IV.

Economy

Paraguay is one of the poorest countries in South America. The economy was long based largely on agriculture, and economic development was slowed by lack of skilled manpower, transportation facilities, and investment resources. Beginning in the 1950s, the government initiated numerous programs to stimulate development, including increased public investment in roads, airports, and hydroelectric power, often involving foreign investment. Paraguay experienced rapid economic growth during the 1970s, as roads were completed, prices rose for its exports, and work began on the Itaipu dam. But political instability, falling prices, debt, and other problems stalled economic performance during the 1980s and 1990s.

In 2005 the gross domestic product (GDP) of Paraguay was $7.3 billion, or $1,242.30 per capita. (The GDP is a measure of the value of all goods and services produced by a country.) Services contributed 59 percent of the GDP; industry, 19 percent; and agriculture and forestry contributed 22 percent. Paraguay also has a large “informal” economy that includes street vendors and the resale of imported goods to Brazil and Argentina.

A.

Agriculture, Forestry, and Fishing

Nearly half of Paraguay’s workers are employed in the agricultural sector. Many of them farm on a subsistence basis. The leading agricultural products are cassava, seed cotton, sugarcane, corn, wheat, root crops such as sweet potatoes, and fruits such as bananas and oranges. Livestock breeding is a significant agricultural occupation; Paraguay has more cattle than people. Other livestock includes pigs, sheep, and horses.

Forestry has been important to the economy of Paraguay. However, the country’s forest resources have been depleted as trees are cut for timber and fuel, especially in eastern Paraguay. In addition to timber, other forest products include yerba maté (Paraguayan tea), quebracho extract (tannin), wax, oils, and nuts. In landlocked Paraguay, fishing is of minor importance.

B.

Mining and Manufacturing

Mining is unimportant in Paraguay. Although deposits of various minerals are reported, they are not exploited commercially. Limestone, extracted in significant amounts, is used in producing cement.

Manufacturing is confined largely to agricultural and forestry products and to basic consumer goods. Most manufacturing establishments are small, and the processing of the country’s agricultural products are their chief function. Manufacturing is concentrated in the vicinity of Asunción. Among the important products are packed meat, sugar, and other foodstuffs; textiles; and electric power. A large steel mill opened in 1986 north of Asunción.

C.

Energy

Almost all of Paraguay’s electricity is produced in hydroelectric facilities. The great Itaipu hydroelectric project on the Paraná became fully operational in 1991. The joint Paraguayan and Argentine Yacyretá Dam project was completed in 1994. Paraguay uses only a small part of the hydroelectric energy it produces.

D.

Currency and Foreign Trade

The basic unit of national currency is the guaraní. The Central Bank of Paraguay (founded in 1952) issues currency and controls exchange.

In 2002 Paraguay’s imports cost $1.7 billion, and its exports earned $1.2 billion. Major imports were petroleum, machinery, transportation equipment, metal and metal products, and foodstuffs; leading exports were cotton, soybeans, timber, oilseeds, and meat. The chief purchasers of Paraguay’s exports are Brazil, Argentina, Uruguay, and Chile. The leading sources of Paraguay’s imports are Brazil, Argentina, China, and the United States. Paraguay is a member of two trade associations, the Latin American Integration Association (LAIA) and the Southern Cone Common Market (known by its Spanish acronym MERCOSUR). The LAIA, created in 1980 to replace the Latin American Free Trade Association (LAFTA), works to integrate the economies of member countries, which include most South American countries as well as Mexico. MERCOSUR, a free trade association created in 1995, lowers tariffs between Paraguay, Argentina, Uruguay, and Brazil.

E.

Transportation and Communications

Internal waterways—chiefly the Alto Paraná and Paraguay rivers—long provided the main means of transportation in Paraguay. In 1999 Paraguay had 29,500 km (18,330 mi) of roads. Paraguay is served by a section of the Pan-American Highway, and the Trans-Chaco Highway links Asunción with Bolivia. Highways completed during the 1980s improved travel between Paraguay and neighboring Argentina and Brazil. Paraguay has about 440 km (about 275 mi) of operated railroad track. Asunción is served by an international airport completed in 1980. Local airlines operate within the country.

Paraguay has several daily newspapers and both government-run and commercial radio and television stations. Although the media express a variety of views, criticism of government corruption can provoke intimidation.