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Paraguay, a small country with great export potential

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With a territory that barely exceeds 406 thousand square kilometers and just over 7.6 million inhabitants , Paraguay’s export potential exceeds that of much larger countries on the continent.

Its territory and population are small compared to those of its neighbors Argentina, Bolivia and Brazil. But, in return, Paraguay stands out for having a very stable economy that grows at a constant pace.

This is notable in a world that has not yet recovered from the Covid-19 pandemic and is now facing rising oil and gas prices as a result of European and US sanctions against Russia for its military intervention in Ukraine.

In this situation, the country managed to maintain exports to its traditional customers and even conquered new markets in the last two years.

Currently 41 countries receive products from Paraguay, which demonstrates the commercial success of its public and private companies.

Paraguay’s export potential in numbers

Before continuing to talk about Paraguay’s export potential we must review some important figures about its economy.

In 2021, the Republic of Paraguay had a GDP of 40,305 million dollars, which represents a Gross Domestic Product per capita of US$5,481.

Furthermore, it started the year 2022 with more than 9.6 billion dollars in the coffers of its international reserves and an external public debt of just 11.45 billion dollars.

This places the country’s debt within a very manageable range in the face of unforeseen future events in world markets and the value of strong currencies.

Added to this is the fact that by 2022 it is estimated that the Paraguayan economy will grow 3.7% and its inflation will remain at around 6.5%.

In relation to what the country produces, in 2021 the Central Bank of Paraguay indicated that the manufacturing sector contributes 20% of GDP, followed by commerce (10%), government services (9%). construction (8%) and agriculture (7%),

Other important sectors were the production and commercialization of hydroelectric energy (7% of GDP), as well as transport (4%) and livestock (3%). The financial and banking sector (6%) and telecommunications (3%) also stood out.

Paraguayan exports grow at a constant rate

The numbers obtained so far in the 21st century demonstrate Paraguay’s great export potential and the success achieved in its trade policies with the rest of the world.

In 2003, Paraguayan exports reached a total of 2.5 billion dollars, of which 50% corresponded to the sale of electricity to neighboring countries and another 29% to primary products.

Exports of manufactured goods of agricultural origin (MOA) came in third place, with a percentage of 17%, followed by those of industrial origin (MOI) which reached 4%.

By 2021, Paraguayan exports increased to 10.547 million dollars, of which 47% corresponded to primary products.

In turn, exports of manufactured products of agricultural origin (MOA) consolidated in second place with 26% and electricity exports in third place, with 15%.

Exports of products of industrial origin (MOI) now occupy fourth position, with 10% of the total.

As for the destination of Paraguayan products, the main markets are located in the American continent, Europe and Asia. There is also exchange with Australia, but so far there are no direct exports to Africa.

Leadership in the production area

Detailing the main Paraguayan exports, we have that this country occupies the first place in the world in clean energy exports, in this case based on hydroelectric generation.

It is also the world’s second largest producer of stevia, a natural sweetener in great demand, as well as the world’s third largest exporter of yerba mate.

Added to this is the fact that Paraguay is the fourth largest soy exporter in the world and the sixth largest exporter of soy oil. In livestock farming, it is the eighth largest exporter of beef.

An excellent country to do business

Currently Paraguay leads the ranking of the Latin American countries with the best climate for doing business, followed by Chile, Brazil, Colombia, Peru and Mexico.

Regarding the ease of carrying out projects with national or foreign investment, the World Bank places it in the middle at a continental level along with Brazil and Argentina.

But if anything tips the scales in Paraguay’s favor when it comes to doing new business, it’s its tax system.

It is the country with the simplest tax system and which offers more incentives for foreign or national investment compared to any other on the continent.

For example, income tax, personal income tax and VAT are set at 10%, while taxes on contributions barely reach 35%. In comparison, Argentina, Brazil, Chile and Uruguay apply taxes that are triple those of Paraguay.

This is largely due to the latest tax reforms implemented in the country, which took into account the importance of attracting foreign capital.

Both foreign companies and individuals benefit from a special reduced taxation regime that varies between 10 and 23.5%. Even taxes are not applied to the remittance of profits remitted to the parent companies of foreign companies.

Access to expanded markets

Finally, we must mention another condition that has sustained Paraguay’s export potential so far in the 21st century.

As a member of the Southern Common Market (Mercosur), Paraguay has access to an expanded marketof more than 260 million consumers.

In Mercosur, Paraguayan products are exempt from many tariffs applicable in other member countries.

It also benefits from special regimes for the import of raw materials, agricultural production factors, capital goods, telecommunications or IT equipment.

Automotive products manufactured in Paraguay with a high content of national raw materials can be exported to Mercosur with a 0% tariff, as long as each sale does not exceed US$35 million.

Finally, it is worth highlighting that the Paraguayan Government launched a post-pandemic strategic plan based on taking advantage of the country’s potential. These potentialities are:

  • High quality of life at a reasonable cost
  • High population growth rate
  • Great availability of trained labor
  • Abundance of cheap energy
  • Abundance of renewable natural resources
  • Privileged position in Mercosur

The main idea of this plan is to promote the growth or reactivation of key sectors for the country, such as creative industries, tourism, agribusiness, light industry, professional services, the forestry sector, information technology and logistics. regional.

In conclusion, Paraguay has recognized export potential, but also future plans to take advantage of it.

This will undoubtedly place Paraguay in a privileged position compared to other nations where political uncertainty and the lack of a post-pandemic economic plan prevail.