LatinFinance - July/August 2014 - 46

PARAGUAY | Overview
One year after former businessman Horacio Cartes took over as president, Paraguay is in
the midst of what it says is an aggressive reform agenda

Small country, big hopes
A

Source: iStockphoto

surprisingly bright festival of
Brazilian and South Korean brands
in the streets of Asunción contrasts
with the tranquil waters of the Paraguay
River, which flows through the sleepy
capital city.
The landlocked country, located in the
heart of South America, is looking for a new
economic dawn.
High rise buildings are still few and far
between in the emerging business district
of Santa Teresa, and in the colonial part of
the city, where most of the ministries are
located. But under the new government of
President Horacio Cartes, Paraguay is trying
to shake off its old image as a sometimes
corrupt, authoritarian and unstable Latin
American country, crippled by a volatile
economy.
To that purpose, the president - a
billionaire businessman - is trying to
build a reputation as a modernizer. He has
TRANQUIL CITY: The new government in
surrounded himself with a generation of
Asunción says change is afoot
mostly young technocrats: their ambition
is to clean up the country's act, and build nothing less than the
extension the vagaries of the climate and commodity prices -
Singapore of South America. The aim is to show the world that
and thereby put an end to stop-and-go economic cycles.
Paraguay means business, away from its traditional image of
Up to now, there have been at least two things Paraguayans
authoritarianism, corruption and illicit trade.
have been good at: growing soya and raising livestock. In
Cartes, who only joined the conservative Colorado Party
good years, record harvests push GDP growth towards double
shortly before winning the 2013 election, will complete his first
digits (like last year, when the economy expanded by 13%) and
year in office next month. His informal and direct style speaks
buoyant exports strengthen currency reserves.
volumes about his intentions to change the way things are done
But in bad years, recession is always around the corner (in
in his country.
2012, GDP contracted by 1.2%). Such hiccups generally upset
His government is intent on transforming the economy,
investors. But Paraguay has some advantages, such as a low tax
boosting competitiveness and attracting foreign investment. But
burden on the economy of some 12% of GDP.
nearly one year on from winning power, where is he, and his
"Our big differential is to be competitive in terms of tax,"
government?
Cartes tells LatinFinance. But Paraguay also has plenty of
His ministers are full of references to a reform agenda that
cheap energy on its hands, thanks to hydroelectric dams with
will put the country's economic house in order. True, important
neighboring countries Brazil and Argentina.
structural reforms were passed quickly at the beginning of his
Now, the challenge is to attract investors with this mix of low
term, in spite of a divided Congress. These should alleviate
taxation and a new, business friendly, regulatory framework,
public finances and open infrastructure to private investment.
in order to modernize infrastructure, including logistics. A $16
But one of the biggest challenges remains to diversify
billion plan is being rolled out, while a new industrial base that
the economy and reduce dependency on agriculture and by

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