Paraguay has embarked on a path of economic transformation and progress, internationally recognized with the attainment of investment grade by the rating agency Moody’s. 

1990s: Crisis and Challenges

During the 1990s, Paraguay faced a series of financial crises that deeply impacted the national economy. Businesses and workers lost their savings, the price of the dollar rose rapidly, and the public sector found itself without resources to meet its obligations. Inflation was unstable, exceeding double digits, and the economy weakened, leading to almost half of the population falling into poverty by the early 2000s. This situation revealed the urgent need to establish a more effective and resilient economic management.

From 2002: Macroeconomic Stability and Institutional Development

Since 2002, economic policy has been oriented toward macroeconomic stability. This approach allowed more than a decade of growth with price stability, laying the necessary foundations to implement development policies that promote inclusive and sustainable growth. Building a solid institutional base became a fundamental pillar to achieve this stability, enabling better coordination and efficiency in the implementation of economic policies.

Institutional and Monetary Reforms (2003-2010)

Starting in 2003, the need for changes in two key institutions was recognized: the Ministry of Finance (currently the Ministry of Economy and Finance) and the Central Bank of Paraguay (BCP). These reforms initiated a period of significant changes in the management of these institutions, marking the beginning of a crucial stage in constructing institutional pillars for development.

In 2011, the BCP implemented a monetary policy based on inflation targets, establishing an objective that ensures low and stable inflation. Additionally, it promoted a regulatory framework that strengthened its role as a supervisor, ensuring a solid financial system. These measures reflect a clear commitment to constructing a robust institutional infrastructure to maintain economic stability.

Fiscal Strengthening and Transparency (2011-2018)

The Ministry of Finance carried out reforms that improved the financial situation of the public sector, achieving eight consecutive years of fiscal surplus. The approval of the Fiscal Responsibility Law and the Public Information Access Laws promoted greater transparency and modernization in public finance management. For the first time, the decision to invest the surplus of the Fiscal Fund generated profits for public sector pension funds. These achievements testify to the continuous institutional development prioritized at all levels of government.

Furthermore, the approval of the Public-Private Partnerships Law and Law 5074 "Turnkey" allowed the country to expand its capacity for investment in public infrastructure, reflecting again the commitment to building an efficient and transparent institutional structure in the use of public resources.

Structural Reforms and Financial System Modernization (2013-2018)

Between 2013 and 2018, the National Government promoted a series of initiatives and reforms to strengthen the fundamentals of the national economy. These reforms included modernizing the financial system through the reform of the Organic Charter of the Agricultural Credit of Enablement, the National Development Bank, and the BCP. 

The Guarantee Fund for MSMEs was created, and key laws such as Financial Rehabilitation for Small Producers, Financial Education, and Protection against Abusive Credit Practices were enacted. These modernization efforts and building a solid institutional base have been fundamental in ensuring a safer and more accessible financial environment for all citizens.

In 2018, Paraguay adhered to the Global Forum on Transparency and Exchange of Information for Tax Purposes and participated from the beginning in the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) Actions of the OECD, reaffirming its commitment to transparency and international taxation. This crucial step was possible thanks to robust institutional development that allowed the country to meet international transparency and fiscal cooperation standards.

Tax Reform (2019)

In 2019, Paraguay implemented a tax reform focused on increasing the share of direct taxes and increasing tax collection through formalization. The changes simplified the system and distributed the tax burden more equitably.

The approval of the FATF exam in 2022 in the fight against money laundering demonstrated Paraguay's commitment to transparency and fighting corruption, highlighting the coordination between various public entities. This achievement reflects comprehensive institutional development that ensures the effective implementation of policies against money laundering and corruption.

In 2023, institutional strengthening and economic reorganization have been prioritized. Inflation was reduced, and the previous government's debts related to the pandemic were made transparent.  A credible, transparent, and responsible fiscal convergence plan was designed and implemented to fully restore the macroeconomic solidity that characterized our country for many years. 

Additionally, an ambitious reform agenda was implemented, including the creation of the Superintendency of Pensions, the National Directorate of Tax Revenue, the Ministry of Economy and Finance,  the State Administrative Organization Law, and the Carbon Credit Law. Furthermore, an active public debt management process was initiated, including the first issuance of Treasury bonds in Guaranies on international markets.

The recently approved National Anti-Corruption Strategy is an unprecedented public commitment by the three branches of government (Executive, Legislative, and Judicial) and two extra branches (General Comptroller and General Prosecutor) of the republic, establishing a clear roadmap with tasks, commitments, and measurable objectives to collectively tackle corruption in our country. This document is an example of how constructing a robust institutional and governance infrastructure can guide and coordinate efforts in fighting corruption. This initiative was highlighted as one of the foundations of the recent rating upgrade by Moody’s.

Each of these reforms is a testament to the continuous commitment to building a solid institutional base to ensure more efficient and transparent public management.

International Recognition

These efforts have positioned Paraguay as one of the most stable countries in the region. The predictability of macroeconomic policy has fostered the development of new sectors that generate employment and strengthen resilience to adverse external events. Moody’s has recognized these advances, highlighting the social and political consensus that has allowed maintaining a stable economy and promoting reforms that strengthen transparency and institutionalism.

Paraguay thus consolidates itself as a model of stability and growth, with a firm commitment to sustainable and equitable development, supported by the construction of constant institutional infrastructure that ensures the effective implementation of economic and social policies.

What Does Obtaining Investment Grade Mean?

International Recognition: Paraguay being recognized as an investment-grade country is a statement to the world that our economic journey over more than two decades has been successful. This positions our economy as a reliable and attractive option for doing business and creating jobs.

Lower Country Risk: Obtaining investment grade reduces country risk, resulting in greater ease of financing at more favorable interest rates. This benefits both the public and private sectors, allowing more economic access to the resources needed for development.

Attraction of Investments: It is a signal that fosters local investment and attracts international investment, creating a more dynamic and competitive environment. The perception of economic stability and credibility is key to attracting foreign capital and generating new opportunities.

Positive Impact on Employment and Infrastructure: This recognition will have a positive impact on creating quality jobs and investing in infrastructure. The diversification of the economy and the improvement of public finances are direct effects of a more stable and attractive economic environment.

Capacity Development: Greater foreign investment not only brings capital but also knowledge and technology. This will open doors for knowledge exchange and the improvement of technical and professional capacities, strengthening our workforce and preparing it to face future challenges.

In summary, obtaining an investment grade is a crucial step for Paraguay’s sustainable development, consolidating our economy on the international stage and opening new opportunities for all sectors of society.