 0.45, making it clear that sustained economic growth has not proportionally translated into improved living conditions for the lower strata of society.
Lottery ticket seller with a pack of different colored billsCredit, Getty Images
Photo caption,Informal work continues to be a structural factor in Paraguay, with around 60% of the employed population working informally
Informal work continues to be a structural factor in Paraguay, with around 60% of the employed population working informally
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5. Infrastructure in the heart of South America
Paraguay emerges as the main logistics and energy center in South America, driven by the Paraguay-Paraná waterway and the Bioceanic Corridor, which will connect the Atlantic Ocean to the Pacific.
The 3,500 kilometer highway will connect the port of Santos (SP) to the Chilean ports of Iquique and Antofagasta, crossing the heart of the Paraguayan Chaco.
When the final stretches of this corridor are in operation, the transit time for exports destined for Asia will be reduced by up to 14 days and logistics costs by around 25%
The Paraguay-Paraná waterway also received significant improvements. The route is of fundamental strategic importance for the export of soybeans, corn and meat.
The waterway benefited from a public-private alliance worth US$500 million (around R$2.6 billion) for dredging and signaling. The works ensured its navigability throughout the year, regardless of weather conditions.
"Companies such as Cofco, ADM and Viterra expanded their port facilities along the river", highlights Mendes Teixeira. "These modern terminals now receive more than 25 million tons of cargo per year."
"The Paraguayan river fleet is currently the third largest in the world, surpassed only by the United States and China, which demonstrates the country's maritime prowess, even though it does not have an outlet to the sea."
Maintaining the growth rate of 5% per year will be difficult. Economists indicate that growth will continue, but with less momentum, in a more stable manner.
Paraguay has very clear strengths. But, to take the leap towards a higher revenue economy, the country needs to resolve structural constraints, offering greater productivity, better jobs, stronger institutions and sustainable development for the entire population.

Source: G1