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Economy (2002 Central Bank data.)
GDP: $5.6 billion.
Annual growth rate: -2.2%.
Per capita GDP: $940.
Natural resources: Hydroelectric sites, forests.
Agriculture (27% of GDP): Products--soybeans, cotton, beef, cereals, sugarcane.
Arable land: 9 million hectares, of which 30% is in production.
Manufacturing (14% of GDP): Types--sugar, cement, textiles, beverage, wood products.
Trade (2002): Exports--$990 million: soybeans, meat and meat products, flour, animal hides, cotton and vegetable oil. Major markets--Brazil (37%), Uruguay (17%). Imports--$1.56 billion: machinery, fuels and lubricants, transportation and accessories, chemicals and pharmaceuticals, beverages and tobaccos. Major suppliers--Brazil (32%), Argentina (20%).
Economy of Paraguay
Paraguay has a predominantly agricultural economy, with a struggling commercial sector. There is a large subsistence sector, including sizable urban unemployment and underemployment, and a large underground re-export sector. The country has vast hydroelectric resources, including the world's largest hydroelectric generation facility built and operated jointly with Brazil (Itaipú Dam), but it lacks significant mineral or petroleum resources. The government welcomes foreign investment in principle and provides national treatment to foreign investors, but widespread corruption is a deterrent. The economy is dependent on exports of soybeans, cotton, grains, cattle, timber, and sugar; electricity generation, and to a decreasing degree on re-exporting to Brazil and Argentina products made elsewhere. It is, therefore, vulnerable to the vagaries of weather and to the fortunes of the Argentine and Brazilian economies.
According to Paraguayan Central Bank (BCP), Paraguay's GDP in 2002 of $5.60 billion in current dollars represented a decrease of 2.2% from 2001. The GDP per capita fell to $940, its lowest level in 17 years. Given the importance of the informal sector, accurate economic measures are difficult to obtain. Paraguay generally maintains a small balance-of-payments surplus. In early 2003, official foreign exchange reserves fell to below $641 million, and foreign official debt rose slightly to $2.28 billion. The local currency lost over 50% of its value against the dollar in 2002. Inflation rose to 14.6%.
Agriculture and Commerce
Agricultural activities, most of which are for export, represent about 24% of GDP. More than 200,000 families depend on subsistence farming activities and maintain marginal ties to the larger productive sector of the economy. The commercial sector is primarily engaged in the import of goods from Asia and the United States for re-export to neighboring countries. The recorded activities of this sector have declined significantly in recent years, placing a strain on government finances, which depend heavily on taxes on this trade. In general, Paraguayans prefer imported goods, and local industry relies on imported capital goods. The underground economy, which is not included in the national accounts, may equal the formal economy in size. The bulk of underground activity centers on the unregistered sale of imported goods--including computers, sound equipment, cameras, liquor, and cigarettes--to Argentina and Brazil.
Since 1989, the government has deregulated the economy, which had been tightly controlled by President Stroessner's authoritarian regime. The Rodriguez and Wasmosy administrations eliminated foreign exchange controls and implemented a dirty floating exchange rate system, reformed the tax structure and established tax incentives to attract investment, reduced tariff levels, launched a stock market, and began a process of financial reform. Though the short-lived Cubas administration was hampered by political conflicts, it attempted to reduce the rising government deficit by cutting spending, to fight intellectual property piracy in order to attract foreign investment, and to address a financial sector crisis that had simmered since 1995. Under political pressure, the Gonzalez Macchi government has had to suspend a process of privatization and economic reforms. Movement on these issues may have to await the new government takes office in August 2003 (national elections take place on April 27, 2003). In the meanwhile, the fiscal deficit has grown, and Paraguay's external debt now reaches 40% of current GDP.
The central government budget, excluding decentralized agencies and state-owned enterprises, represents more than 20% of GDP.