Eduardo Marques Almeida, the Inter-American Development Bank’s Representative in Paraguay, explains the work of the IDB in terms of aiding the productive transformation of the country
Leading Edge (LE): What is Paraguay’s regional and international status currently considered to be?
Eduardo Marques Almeida (EMA): In 2015 Paraguay’s GDP grew at a rate of 3%, whilst growth for the same year for Latin America was -0.1% and -1.4% for South America. The same occurs in the growth predictions for 2016 in which South America has a predicted growth of -2.0% and Paraguay will see 2.9% growth according to the IMF. It is estimated that for each percentage point fall in Brazilian GDP, Paraguayan GDP falls by approximately 0.5%. The trade links between the two countries are so strong that 25% of Paraguay’s total exports go to Brazil and there is also a considerable trade network in cities on the Brazilian border. The governments of the last ten years have worked to promote Paraguay in the world and attract foreign investment. As for government bonds, the first were released in January 2013 and currently represent a debt of US$2.38 billion.
LE: What is Mercosur’s current status and what is Paraguay’s role within it?
EMA: Mercosur continues to be a forum for dialogue on trade openness and the consolidation of members as a political block. In regional terms, Paraguay has increased its economic integration with Brazil not only in terms of trade but also regional value chains.
LE: What were the factors behind Paraguay’s economic success?
EMA: They can be summarised as macroeconomic stability, openness and confidence in the country, competitive cost structure, and cooperation between the public and private sectors to boost certain industries. The country’s macroeconomic stability has been characterised by a sustained growth of almost 5% each year for the last ten years. Inflation levels are low. The Central Bank has adopted a policy of fixed annual inflation objectives set at 4.5% per year which has been achieved from the outset. Public policy includes various tax incentives for investors. In addition to tax, Paraguay offers relatively low labour costs.
In 2016, South America has a predicted growth of -2.0% and Paraguay will see 2.9% growth according to the IMF
LE: What are the main challenges that Paraguay still faces?
EMA: Improving infrastructure and connectivity with the region and the world, continuing to create means of attracting foreign investment to promote diversification of the economy, and strengthening institutions in order to implement public policies.
LE: What is the role of the IDB in Paraguay’s economic and social development?
EMA: The IDB’s strategy in the country is to support its productive transformation, strengthening underused human resources in the labour market and prioritising investment projects in sectors such as transport and connectivity, water and sanitation and energy, amongst others. The IDB supports the government in areas where it has limited knowledge or administrative capacity, such as tendering PPPs. Finally, the IDB leverages special resources which the government has allocated for education and health spending.
LE: What are some examples of ongoing projects?
EMA: Building and maintening the main roads that connect up the country (US$122 million); the construction and maintenance of a road in the department of Caazapá (US$105 million); improving local roads in the eastern region (US$100 million); constructing a transport system for reaching the centre of Asunción; and modernising government offices. In addition, the construction of an electrical substation close to the Yacyretá Dam to support the creation of a 500kV transmission line connecting Yacyretá with Asunción, costing some US$69.5 million.
LE: What are the main short-and medium-term investments?
EMA: The bank will continue to support Paraguay in terms of infrastructure, production development, human capital development and improving institutional capacity. Projects awaiting approval for 2016 include an extension for projects for construction and maintenance of the main roads connecting the country (US$90million) as well as supporting home financing (US$30 million).