LatinFinance - July/August 2014 - 59

Infrastructure | PARAGUAY

are expected to be awarded over the
next five years. "We have identified
several areas in Paraguay where you
can establish industries because there
is a surplus capacity of electricity
distribution. However, we still have to
make a substantial investment to make it
widely available. That will happen over
the next five years," says Jiménez.
"More energy is required to attract
industrial investment. Consumption has
been growing at more than 10% per year
and it will probably grow faster if we
make more investment."
The legal framework is now in place,
but there has been strong opposition to
anything that may resemble privatization
from trade unions in the electricity and

water supply and education sectors.
There is also some concern regarding the
quality of the local bureaucracy.
"It is uncertain that Paraguay's
politicized public administration will
be able to provide the trust and legal
security needed to entice international
investors to engage in joint ventures of
this kind," said the Economist Intelligence
Unit.
"Unease at Mr. Cartes' reform
legislation is mounting inside the
Colorado party (PC), which feels that it
is not being consulted and is instead just
being used to rubber stamp the plan. The
coalescing anti-Cartes forces inside the PC
hierarchy may well be tempted to use the
party's nationalist rhetoric to torpedo the

law and so on. The next step is to give certainty to investors
by presenting a bill regarding protection for local and foreign
investment.
LF: When will this be voted
on?
GR: It depends on the last
review of the project. No other
country of the region enjoys such
an environment. If we compare
ourselves with peers, you will
see that our macroeconomic
fundamentals are the best in the
region. The debt-to-GDP ratio,
debt-to-international reserves,
inflation, et cetera.

PPP bill," it said in a recent report.
However, Cartes' administration has
made efforts to improve transparency
and to give citizens greater access to
information. "The Colorado party has
always behaved like this: a section of
the party demands that things continue
the way they were, that civil servants
be recruited without any formal
selection process," says Luis González
Arias, a former diplomat and adviser
to the president of the local business
confederation, the UIP.
"There will always be resistance to
change. The president's main problem is
to put an end to nepotism. But he wants
to put order in the country, and this is
what he has been doing." LF

strong institution and it has a very consistent strategy.
LF: How long will it be until the results of these
structural reforms emerge?
GR: Indicators show we are on the
right track. Some of it depends on how
healthy our neighbors are. But I think
Paraguay will pass the test.
LF: How much can you increase
external debt following the
sovereign's debut eurobond last year?
GR: External debt is not more than
14%. We still have room to increase our
debt levels. We are planning to increase
this up to 25% by issuing bonds and also
taking more loans from multilaterals
institutions like the IDB.
In terms of eurobonds, the increase
will depend on the management
capacity to place them to develop the
necessary infrastructure. We do not
want the debt for the sake of it, only if
there are concrete plans and projects.

©REUTERS

LF: How much of a danger is
inflation?
GR: The danger that we see
in terms of inflation is related to
food production, again. This is the
main issue that affects inflation
BASIS FOR GROWTH: Finance minister Germán Rojas
from time to time. Consumption
says Paraguay should only take on more debt for specific
of tomatoes in Asunción remains
capital projects
more or less the same regardless of
LF: How much of the funds from
the price.
the first bond issue have already been invested?
Inflation is an issue, but this is something we have been working
GR: Nearly all. We issued $500 million. Some $220 million
on very closely with the central bank and the economic team.
remains. But these funds are already allocated. We are waiting
to finalize the contracts to be signed and the work to be
LF: So this means more rate hikes, if necessary?
done. The second issue should be placed within the next two
GR: I think so, because the central bank has become a very
months. LF

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