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Economy of Paraguay
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Economy of Paraguay
The economy of Paraguay is a market economy that is highly dependent on agriculture products. In recent years, Paraguay's economy has grown as a result of increased agricultural exports, especially soybeans. Paraguay has the economic advantages of a young population and vast hydroelectric power. Its disadvantages include the few available mineral resources, and political instability. The government welcomes foreign investment.
Agriculture represents 11% of its GDP. According to official figures, 5% of landowners own 90% of the land.
Paraguay is a middle-income country that changed rapidly in the 1970s and 1980s as a result of hydroelectric development, agricultural colonization, construction, and cash crop exports. Nevertheless, the country's gross domestic product (GDP) in 1986 was approximately US$3.4 billion, or roughly US$1,000 per capita, ranking Paraguay only ahead of Bolivia among countries of South America. Paraguay was the most agricultural economy of South America, and that sector influenced the performance of virtually every other sector of the economy. The over dependence on agricultural economy and low tax collections deteriorated the already wide gap wealth distribution. The extreme poverty increased from 16% to 20% during 2001 to 2012, even as the economy grew. By 2013, it has a human development index of 0.669 which is even lower than Bolivia.
The Paraguayan economic miracle of the 1970s came to a halt in 1982 because of the completion of construction at Itaipú, lower commodity prices for cotton and soybeans, and a global recession. The economy recovered in 1984 and 1985, stagnated in 1986, and continued to expand in 1987 and 1988. Despite its rapid growth, the Paraguayan economy became increasingly dependent on soybeans and cotton for exports and overall economic dynamism. These two crops, however, remained subject to external price fluctuations and local weather conditions, both of which varied considerably.
Economic growth in the post-World War II period occurred in the context of political stability characterized by authoritarian rule and patronage politics. Government economic policies deviated little from 1954 to the late 1980s, consistently favoring a strong private-enterprise economy with a large role for foreign investment. Unlike most other Latin American economies, in Paraguay import tariffs were generally low, fiscal deficits manageable, and exchange rates not overvalued. These trends faltered in the 1980s as the government took a more active part in industry, deficits rose, and the national currency was generally overvalued and devalued numerous times. Throughout the post-World War II era, Paraguay had no personal income tax, and government revenues as a percentage of GDP were among the lowest in the world.
Despite the sustained economic growth that marked the postwar period, the distribution of economic benefits was highly inequitable. Although GDP expanded rapidly in the 1970s, most economists estimated that income distribution worsened during the decade. Government spending on social services was particularly lacking. Paraguay's poverty was mostly a rural phenomenon, which increasingly involved competition for land in the eastern region near the Brazilian border, especially in the departments (administrative divisions) of Alto Paraná, Canendiyú, and Caaguazú. Nonetheless, land tenure was not generally the acute social problem it was in many developing countries.
Although Paraguay faced significant obstacles to future economic development, it displayed extraordinary potential. Paraguay contained little oil and no precious metals or sea coasts, but the country was self-sufficient in many areas and was endowed with fertile land, dense forests, and swift rivers. The process of opening up the eastern border region to economic activity and continued agricultural expansion was expected to effect rapid changes in once-isolated Paraguay. Likewise, the development of a series of hydroelectric plants along the Río Paraná linked Paraguay to its neighbors and provided it access to cherished energy resources and badly needed export revenues. Finally, road construction united different departments of Paraguay and provided the country its first access to the Atlantic Ocean via Brazil. These processes of infrastructure development, hydroelectric expansion, agricultural colonization, and a cash crop explosion allowed Paraguay by the late 1980s to begin to tap its potential
As a colony of Spain, Paraguay had substantial poverty. Paraguay was harmed by the monopolistic trade structure of the Spanish Empire and by its peripheral position among Spain's colonial possessions. Most forms of manufacturing were prohibited in Paraguay by imperial law and Paraguay had to import many goods from the metropolis. In the late 18th century, the Paraguay economy centered around the export of commodities, in particular yerba. A heavily regulated system of trade meant that yerba had to follow a complicated trade route within the Spanish empire, with multiple forms of taxation along the route.
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Economy of Paraguay
The economy of Paraguay is a market economy that is highly dependent on agriculture products. In recent years, Paraguay's economy has grown as a result of increased agricultural exports, especially soybeans. Paraguay has the economic advantages of a young population and vast hydroelectric power. Its disadvantages include the few available mineral resources, and political instability. The government welcomes foreign investment.
Agriculture represents 11% of its GDP. According to official figures, 5% of landowners own 90% of the land.
Paraguay is a middle-income country that changed rapidly in the 1970s and 1980s as a result of hydroelectric development, agricultural colonization, construction, and cash crop exports. Nevertheless, the country's gross domestic product (GDP) in 1986 was approximately US$3.4 billion, or roughly US$1,000 per capita, ranking Paraguay only ahead of Bolivia among countries of South America. Paraguay was the most agricultural economy of South America, and that sector influenced the performance of virtually every other sector of the economy. The over dependence on agricultural economy and low tax collections deteriorated the already wide gap wealth distribution. The extreme poverty increased from 16% to 20% during 2001 to 2012, even as the economy grew. By 2013, it has a human development index of 0.669 which is even lower than Bolivia.
The Paraguayan economic miracle of the 1970s came to a halt in 1982 because of the completion of construction at Itaipú, lower commodity prices for cotton and soybeans, and a global recession. The economy recovered in 1984 and 1985, stagnated in 1986, and continued to expand in 1987 and 1988. Despite its rapid growth, the Paraguayan economy became increasingly dependent on soybeans and cotton for exports and overall economic dynamism. These two crops, however, remained subject to external price fluctuations and local weather conditions, both of which varied considerably.
Economic growth in the post-World War II period occurred in the context of political stability characterized by authoritarian rule and patronage politics. Government economic policies deviated little from 1954 to the late 1980s, consistently favoring a strong private-enterprise economy with a large role for foreign investment. Unlike most other Latin American economies, in Paraguay import tariffs were generally low, fiscal deficits manageable, and exchange rates not overvalued. These trends faltered in the 1980s as the government took a more active part in industry, deficits rose, and the national currency was generally overvalued and devalued numerous times. Throughout the post-World War II era, Paraguay had no personal income tax, and government revenues as a percentage of GDP were among the lowest in the world.
Despite the sustained economic growth that marked the postwar period, the distribution of economic benefits was highly inequitable. Although GDP expanded rapidly in the 1970s, most economists estimated that income distribution worsened during the decade. Government spending on social services was particularly lacking. Paraguay's poverty was mostly a rural phenomenon, which increasingly involved competition for land in the eastern region near the Brazilian border, especially in the departments (administrative divisions) of Alto Paraná, Canendiyú, and Caaguazú. Nonetheless, land tenure was not generally the acute social problem it was in many developing countries.
Although Paraguay faced significant obstacles to future economic development, it displayed extraordinary potential. Paraguay contained little oil and no precious metals or sea coasts, but the country was self-sufficient in many areas and was endowed with fertile land, dense forests, and swift rivers. The process of opening up the eastern border region to economic activity and continued agricultural expansion was expected to effect rapid changes in once-isolated Paraguay. Likewise, the development of a series of hydroelectric plants along the Río Paraná linked Paraguay to its neighbors and provided it access to cherished energy resources and badly needed export revenues. Finally, road construction united different departments of Paraguay and provided the country its first access to the Atlantic Ocean via Brazil. These processes of infrastructure development, hydroelectric expansion, agricultural colonization, and a cash crop explosion allowed Paraguay by the late 1980s to begin to tap its potential
As a colony of Spain, Paraguay had substantial poverty. Paraguay was harmed by the monopolistic trade structure of the Spanish Empire and by its peripheral position among Spain's colonial possessions. Most forms of manufacturing were prohibited in Paraguay by imperial law and Paraguay had to import many goods from the metropolis. In the late 18th century, the Paraguay economy centered around the export of commodities, in particular yerba. A heavily regulated system of trade meant that yerba had to follow a complicated trade route within the Spanish empire, with multiple forms of taxation along the route.
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