ECR: Which way next for Paraguay?

Jeremy Weltman
Published on:

LatAm safe-haven ranking 7th
Euromoney Country Risk score 42.6
Three-year score change -0.9
Implied default probability (1-year %) 0.96

Paraguay’s claims for an investment-grade rating have been bolstered by a five-place jump in Euromoney’s risk survey this year, taking the sovereign to 80th in the global rankings. Economists are more confident of prospects since the election as president last year of the right-wing Colorado Party candidate Horacio Cartes, a reform-minded businessman, and the emergence of a more dynamic, investment-led economy. Cartes is enduring considerable opposition to the workforce dislocation that comes from reforms. The economy is vulnerable, moreover, to a reliance on cash crops – hence the still comparatively low risk score. Yet having long suffered from corruption, poor transparency, weak institutional underpinnings and inadequate policymaking, the shift in political ethos back to the right following six years of left-wing government has spawned optimism the country will shake off its economic and social challenges. A focus on transport and energy projects has seen Paraguay’s score for its hard infrastructure improve, while low inflation and debt, a current account close to balance and solid reserves epitomise the rewards of a policy approach shining in the shadow of Brazil’s failings.