Paraguay—The Emerging Economic Star In South America

Paraguay is the smallest landlocked nation in the Americas, bordered by Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. In 2009, its population was estimated to be oscillating around 6.5 million and due to its central location inSouth America, it is sometimes referred to as the "Heart of South America".

It is one of the poorest nations in the region with over 40% of its people living in poverty with much of the land owned by small elite. Poverty, corruption and economic stagnation were the best words to describe this country in the past two decades, but the implementation of aggressive social and economic reforms is sprouting a “little China in South America”.

Paraguay is a new economic trail blazer in the South Americas coming out from the shadows of Brazil and Argentina and defying the expectations of many policy makers and researchers.

Over the past decade, the country has made some significant inroads in ameliorating the macroeconomic environment, such as creation of Fiscal Advisory council, Fiscal Responsibility Law and the adoption forinflation targeting. These economic reforms have progressively yielded some gains in the macroeconomic front especially the stability of price and foreign exchange rate, and fiscal discipline.

According to the Central Bank of Paraguay, inflationary rate is 4.1% in 2016 from 3.1% in 2015, real GDP growth surged to 3.5% in 2016 from 3.1% in 2015, and public debt upped to 25.5% of GDP in 2016 from24.2% in 2015. These results could have been better but for the falling international prices of commodities, bad weather, and moderate fiscal and current accounts deficits.

Other incentives introduced by the country including the Maquila laws as a way to attractforeign investments to the nation due to its investment and business friendly environment. Many corporations especially from Brazil and Argentina have moved there to take advantage of the country cheaper energy cost, labor, taxation, political stability, and friendly business regulation.

On the face of high levels of poverty, inequality, and somewhat corruption having been ranked 123 out of 176 nations according to International Transparency Corruption Perception Index in 2016, Paraguay is progressively creating a new economic success story ahead of giant neighbors including Brazil and Argentina.