Paraguay leads regional growth in South America, behind only Guyana Getty Images In the 2026 FIFA Men's Football World Cup, the Paraguayan team is not among the favorites in Latin America. But, in another sector, the country has been scoring goals non-stop: the economy. In the last three years, Paraguay grew, on average, 5.5% per year, well above the average of its neighbors and South America as a whole. Figures from the World Bank indicate that around 300,000 Paraguayans have been lifted out of poverty in the last two years. And 2025 recorded the lowest unemployment rate in the last 13 years. Economists agree that the country is experiencing an economic boom. They cite reasons such as a relatively simple and competitive tax system, moderate public debt, low inflation, young population and availability of cheap renewable energy. Paraguay's geographic location, in the center of the continent, also offers certain advantages. The experts' doubt is whether this is a one-off growth or whether it is part of a long-term trend. "At this moment, Paraguay is moving from a stage of very accelerated growth, driven by agriculture and other factors, to another phase, perhaps of more stability, but with high levels of growth", explains to BBC News Mundo (the BBC's Spanish service) the main analyst for the Americas at the risk intelligence company Verisk Maplecroft, Mariano Machado. In fact, according to him, projections from the International Monetary Fund (IMF) calculate Paraguay's growth in 2026 at around 3.7% — below the 6.6% last year. In other words, Paraguay's boom is real, but its economy is moving from exceptional growth to a more stable execution phase. In this new stage, President Santiago Peña's conservative government will need to try to convince an important part of the Paraguayan population, who continue to realize that the benefits of growth do not reach everyone equally. In 2025, Paraguay's GDP grew by 6.6%, according to the country's Central Bank Getty Images "Generally, a growing economy generates more jobs and income," explains Humberto A. Colman, chief economist at the Paraguayan Development in Democracy foundation (Dende, in its Spanish acronym). “In fact, in the last three years, more than 260,000 jobs have been created, a considerable number for a workforce of around 3.4 million people,” he continues. "But lower quality jobs still predominate. Six out of every 10 workers are in the informal economy, which limits their access to social security." “And although real wages have increased by more than 5% in the last year, many families have not yet fully recovered the purchasing power lost in a previous period of strong food inflation,” explains Colman. This phenomenon helps to explain why high inequality in income distribution still persists. It is an abyss that cannot be closed, despite the country's growth, and it will be the biggest challenge to be faced by Paraguayans in the coming years. Poverty reduction For Susana Cordeiro Guerra, vice-president of the World Bank for Latin America and the Caribbean, Paraguay's economic growth has had an impact on the population, especially in relation to poverty reduction. “Over the past two decades, poverty has fallen by more than half to 16%, while extreme poverty has reached an all-time low of 2.4%,” she explains. "Much of this progress came from improvements in agricultural productivity, which helped increase rural incomes." "The results were recognized abroad by credit rating agencies", continues Guerra. "Moody's promoted Paraguay to investment grade, citing its solid growth and the reforms carried out in the country. S&P followed the same path, raising the rating to BBB, in December 2025. And Fitch also improved its outlook to positive, in October 2025." The Itaipu hydroelectric plant, one of the largest engineering works in the world, is jointly managed by Brazil and Paraguay Getty Images The increase in credit rating reduces the country's financing cost, as it transmits less risk to investors. As a result, more foreign investments emerge, access to international capital markets is facilitated and the national currency can be strengthened. But Machado believes that, although the better credit rating has strengthened the country's attractiveness for investors, "the government now needs to transform this confidence into bankable projects, export capacity and better infrastructure." What factors helped the Paraguayan economy reach this sweet moment? There are three pillars that support this takeoff: the strength of the agricultural sector, the country's energy potential and low taxes. But infrastructure development also played an important role, in addition to foreign capital investment. 1. Cheap energy Energy potential is starting to become one of the country's most valued assets. Paraguay is the world's largest exporter of clean electricity per capita, thanks to the Itaipu dam. Therefore, it has become a hub of attraction for data processing centers and high-tech manufacturing. "Energy is Paraguay's geopolitical asset", according to Machado. "Hydroelectric energy has become the central axis of the Paraguayan proposal, in terms of artificial intelligence, data centers, fertilizers and industrial growth." For him, "the boost to data centers could transform Paraguay's development model." "The interest of the United States, Taiwan and the private sector in Paraguayan AI and data center plans is directly related to the electricity produced by the Itaipu and Yaciretá dams." In 2025, Chile remained Paraguay's main beef importer Getty Images "Taking advantage of green energy and digital energy, Paraguay is not just building roads, but a digital future backed by 100% renewable energy," agrees economist Lucas Mendes Teixeira, president of the LatAm Future think tank. But Paraguay doesn't just export electricity. The country is also advancing in the biofuels market. The country follows in the footsteps of Brazil, which developed a leading industry in the production of ethanol and biodiesel, based on agricultural crops. Now, Paraguay has been boosting the production of renewable fuels, to diversify its energy matrix and generate new exports. 2. Agriculture and exports Agriculture represents almost two thirds of Paraguay's economic activity. It includes not only crops, but also local industries that depend on the sector. Soy is one of the main products, but there are other subsectors that play a very important role, such as livestock farming and meat exports, especially pork. And there is an increasing participation of the industry related to forestry activities. "In 2022, Paraguay suffered an intense drought, which led the country to a serious crisis in the sector. The economy contracted, dragged down by a season of low harvest and decline in the agricultural sector", explains Marcos Lascurain Rodrigo, economist in charge of Paraguay at the company FocusEconomics. "From 2023 onwards, we will see a recovery, with good harvests, which will once again bring good income to farmers and resume the growth of agricultural exports." For Machado, the difference with this government is the work to diversify the destination of the country's exports. "At an international level, Paraguay is one of the few countries that recognize Taiwan and the island is one of the main destinations for Guarani exports, especially beef and pork," he explains. "But the country is also actively seeking other Asian markets, which allow for even greater expansion." Asunción, capital of Paraguay, on a sunny day with blue skiesCredit, Getty Images Photo caption,The metropolitan region of the capital, Asunción, concentrates around a third of Paraguay's population The metropolitan region of the capital, Asunción, concentrates around a third of the population of Paraguay Getty Images 3 . Foreign direct investment Foreign direct investment (FDI) in Paraguay has soared over the past two decades, reaching record levels. It was the result of the country's relative political and economic stability, compared to neighbors such as Argentina and Bolivia. "Since 2023, President Santiago Peña's government has created a series of reforms, aimed at improving the business environment and creating a more stable business and investment environment, with a very orthodox economic agenda favorable to private investment," explains Lascurain. "From that year onwards, we saw the resumption of investments, which would become the main engine of Paraguayan economic growth at the time." The latest data available from the Central Bank of Paraguay (BCP) estimates that FDI will reach US$931 million (around R$4.8 billion) in 2024. This number represents an increase of 15% compared to the previous year. International companies have turned to the country in search of cheaper labor, macroeconomic stability and access to nearby regional markets, due to its geographic location in the heart of South America. One of the most important private infrastructure projects in the region is the cellulose factory of the multinational Paracel. "With investments of more than US$4 billion [around R$20.8 billion] over several years, this installation, near Concepción, represents the largest single private investment in the history of Paraguay", explains Mendes Teixeira. In addition to the factory itself, the project includes the construction of a private river port and a considerable expansion of the regional road network, generating more than 40 thousand indirect jobs. "The country has a window of opportunity to transform stability into investment, investment in productivity and productivity into better jobs and well-being for its citizens. The country has demonstrated that it can grow and reduce poverty", highlights the representative of the Inter-American Development Bank (IDB) in Paraguay, Alonso Chaverri-Suárez. For him, the task in the coming years will be to sustain the advances and ensure that more families can transform these cyclical improvements into a stable trajectory of well-being. Man counts guarani notes on a street in AsunciónCredit, Getty Images Photo caption,In Paraguay, poverty is clearly rural. It affects around 40% of the population in the countryside, compared to 15% in urban areas. In Paraguay, poverty is clearly rural. It affects around 40% of the population in the countryside, compared to 15% in urban areas Getty Images 4. Low taxes Paraguay's tax burden, one of the lowest in Latin America, also attracted companies. The country maintains fixed rates of 10% for income tax, VAT and corporate taxes. In terms of comparison, the effective corporate tax rate in Brazil is 34%. "That's why international promoters invest billions in the country", explains Mendes Teixeira. "Paraguay's macroeconomic discipline allows it to reduce taxes, offer tax exemptions and better conditions", highlights Machado. Paraguay does not have the scale of the Brazilian economy. But, as it is in the center of the Southern Cone, the country acts as an interconnection point between all economies in the region. But this low fiscal pressure tends to spark discussions. After all, with low taxes, the State collects less, which limits its ability to finance public services such as education, health, infrastructure, social security and justice. Fiscal pressure is defined as the relationship between taxes and the country's GDP. In Paraguay, this rate is 14%, the second lowest in Latin America, second only to Panama. The number is below the Latin American average (22%) and developed countries (34%), according to the Organization for Economic Cooperation and Development (OECD). Paraguay has one of the highest inequality rates in Latin America. The Gini coefficient is used by the World Bank to assess inequality. In it, 0 is perfect equality and 1, maximum inequality. Paraguay's Gini index is around 0.45, making it clear that sustained economic growth has not proportionally translated into improved living conditions for the lower strata of society. Lottery ticket seller with a pack of banknotes of different colorsCredit,Getty Images Photo caption,Informal work continues to be a structural factor in Paraguay, with around 60% of the employed population working informally Informal work continues to be a structural factor in Paraguay, with around 60% of the employed population working informally Getty Images 5. Infrastructure in the heart of South America Paraguay emerges as the main logistics and energy center in South America, driven by the Paraguay-Paraná waterway and the Bioceanic Corridor, which will connect the Atlantic Ocean to the Pacific. The 3,500 kilometer highway will connect the port of Santos (SP) to the Chilean ports of Iquique and Antofagasta, crossing the heart of the Paraguayan Chaco. When the final sections of this corridor are in operation, the transit time for exports destined for Asia will be reduced by up to 14 days and logistics costs by around 25%. The Paraguay-Paraná waterway also received significant improvements. The route is of fundamental strategic importance for the export of soy, corn and meat. The waterway benefited from a public-private alliance worth US$500 million (around R$2.6 billion) for dredging and signaling. The works ensured its navigability throughout the year, regardless of weather conditions. "Companies such as Cofco, ADM and Viterra have expanded their port facilities along the river", highlights Mendes Teixeira. "These modern terminals now receive more than 25 million tons of cargo per year." "The Paraguayan river fleet is currently the third largest in the world, surpassed only by the United States and China, which demonstrates the country's maritime prowess, even though it has no exit to the sea." Maintaining a growth rate of 5% per year will be difficult. Economists indicate that growth will continue, but with less momentum, in a more stable manner. Paraguay has very clear strengths. But, to take the leap towards a higher revenue economy, the country needs to resolve structural constraints, offering greater productivity, better jobs, stronger institutions and sustainable development for the entire population.