The prestigious American magazine Newsweek closes 2024 by highlighting the country's achievement of investment grade, reflecting a solid financial base and generating hopes for an increase in foreign investment in its rapidly diversifying economy.

In an article published in its December issue, Newsweek mentions that the elevation of Paraguay's credit rating to Baa3 by Moody's Ratings is a sign of confidence in the trajectory of the national economy, considered by the magazine to be one of the fastest growing in South America. This not only helps to improve the international perception of the economy, but also to attract a greater amount of foreign investment, in addition to contributing to solid and sustainable economic growth.

President Santiago Peña Nieto is quoted as saying in his announcement last July that “this recognition by Moody's not only reduces our country risk and improves our financing conditions, but also sends a clear message to the world: Paraguay is a reliable and attractive place to invest.”

However, the road to achieving investment grade status has not been easy. In 2003, the country undertook a series of structural reforms to leave behind a period marked by political instability, weak financial regulation and increasing poverty. Added to this was the creation of the Investment and Export Network (Rediex) in 2004 to implement the National Export Plan, with the vision that exports and attracting investments are the most effective tools to achieve economic and social development in Paraguay. Under an agreement with the IMF, and with a commitment to fiscal responsibility and the promotion of export commodities, Paraguay started the process and issued its first international bonds.

These bonds made possible investment in infrastructure, especially in the road sector, in addition to stabilizing the financial sector and reducing poverty, which fell from over 50% to around 20%. In addition, GDP grew steadily, increasing by an annual average of 3,7% between 2006 and 2022. Added to this is government debt, which stood at 38,6% of GDP in 2023 (IDB), and inflation of around 5%.

Returning to the present, the infrastructure improvements that will be necessary to accommodate greater commercial activity are mentioned, such as the expansion of the Silvio Pettirossi airport, and of Route 15, which will be part of the Bioceanic Corridor. Likewise, Paraguay's tax system and special regimes are cited as attractive for foreign investment, as is the young labor force with competitive wage costs.

It is also mentioned that, while two decades ago the value of the country's exports was made up of 50% electric energy, the Paraguayan economy has undertaken a process of diversification. The overall volume of exports has quadrupled, and raw materials represent 47% of the total, with 12% manufactured products, showing the progress of the national industry.

Other growing sectors are real estate and forestry, which are attracting large investments, benefiting from the country's investment grade status. We cannot forget the historic agreement between the European Union and Mercosur, achieved after 25 years of negotiations, which will create new markets for the national economy, opening the doors to products such as meat and cereals such as soya and chia, to a combined free trade zone of 700 million people.

Today, President Peña highlights economic stability as one of the country's main attractions for international investors. The other is the availability of abundant, cheap and clean energy, coming from renewable sources and, mainly, from the Itaipú dam. The government's vision is to attract multinational companies, helping them meet sustainability goals by taking advantage of Paraguay's green energy, and turning the country into a technological center for the region.

To achieve this, close cooperation between the public and private sectors is necessary, following the example of Costa Rica as a model in terms of openness to the global economy, as highlighted by the president himself, to bring greater development and prosperity to Paraguay. At Rediex, which is part of the Ministry of Industry and Commerce, this has become the banner that guides daily policies and activities, seeking to generate synergy between both sectors to attract direct investment to Paraguay.

 

The full article is available in English at site from Newsweek.

Illustrative photo: Wikimedia Commons