Paraguay is a developing country with agriculture, trade and light industry as the main trade routes. Much of the economic activity in the country takes place on an informal basis. Among other things, poor border control and corruption makes re-export of consumer goods an attractive business for many. Because of the large, informal sector, the real economic activity in the country is therefore difficult to measure. It is assumed that service industries in 2013 accounted for approx. 61.9% of GDP, small scale industry for 17.7% and agriculture for 20.4%.
Paraguay’s economy grew rapidly in the period 2003-2008. Strong dependence on export goods from the agricultural sector, poor crops and a decline in world market demand led to economic downturns in 2008–2009. A 13% growth in GDP in 2010 and 12% in 2013 has made Paraguay one of the fastest growing economies in South America. However, high political instability and corruption are two of several important factors that threaten long-term economic stability and growth.
As one of the most rural countries in South America, agriculture has been fundamental to Paraguay’s economic development, and remains the mainstay of the country’s economy today. As of 2013, agriculture (incl. Forestry and fishing) employed approx. 26.5% of the working population contributed 20.4% of the gross domestic product (GDP).
For the country’s poor in rural areas, subsistence agriculture is the only way of life, while for large landowners, exports of agricultural products such as meat, maize, grain and especially soy have created great wealth. Paraguay’s significant economic growth since 2010 is mainly due to increased exports of these agricultural commodities. For example, soy alone accounted for 40% of export revenue in 2012.
At the same time, the importance of agriculture in the country is constantly creating political unrest. Among other things, the extreme distortion of land is a recurring theme, where marginalized small farmers demand land reform. As of 2012, 2% of landowners controlled 80% of the total agricultural area.
The best agricultural areas are in the east. Large quantities of soybeans, cotton, sugar cane, cassava, wheat and corn are produced here. As of 2013, Paraguay was the fourth largest soy producer in the world. Animal husbandry, essentially cattle and pigs, is also important. On overcrowded small farms in the southeast, manioc, corn, sugar cane and sweet potatoes are grown, mostly for their own use. In the east, there is mainly extensive animal husbandry.
It is not until the 1970s that forestry has been run to any great extent. Then considerable logging work started, also to increase agricultural land in the east. For a while there has been a harvest ban for some species of wood, and an order for new forestry to maintain forest resources, but there is some significant illegal forestry and export. Alongside timber and the quebracho tannery, wood oil is also extracted from the coyol palm.
Paraguay has been self-supplied with electricity since 1976, and exports electrical power to Brazil and Argentina. Electricity production came to 51.5 billion kWh in 1999, almost exclusively from hydropower as an energy source. In 1999, the country exported 46 billion kWh.
The industry is largely based on the processing of raw materials from agriculture and forestry, and employs 18.5% (2013) of the working population. In 2002, the industrial sector contributed 26% of GDP, compared with 17.7% in 2013. Expected growth rate in the coming years is an average of 3.7% per year.
The food industry is based on the processing of agricultural products in slaughterhouses and oil mills, in particular the processing of soybeans. In addition, there are textile, soap, cigarette and shoe industries as well as cement mills and sawmills. Most of the industrial production takes place in small and medium-sized enterprises.
Paraguay, in collaboration with Brazil, built the Itaipú dam, which is the world’s second-largest hydropower plant measured in hydropower production. Only the Three Gorges dam in China has greater production. Paraguay is almost 100% self-sufficient in hydropower.
According to Countryaah, Paraguay traditionally has a trade deficit with foreign countries. In 2001, the import value was USD 3077 million, the export value USD 1237 million. The main export products are various oilseeds, especially soybeans, cotton, timber, timber and meat products. Among other things, it imports machinery and transport equipment, fuels, chemicals, pharmaceuticals, etc. Traditionally, Brazil has been the most important trading partner. Other important trading countries are the USA, Japan, the Netherlands and Argentina.
Transport and Communications
The rivers of Paraguay and Paraná account for most of the transport of merchandise. In particular, Paraguay, which forms a 1260 km long axis through the country in the north-south direction, is of great importance, and over Paranás 1630 km through Argentina to Buenos Aires, most of Paraguay’s foreign trade goes. The Pan-American Highway goes approx. 700 km inland, and another main road (Trans-Chaco) leads from Asuncion to Bolivia. A large part of the road network is without a fixed tire. An international airport is located at the capital Asuncion, and from 1996 also at Ciudad del Este, at the southern end of the Itaipud dam.