Paraguay has strong commerce, power, agriculture, and retail sectors, but most of the economy's strengths tend

to be focussed in small areas. The retail sector is concentrated in Ciudad del Este, tourism is concentrated in the capital, and the power industry, trade, and transport are concentrated along the Paraguay and Parana Rivers. Despite these specific areas with strong, focused economic sectors, Paraguay is still one of South America's less-developed nations in an economic sense. Paraguay also relies heavily on Ciudad del Este, the world's third-largest retail centre. This city is a border town on the Parana River (on the Brazilian border) and as a result is susceptible to heavy smuggling. Crime is also a serious problem there and the police force of Ciudad del Este is suspected of widespread corruption. Store-owners have hired guards to monitor their stores around the clock, and these guards outnumber police officers by more than 5 to 1. The mayor even has 4 bodyguards at all times. Theft is prevalent. Crime is a less extreme problem in Asuncin. Paraguay - Infrastructure In economic terms, Paraguay has depended heavily on its rivers, especially in the 20th century. Waterways provide 3,100 kilometers (1,926 miles) of transport paths. Most international trade flows through the Paraguay and Parana Rivers, which connect Asuncin to the Atlantic Ocean through Brazilian territory. These 2 rivers have helped alleviate the consequences of Paraguay's land-locked location. Paraguay's Flota Mercante del Estado, a merchant marine owned and operated by the state, has transported cargo on the Paraguay and Parana Rivers since 1945. Towards the end of the 20th century, more and more freight has been carried along roads, notably to Buenos Aires, Argentina, and Santos and Paranagu in Brazil. Paraguay has a sufficient network of roads and bridges, but about half of the roads are still unpaved. 15,000 of the 29,500 kilometres of roads were paved as of 1999. Major highways connect Asuncin to Ciudad del Este, Paranagu, and Encarnacin. Another highway runs from Villa Hayes across the Chaco region to the Bolivian border. Paraguay's railway system is limited. The railway Ferrocarril Presidente Carlos Antonio Lpez, which stretches 441 kilometres (274 miles) from Asuncin to Encarnacin, makes up much of the railway system in Paraguay. Railways total 971 kilometers (603 miles), which includes privately-owned railways as well. The nation's airport network, however, is much broader. With 937 airports, Paraguay's most notable airports are the government-owned Lneas Areas Paraguayas, opened in 1962, and the modern international Silvio Pettirossi, established in 1980 near Asuncin. Only 11 airports had paved runways as of 2000. Combined, Paraguay's network of roads, rivers, railways, and airports facilitates its strong trade and transport industry. Power Paraguay has substantial economic potential in hydroelectric power, which accounted for 99.79 percent of the nation's electricity in 1999. Paraguay depended on thermoelectric power plants, located in the capital that burned wood and oil until 1968. That year, the Acaray hydroelectric power plant was built, and there have also been large joint ventures in hydroelectricity with Argentina and Brazil. The government-owned National Power Company distributes all electricity.

Communications

The communications network in Paraguay is limited in terms of its population size. There is insufficient telephone service and poor connections outside of Asuncin and its surrounding area. Still, much of the population has access to newspapers, radios, and televisions, and depends on them for news and information. The nation has 4 television stations (2001), 79 radio stations (1997), and 4 Internet service providers (1999). Foreign investment has pushed the communications technology of the nation ahead in recent years. In the mid-1990s, for example, PanAmSat signed a 15-year contract with 2 Paraguayan television stations to provide satellite service.

Communications Newspa Radio pers s TV

a

Cable
a

Mobile Fax
a a

Personal
a

Interne Interne t Hosts b Users b 1999 2.4 1,508.7 7 18.45 38.34 1999 20 74,100 3,500 300

Country

Sets subscribers Phones Machines Computers t

Year

1996

1997 182

199 8

1998

1998 41 256 47 60

1998 N/A 78.4 3.1 N/A

1998 9.6 458.6 30.1 91.2

Paraguay 43 United States Brazil Uruguay

a

101 N/A

215 40 293

2,146 847 244.3 444 607 316 16.3 241 N/A

Data are from International Telecommunication Union, World Telecommunication

Development Report 1999 and are per 1,000 people.

b

Data are from the Internet Software Consortium ( http://www.isc.org ) and are per 10,000

people. SOURCE: World Bank. World Development Indicators 2000.

Public and Private Investment General Alfredo Stroessner, president from 1954 to 1989, encouraged private investment at both domestic and international levels, especially in commercial agriculture ventures. He emphasized cotton and soybean production through government favours in terms of land and money. Before the 1970s, public investment was low and focused mainly on the expansion of infrastructure and communications, but after the 1970s, several new state-owned businesses increased public sector spending and employment rates. During the 1970s and early 1980s, Paraguay offset its crippling foreign debt and trade deficit with international loans, but paying back these loans in the years to come weakened the national economy. The economic growth of the 1970s did not benefit the entire nation equitably, but did benefit the police and military, as well as the upper class

involved in business, agro-industry, and industry. The military and the agro-industrial elite both had ties to the Colorado Party in power. The working class was held back by low wages and limitations placed on the activities of labour unions.

Foreign Investment Foreign investment has played a substantial role in Paraguay's economic growth, particularly in the 1970s and 1980s. Joint ventures with Brazil and Argentina in building hydroelectric power plants gave Paraguay a surplus of power and made it a leading power producer. Also, the government tried to attract foreign investors through low income taxes and tax exemptions during this time. The years of President Andres Rodriguez (1989-93) were marked by reforms implemented to ensure transition to a market economy. He abolished the multiple exchange rates, low-cost subsidies to state enterprises, and export taxes. He also privatized several state enterprises and broke up state monopolies in telephone, water, and energy. Ecuador's airline, Cielos de America, bought 80 percent of the national Paraguayan airline; the remaining 20 percent was reserved for employees. The trade deficit caused by the international loans of the early 1980s was severely exaggerated by inaccurate figures stemming from large-scale smuggling, until Rodriguez's reforms weakened the causes of smuggling. The 1990s were marked by substantial foreign investment in the form of multinational corporations. Joint ventures using foreign capital to spur domestic development include hydroelectric power plants built with Argentina and Brazil, cotton mills and spinning plants built with Italy and Brazil, and foreign oil companies searching for possible drilling sites. The late 1990s have been a time of consolidation in the transition to a market economy, but the national economy is still underdeveloped in comparison to other Latin American nations.

Challenges in Public Sector Paraguay s relatively weak public sector performance remains a key challenge. Traditionally, service delivery by State-Owned Enterprises (SOE), such as water, electricity and communications has been inadequate. The current administration has improved the prospects for provision of basic services. This was most notable after the introduction of a new SOE oversight institutional framework, which has led to more effective financial and performance supervision by the Government of the SOE portfolio. However, there remain significant opportunities for improvement in such areas as financial control; institutional reorganization and development; introducing basics for result-based management frameworks; and tax administration. Beyond addressing high levels of inefficiency and ineffectiveness, there is also a need to continue mitigating high politicization, discretionary practices, and lack of transparency within the public sector. At the same time, there is a need to ensure the sustainability of the public sector reforms initiated with the new reformist administration, by strengthening their legal foundations and deepening the reforms. The challenges related to reforming the public sector go well beyond sheer political will and external assistance as they are deeply seated in a number of structural institutional constraints.

Country Partnership Strategy

The Country Partnership Strategy was recently approved for the years 2009-2013. It proposes to allocate US$100 million in new projects each year. The financial and non-reimbursable technical assistance focuses on three main pillars supporting the government program of this administration:
y y y

Modernization of the status of public administration. Equity and equal opportunity for the less privileged groups. Generation of employment and economic growth

At the moment the portfolio of ongoing operations in Paraguay includes four Investment Operations for infrastructure, rural development, water and sanitation, energy as well as one project to support development policy public sector. These commitments total US$272.5 million, and they include: Road Maintenance The Road Maintenance Project seeks to improve road infrastructure management and maintenance in Paraguay. The project establishes a sustainable road management strategy that provides for the upgrading and maintenance of the road network through the strategic and transparent use of scarce resources. Sustainable Rural Development An initiative for Sustainable Rural Development aims at helping improve the standard of living of small producers and indigenous communities in the Departments of San Pedro and Caaguaz. The plan will support community organizations and foster self-government to improve the management of natural resources and thus contribute to the socio-economic development of the population. Water and Sanitation Sector The Project for Modernization of the Water and Sanitation Sector aims to improve the governance of the sector, improving water services and increase access to sewerage services in the metropolitan area of Asuncin. The project also seeks to increase access to sustainable water and sanitation in rural areas. Policy Development The Project to Support Development Policy Public Sector seeks to diminish the impact of the global economic crisis and at the same time improve the functioning of the state. Energy Sector In November 2010 the Board of Executive Directors approved the Project for Strengthening Energy Sector. The project aims to achieve an increase in the quantity and quality of service delivery of electricity to the national level, while improving the performance of the National Electricity Administration (ANDE). The project is pending in Congress.

References y http://www.nationsencyclopedia.com/economies/Americas/Paraguay.html#ixzz1klbeXByS http://www.nationsencyclopedia.com/economies/Americas/Paraguay-OVERVIEW-OFECONOMY.html#ixzz1kkWn2anu