Paraguay’s future hangs in the balance
Freeing up markets would help the country lose its tag as the poor man of Latin America.
Fernando Lugo won Paraguay’s presidential election with 43% of the vote and in August he will be sworn in to lead the second-poorest nation in South America (annual per capita GDP of $4,000). Paraguay is yet to embrace the capital markets and is ranked as one of the most corrupt nations in Latin America, despite becoming a democracy more than 20 years ago.
Paraguay has been ranked as the fifth-worst place to do business in Latin America, and has one of the lowest rates of foreign direct investment in the region. Paraguay is also ranked as the second-worst country in the region for access to capital for entrepreneurs, according to the capital access index – only Haiti ranks worse.
If Lugo is finally going to lift the majority of the population out of poverty, as he claims he will do, then it is time to turn these statistics around.
One way for Lugo to start could be to free up the markets. In each of the past three years, remittances, which mostly come from the US, were about $300 million a year and were nearly double the country’s FDI flows. This statistic highlights Paraguay’s vulnerability to external shocks, especially in the light of the coming US recession.