Paraguay is positioned for a promising future, with abundant natural resources, a young population, and a stable macroeconomic environment. However, to fully realize its potential, the country needs to adopt a new growth strategy that prioritizes productivity, resilience, and sustainability.
The World Bank's recent report, "From Landlocked to Land of Opportunity," acknowledges Paraguay's significant economic progress over the past two decades. This progress has been driven by institutional reforms that have emphasized macroeconomic stability and an open trade and investment regime. Nevertheless, the report cautions that the pace of growth and poverty reduction has slowed in the last decade, similar to other countries in Latin America.
To address these challenges, the report offers three key recommendations:
1. Build resilience: Despite structural changes, Paraguay's economy remains dependent on natural resources and is vulnerable to external shocks such as climate risks. Diversifying exports—including services—and deepening financial and capital markets are essential steps to mitigate these impacts.
2. Boost productivity: Enhancing productivity in manufacturing and service sectors is crucial for creating quality jobs and encouraging economic diversification. This involves facilitating the entry of new businesses while phasing out unproductive ones, investing more effectively in education and workforce skills, and improving access to finance for micro and small enterprises.
3. Ensure sustainability: Sustainable management of natural resources is vital for long-term growth and climate resilience. Improving access to finance and training can promote sustainable technologies and practices in agriculture, particularly among smallholders. Additionally, strategic management of the electricity sector could enable Paraguay to leverage its abundant clean energy resources for economic diversification.
The report also underscores the importance of public institutions in driving these economic transformations. Key areas include enhancing public service quality, strengthening the rule of law, and improving governance.