PARAGUAY | Macro-economy: Boom and bust

Jul 1, 2014

A new investor-friendly legal framework and efforts to improve infrastructure are key to Paraguay’s efforts to diversify its economy

Feeding the world might not seem a bad strategy for a country at a time when global demand for food is set to increase for years to come. But for Paraguay, being an agricultural producer is not enough.

Rollercoaster economic growth reflects lack of diversification - and overdependence on agriculture and its star products, soya beans and meat. It has exposed the economy to sharp ups and downs.

Paraguay has taken advantage of the commodity boom of the past decade to accumulate international reserves. But lousy weather conditions also plunged it into recession in 2009 (- 4%) and 2012 (-1.2%).

The economy bounced back strongly last year on the back of a bumper harvest. But that does not fool anyone at home.

"Last year was not a normal year. We grew at more than 13%," says Carlos Fernández, Paraguay's central bank governor. "This year we are still growing, but growing at...

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