Paraguay is considered as a developing country. The Index of Human Development in 1994 was of 0,706, locating it in the position 94 in the worlds ranking.

In 2000, the GDP ascended to 7.835 million current dollars with a GDP per head of 1.535 US$ (constant of 1982). The rate of growth of GDP regarding the previous year was of 1,5%, in front of 0,5% in 1999 and -0.4% en1998. All these growth was always below the populational growth that is of 2.6% every year.

The base of its economy is the primary sector, especially agriculture and cattle raising, due to the excellent quality of its lands. Bill also counted until recently with an important timber wealth that could be recovered of being that they are implemented seriously and thoroughly the techniques of the reforestation. The country also has a high hydroelectric potential. Other basic characteristics of their economy are the scarce qualification of the human resources, the already mentioned irrational exploitation of the forest resources, the scarce saving capacity and a high level of informal economy.

The rural areas have a fundamental weight in the economy of the country. The participation of the agriculture in the GDP is of 26% (2000), being however the main source of the population's employment, contributing with 60% of the exports and constituting the biggest source in supply of the industrial sector. From 1950, it is continuous the decrease of the primary sector in the participation of the GDP. In those dates, the participation was of the 41, 2%.

The industrial sector that contributed to the GDP with 17% in the decade of the 50, reaches in 1995 21% of the GDP and he/she fell to 18% in 2000 again, being strongly consolidated around the prosecution of agricultural products.

The basic services (electricity, dilutes, transport and communications) they are located in 2000 in 11% of the GDP, increasing from a 4,6 in 1950.

The general services that participated with the 37 in the mentioned decade, 2% has ascended until 44% in 2000. It is important to highlight the presence of the subsector Trade and Finances that it constitutes, on the other hand, 26% of the general services.

The economically active population (EAP) was of 1,6 million people in 1992 (the population's 34,8%), with a level of unemployment of 9% (136.000 people). there are not data many more modernized on the EAP, since in 1992 was carried out by last time a national census. In December of 2000 the legal minimum wage was fixed in US $195.

The control of the inflation has been vital during the last years. In front of the discharges rates of inflation of the neighboring countries and at the high level of the external trade, Paraguay has been able to go staying with relatively low levels of inflation inside the area that in 1999 it ascended to 5,4 annual%, the minor from 1982.

From the second half of the decade of the 30 until principles of the decade of the 70, the Paraguayan economy was one of those most stagnated ones of Latin America, until the point that in that extensive period its growth only arrived to 3%. Starting from the decade of the 70, a change arises in the tendency, registering a rate annual stocking of 8,5%, due fundamentally to the development of the agricultural production (through an amplification of the agricultural frontier - methodology that already arrived to its limit since it was drained the readiness of fiscal lands that could be distributed in the future among the farmers practically), in short soya and cotton, and on the other hand to the construction of it dams it hydroelectric of Itaipú, together with Brazil, with a capacity of production of 12,6 millions of Kw/hora.

After this stage of growth, the Paraguayan economy slowed down considerably during the years 80 and 90. In fact, during the decade of the 80, the rate of annual growth hardly overcame a little 3%, an index bigger than the population's growth. From 1996 and in continuous form the annual growth of the economy was always located below the populational growth.

At the beginning of the decade of the 90, it has shown the weak capacity to maintain a sustained economic growth again, fact that has like main cause the fall of the agricultural product as consequence of the fall of the international prices of the cotton and of the soya and in smaller measure for the climatic conditions.

The financial crises of 1995 and 1997/98, with the intervention and the later closing of more than 40 financial entities (among banks, financial offices, excange bureaus, insurenca companies and general warehouses of deposits) the financial system was destabilized until ends of the 98, but it recovered its stability again and now it is cleaned up. It is expected with almost absolute security that the remaining financial entities have the necessary solvency to avoid future crisis. However, the lingering crisis of the financial system that lasted about three years, truncates the best perspectives that he/she had the country, depressing in its moment to the consumption, the investment and the trade.

From the moment of the intervention of the financial entities the Central Bank of the Paraguay assumed the administration of the companies and it largely financed the obligations registered before the depositors, the correspondents abroad and other creditors, and it gave credits to pay the costs of operation of this entities. For such an end I believe the Net of Security of the National Financial System to face the credit reduction.

The integration in the MERCOSUR, (Argentina, Brazil, Paraguay and Uruguay), has consolidated firmly after entering in validity January of 1995, 1 with the area free of trade between the four countries and an union aduanera in imperfect first moment for the existence of a differentiated external tariff, with regard to the rest of the world. However, from January 1 2000 a common external tariff exists.

The linking agreement signed in 1995 with Bolivia, the negotiations for the future approach of Chile, the cooperation agreement with the European Union to sum up an area of free trade among the blocks, the official presentation of the MERCOSUR before the Multilateral Organization of Trade (OMC), and their corresponding international recognition, as well as the action program to deepen the integration constitutes the most important successes achieved by Paraguay from face to the integration in blocks supranacionales, avoiding its traditional isolation due to its central position in the heart of America of the South and to the lack of marine coast.

The country confronts a slow process of privatizations, allowing the transfer of public companies to the private sector. Among the companies privatized in the first stage (up to 1995) they are companies of prosecution of agricultural products (FERTIPAR, CAPASA), the airline (LAPSA), it leaves of the merchant fleet (FLOMERPASA) and of the industry metalúrgica (ACEPAR). At the moment is getting ready the monopolist's privatization in telecommunications in what refers to fixed telephony (ANTELCO) and to services of water (CORPOSANA), the cement industry (INC) and of petroleum (PETROPAR), besides the railroad (FCCAL). The National Congress already authorized the privatization of all these companies. the process of the sale of ANTELCO is the most advanced and it should culminate before ends of the 2001.

The improvement of its favorable international image favors new investment opportunities and business that he/she offers the economy and the country. The tourism is an activity with a high potential of growth. Nevertheless, an important challenge to reach to get it is to endow from bigger legality, modernization and growth to the international commercial relationships.

Source: www.enciclonet.com (© Micronet)
Encarta Enciclopedy 99 (© Microsoft)
Translations and editing by: Thomas Otter
 

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