Paraguay

Economic Overview of Paraguay

GDP and Economic Growth
• GDP (2024 estimate): $17.5 billion USD.
• Growth Rate: Paraguay’s economy is expected to grow by 4.0% in 2024, supported by strong performance in agriculture, exports, and a stable macroeconomic environment. The country has seen consistent growth in recent years, and its economy is expected to continue benefiting from strong agricultural exports and increased foreign investment in various sectors.

Key Economic Features
• Agricultural Dominance: Paraguay’s economy is heavily dependent on agriculture, particularly the production of soybeans, corn, and beef. It is one of the world’s largest exporters of soybeans, which drives a significant portion of its GDP.
• Foreign Investment: The country has a relatively open economy, with a favorable business climate attracting foreign direct investment (FDI), particularly in agriculture, manufacturing, and services.
• Strong Export Sector: Paraguay has a strong export sector, with key trading partners including Brazil, Argentina, the United States, and the European Union. The country is a member of the Southern Common Market (MERCOSUR), which provides it with preferential access to regional markets.

Key Sectors of the Paraguayan Economy
1. Agriculture and Agri-business
• Agriculture is the cornerstone of Paraguay’s economy, with the country being a major global exporter of soybeans, beef, and other agricultural products. This sector presents opportunities for UK exporters in agricultural technology, machinery, and sustainable farming practices.
• There are also opportunities in the agri-food sector, particularly for UK firms involved in food processing, packaging, and agribusiness consulting.
2. Energy and Hydroelectric Power
• Paraguay is a leading producer of renewable energy, particularly from hydroelectric power. The Itaipu Dam, shared with Brazil, is one of the world’s largest sources of electricity generation.
• UK businesses in renewable energy, energy efficiency, and power generation technology can find opportunities in Paraguay’s growing energy sector.
3. Infrastructure and Construction
• Paraguay’s infrastructure is undergoing significant development, including transportation, urban development, and energy infrastructure. There are opportunities for UK companies involved in construction, civil engineering, and project management.
• The government’s focus on improving infrastructure, particularly in transport and utilities, creates room for UK firms specializing in these areas.
4. Manufacturing
• Paraguay’s manufacturing sector is growing, particularly in food processing, textiles, and chemicals. UK companies can explore partnerships with local businesses or invest in Paraguay’s growing manufacturing industry.
• The availability of low-cost labor and access to regional markets make Paraguay an attractive option for manufacturing ventures.
5. Tourism
• While tourism in Paraguay has traditionally been underdeveloped, the government has recently focused on promoting tourism, especially eco-tourism and cultural tourism. There are opportunities for UK businesses in hospitality, eco-tourism, and travel services.

Trade Environment

Main Export Partners:
• Brazil, Argentina, United States, European Union, Chile, and Russia.

Main Import Partners:
• Brazil, Argentina, China, United States, and European Union.

Trade Policies:
• Paraguay is a member of MERCOSUR, which grants it preferential access to regional markets, including Argentina, Brazil, Uruguay, and Venezuela.
• The country is also party to a number of trade agreements with countries outside the region, including the European Union, which provides trade benefits for UK exporters.

Opportunities for UK Exporters to Paraguay
1. Agriculture and Agri-business
• With agriculture being a key driver of the economy, there is significant potential for UK exporters in agricultural machinery, seeds, fertilizers, and crop protection technologies.
• Sustainable farming practices and agri-tech solutions can also find a growing market in Paraguay as the country looks to increase its agricultural efficiency and environmental sustainability.
2. Renewable Energy and Technology
• Paraguay’s reliance on hydroelectric power presents opportunities for UK companies involved in energy generation, efficiency, and renewable technologies. There are prospects for British firms to partner with local businesses in the energy sector and provide technology for sustainable development.
• Additionally, there is a growing interest in the use of alternative energy sources, such as solar and wind power, creating new business opportunities.
3. Construction and Infrastructure
• Paraguay’s need for infrastructure development, particularly in transport and utilities, presents significant opportunities for UK construction firms.
• Opportunities also exist for UK businesses in project management, design, and planning services, as the government accelerates infrastructure projects.
4. Manufacturing and Export of Consumer Goods
• Paraguay’s growing manufacturing sector is creating new opportunities for foreign investment. UK businesses can look to establish production facilities in Paraguay to take advantage of its low-cost labor force and access to MERCOSUR markets.
• There are also opportunities for UK companies to supply machinery and technology for local manufacturers in food processing, textiles, and other industries.
5. Tourism
• With growing government efforts to promote tourism, UK businesses in the hospitality and travel sector can explore opportunities for investment, hotel management, and touristic services. Eco-tourism and sustainable tourism are also key growth areas in Paraguay.

UK-Paraguay Trade Relations

Trade Agreement:
• As a member of MERCOSUR, Paraguay benefits from regional trade agreements that allow UK businesses to access regional markets with lower tariffs. The UK-Paraguay trade relationship has strengthened in recent years, especially after Brexit, with opportunities in agriculture, energy, and manufacturing.

UK Exports to Paraguay (2023):
• Machinery and mechanical appliances: £8 million.
• Pharmaceuticals and healthcare products: £5 million.
• Electrical machinery and equipment: £4 million.
• Food and beverages (including spirits): £3 million.
• Transport equipment (including vehicles): £2 million.

Investment Climate:
• Paraguay offers a favorable environment for foreign investment, with low taxes and incentives for investors in key sectors such as agriculture, energy, and manufacturing.
• The country’s business-friendly environment, coupled with its growing economy and strategic location in South America, makes it an attractive destination for UK companies looking to expand in the region.

Market Entry Considerations

Challenges to Entry:
1. Regulatory Environment: While Paraguay is open to foreign investment, businesses may face challenges related to bureaucracy, especially in navigating regulatory requirements. Working with local partners or consultants is highly recommended to ensure compliance.
2. Competition: The country’s competitive sectors, especially in agriculture and energy, may require UK companies to offer specialized products and services that differentiate them from local and regional players.
3. Language Barriers: Spanish and Guaraní are the official languages of Paraguay. Having Spanish-speaking staff or business partners can facilitate smoother operations in the local market.

Cultural and Language Barriers:
• Business culture in Paraguay is based on personal relationships, and it is important to invest time in building trust and rapport with local partners.
• While Spanish is the primary business language, understanding the local customs and showing respect for Paraguayan culture can help establish stronger business connections.

Recommendations for UK Exporters
1. Leverage MERCOSUR Trade Benefits: UK companies should take advantage of the trade preferences available to Paraguay as a member of MERCOSUR, allowing easier access to regional markets.
2. Partner with Local Firms: Forming partnerships with local businesses can help UK companies navigate the regulatory landscape and build relationships in Paraguay’s competitive sectors.
3. Focus on Sustainable Development: As Paraguay increasingly prioritizes sustainable energy and agricultural practices, UK exporters offering green technologies and sustainable solutions can tap into the growing demand.
4. Explore Growing Infrastructure Opportunities: With substantial government investment in infrastructure, there are numerous opportunities for UK firms specializing in construction, urban development, and transport infrastructure.

Contact Information

British Embassy in Asunción
• Address: Edificio World Trade Center, Avda. España 347, Asunción, Paraguay.
• Phone: +595 21 213 000.
• Email: consular.asuncion@fcdo.gov.uk.

British Chamber of Commerce Paraguay
• Address: Avda. España 222, Asunción, Paraguay.
• Phone: +595 21 603 201.
• Email: info@britishchamber.org.py.

Recent Political Developments
1. Government and Economic Policy:
• Paraguay’s government has continued its efforts to foster economic growth, with a focus on improving infrastructure, increasing exports, and attracting foreign investment. Economic reforms, particularly in the agricultural and energy sectors, remain a priority.
• The country has also been focusing on diversifying its economy to reduce dependence on agriculture and increase its industrial base.
2. Geopolitical Relations:
• Paraguay has strong trade and diplomatic relations with neighboring Brazil, Argentina, and other MERCOSUR members. The UK is a key partner in trade and investment, particularly in sectors like renewable energy, agriculture, and infrastructure.
• The political stability of Paraguay remains a key strength, with the country positioning itself as an attractive investment destination in the region.
3. Domestic Challenges:
• Paraguay faces challenges related to poverty and inequality, and the government continues to focus on improving social services and addressing regional disparities. Nevertheless, the country remains a relatively low-risk environment for business.

Conclusion

Paraguay offers a range of opportunities for UK exporters, particularly in agriculture, energy, infrastructure, and manufacturing. The country’s strategic location, strong export sector, and favorable investment climate make it an attractive destination for UK businesses looking to enter the South American market.

To succeed in Paraguay, UK companies should take advantage of the MERCOSUR trade benefits, which provide preferential access to regional markets. Establishing partnerships with local firms will be key in navigating the regulatory environment and overcoming potential cultural and language barriers. Additionally, focusing on sustainable solutions in sectors such as agriculture, energy, and infrastructure will align with Paraguay’s growth strategies, offering long-term business potential.

With its stable political environment and ongoing efforts to modernize its economy, Paraguay presents numerous opportunities for UK businesses to expand their presence in South America. By understanding the local market dynamics and leveraging Paraguay’s growing export sectors, UK exporters can successfully tap into one of the region’s emerging economies.