Paraguay

Paraguay attempting to join the OECD's Development Group

Several news outlets reported on 9 December 2016 that Paraguay presented its candidature to join the OECD's Development Group. This group is comprised of 51 members and works as a platform for the sharing of best practices related to economic development. OECD member states share their experiences in areas such as sustainable market growth, and democratic governance. Planning Minister José Molinas explained that being able to learn from OECD's best practices will help Paraguay attain the economic and political goals set forth in its 2030 National Development Plan (La Nación). Molinas explained Paraguay's candidature has passed the first stage, which involved presentations from President Cartes and Treasury Minister Santiago Peña. The OECD's Council will meet in February 2017, and if no objections are raised it would instruct the institution's Secretary General to process Paraguay's membership (Entorno Inteligente).

Paraguay's strong GDP growth continues in third quarter

Paraguay's economy grew by 5 percent on an inter-annual basis, announced the Paraguayan Central Bank (BCP) on 6 December 2016. This figure makes Paraguay one of the fastest-growing economies in Latin America, strongly outperforming its Andean and South American neighbors. The BCP estimates Paraguay's GDP will grow by at least 4 percent in 2016, and maintain a growth level of 3.7 percent in 2017 (ABC Color). BCP President, Carlos Fernández Valdopinos, stated that Paraguay would be second or third in Latin America in terms of 2016 GDP growth, and also explained that the engines powering economic growth in the country were changing. Fernández Valdopinos expects sectors like construction or energy to consolidate, and strong growth in the consumer goods and the services sectors (La Nación).

Itaipú dam close to its objective of breaking world record for hydroelectric power generation

On 1 December 2016, the Paraguayan director for the Itaipú hydroelectric damn (jointly managed by Brazil and Paraguay), James Spalding, stated the dam aimed to break the world record for hydroelectric power generation (La Nación). During the week of 5 December 2016, it was confirmed that the dam generated an accumulated amount of 94,207 GWh (Gigawatts per hour) of energy so far in 2016, which represents a new all-time high. According to forecasts, by the end of 2016 the dam could reach an annual production of over 98,800 GWh, which would break the current world record held by Chinese company Tres Gargantas (Crónica). Four key factors have been cited as drivers of this historic performance: demand for energy has been high; increased efficiency of machinery; favorable hydrological conditions; and the use of highly qualified human resources (La Nación).

Paraguayan government backtracks on minimum salary increase

Following an announcement on 28 November 2016 that the minimum wage was to increase by 7.7 percent effective November 2016, the government backtracked and confirmed the increase will apply starting in December 2016. The original announcement implied companies that had already paid their workers their November paychecks would be forced to compensate them with an additional payment. This had elicited heavy criticism from private sector representatives like the National Chamber of Commerce and Services of Paraguay (CNCSP), who argued the retroactive measure was illegal (Última Hora). However, the new announcement that the minimum salary raise will be postponed until December 2016 has been met with disappointment from workers' organizations and trade unions. Aldo Snead, Secretary General of the United Workers' Central, announced his organization would file a formal complaint with the Employment Ministry (ABC Color).

New minimum salary to enter into force in Paraguay

Employment Minister Guillermo Sosa announced on 28 November 2016 that the minimum monthly wage in Paraguay had been increased from US$313 to US$337. Additionally, wages for domestic workers were raised from US$188 to US$203 per month. The changes come as part of the implementation of new labor legislation approved by President Cartes in early November 2016. It is calculated that the increase in minimum wages will affect close to 380,000 Paraguayan workers who currently earn the minimum wage (Última Hora). The change is retroactive, meaning that the companies that have already paid their employees their November paychecks will have to pay them an additional sum in December to make up for the difference (ABC Color).

Mexico and Paraguay strengthen bilateral economic relations

On 9 November 2016, Paraguay's Ministry of Industry and Commerce received a Mexican commercial delegation made up of investors and businesspeople, with the objective of strengthening commercial links between the two countries. This followed a meeting between President Horacio Cartes and Mexican President Enrique Peña Nieto. The Mexican delegation comprised business representatives from the construction, real estate, water processing, and robotics sectors (Webpicking). One of the key developments during the meetings was the discussion of an agreement for "Economic Complementarity," which will provide for the liberalization of trade between the two countries and could enter into force in September 2017. Paraguayan Vice Minister for Trade, Óscar Stark, pointed out the importance of the agreement since Paraguay is the sole Mercosur member that does not have a trade agreement with Mexico, something which has impeded growth in trade relations between the two nations. Vice Minister Stark announced negotiations will take place during the first nine months of 2017, and the agreement will then be referred to the different political institutions in Mexico and Paraguay for their approval (Hoy).

Government announces US$87 million package to support home acquisitions in Paraguay

The Paraguayan government announced on 14 November 2016 it will launch the second phase of the "First Home" program, aimed at helping middle class families finance the purchase of their homes via the provision of loans at subsidized interest rates. The loans will be provided by the Agencia Financiera de Desarrollo (AFD), Paraguay's public bank. This second phase follows the successful pilot program launched in 2014, which supported 773 house purchases. The second phase will turn the program into a "fixed product" in AFD's portfolio, and it will include a financing of US$87 million aimed at financing approximately 2.500 homes (La Nación). Program beneficiaries will have to satisfy a number of criteria in order to access the loans; for example, having an income level that equals less than seven minimum salaries, or not being a home owner. Households with an income of up to four times the minimum salary will be eligible for up to US$43,000 with an interest rate of 7.5 percent; those with incomes amounting to between four and seven minimum salaries will be eligible for loans of up to US$69,000 with an interest rate of 9.5 percent (Última Hora).

Paraguayan interior minister fired in surprise move by President Cartes

Paraguayan Interior Minister Francisco José de Vargas was fired on 29 October 2016 during a surprise announcement in President Horacio Cartes's speech at a convention for his political party Asociación Nacional Republicana (ANR). De Vargas found out about his firing while listening to the radio, and was caught off guard by the news. A potential reason for the firing was that De Vargas was not an ANR party member, and had refused to join the party (ABC Color). Additionally, De Vargas faced mounting criticism for his poor management of the increasing levels of insecurity caused by attacks from the Paraguayan People's Army (EPP). Cartes's political advisor Darío Filártiga has been rumored to be the likeliest person to replace De Vargas, due to his background in security (Última Hora).

Paraguay's central bank increases 2016 GDP growth forecast to 4 percent

The Central Bank of Paraguay (BCP) on 25 October 2016 increased its growth forecast for the country to 4 percent from the previous 3.5 percent it had predicted in July 2016. This marked the third positive revision to its forecasts during 2016, confirming the positive trends mentioned recently by government officials (ABC Color). Industry, construction and trade were identified as the key drivers behind this dynamic growth, with the agricultural sector slightly lagging. The BCP's forecasts are broadly in line with those of other institutions, such as the UN's ECLAC, or Brazilian bank Itaú. The IMF and World Bank, however, maintain their predictions of 3 to 3.5 percent GDP growth for 2016 (La Nación).

Private sector claims it won't be able to compete with Petropar's LPG prices

Capagas, the Paraguayan Chamber of Commerce for Petroleum Gas, claimed state-owned Petropar will not be able to sell Liquified Petroleum Gas (LPG) at its announced price of US$8.81 per 10kg canister (ABC). Capagas Vice President Ausberto Ortellado argued this price (which is 30 percent below current market rates) would not cover costs and is untenable unless subsidies are introduced. Mr. Ortellado claimed Petropar had not factored administrative costs into its estimations, and had therefore arrived at an unrealistically low estimate of the price at which it can sell LPG. He also voiced concerns that public perception of private sector providers will suffer as a result of Petropar selling LPG at a vastly reduced rate compared to its private sector competitors.

Price reductions for fuel and transport set to start in Paraguay

State-owned oil company Petróleos Paraguayos (Petropar) is set to begin applying price reductions to its fuel sales as of 24 October 2016. The government adopted these reductions the previous week, mandating a US$0.017 reduction per liter of fuel. Price reductions are set to affect the complete range of fuels distributed by Petropar, from diesel to petrol. As a consequence of the decreased price of fuel, the government also enforced a lowering of urban bus fares, decreasing standard fares from US$0.37 to US$0.35. Cross-country bus fares will also be reduced by varying amounts, depending on travel distance. In addition to this, the government also announced Petropar will begin selling Liquefied Petroleum Gas imported from neighboring Bolivia (La Nación).

Paraguay denies crisis in Mercosur over Venezuela

Paraguayan Foreign Minister Eladio Loizaga stated on 17 October 2016 there is no crisis in Mercosur over Venezuela. Loizaga reiterated Venezuela is not acting as Mercosur's rotating president, despite statements to the contrary from the Venezuelan government (Globovisión). The Foreign Minister stated in September 2016, the four founding members of Mercosur determined Venezuela could not act as president because the country had not adopted all of Mercosur's rules and noted Venezuela has until 1 December to comply with Mercosur regulations or face possible suspension (La Patilla). Loizaga stated founding members Paraguay, Uruguay, Argentina and Brazil are pushing ahead with negotiations over a trade deal with the European Union (EU) without Venezuela, which is an associate member of Mercosur and was not involved in the initial stages of the trade talks (La Patilla).