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Paraguay Country Brief from www.worldbank.com
OVERVIEW
Paraguay is a landlocked country bordering Argentina, Brazil and Bolivia, in South
America. The name "Paraguay" is derived from the Guaraní word pararaguay meaning
"from a great river". The "great river" is the Paraná River, which produces the greatest
amount of hydroelectric power in the world.
Paraguay is divided by the Paraguay river into the eastern region or Paraguay Oriental
and the western region or Chaco. The southeastern border is formed by the Paraná river,
containing the Itaipú dam shared with Brazil. It is currently the largest hydroelectric
power plant in the world, generating nearly all of Paraguay's demand for electricity.
Guaraní and Spanish are both official languages in the country and most of the population
speaks both of them. Typical to the paraguayan culture are embroidery (ao po'í) and lace
making (ñandutí) with which they do fabrics and clothes full of color and beauty.
ECONOMIC AND SOCIAL EVENTS
The Patriotic Alliance for Change led by Fernando Lugo took office in August 2008 after
61 years of Colorado Party Government, to bring greater equity and social inclusion in
the country.
At present the country’s economic situation is highly favorable, hence it is a historic
opportunity to improve social indicators and give way to the leveling of opportunities.
Economic growth has been the highest since the 70s in the last five years and
perspectives for the future are relatively favorable. At the macroeconomic level, the fiscal
position is in order, inflation has remained at moderate levels and there is greater
intermediation of savings through the financial system. Furthermore, the country’s
present external situation is highly favorable with a systematic increase in recorded
exports (almost 4-fold in the 2002-2008 period, totaling almost US$4.4 billion in 2008).
Paraguayan economy is fundamentally agrarian with over 42% of the population living in
rural areas according to official statistics. Agriculture and agribusiness represent also
about 25% of the GDP, 30% of employment and account for almost all registered
exports.
In the 2004-2007 period the Gross Domestic Product increased an average of 4.5%. This
has been in part the result of a prudent macroeconomic management since 2004 that
brought the country out of a severe debt and banking crisis by, among others, maintaining
an overall fiscal surplus of about 1% of GDP during the same period. The fiscal
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adjustment has been underpinned by a comprehensive fiscal reform that helped to
formalize key industries, such as the re-exportation of computing products.
Nonetheless, the country still faces the enormous challenge of expanding its capital base.
Net Direct Foreign Investment (US$188.8 million in 2007) remains low and well below
the amount of funds the country receives on worker’s remittances from abroad (about
US$341 million in 2007). However, the past few years of regional and country stability
have fostered a number of noticeable developments in industries and services. Private
investment in cellular telephony has been strong even if small in the overall
macroeconomic context.
Paraguay’s poverty rate increased to 46% of the population in 2002 and has since then
fallen to about 35.6% in 2007 in part due to the recovery and in part to efforts to increase
social spending. However, absolute poverty increased from 15.5% to 19.4% in the same
period due to the rise in food prices.
Not much progress has been achieved in terms of the indicators of basic social services.
The maternal mortality rate has not decreased since 1988, when the country had the
fourth highest rate in the continent. The infant mortality rate has remained the same or
increased during the last 18 years to 36.4 per thousand live births in 2003. Drinking water
coverage reaches 80.6% of the urban population, but only 35.2% of the rural population
(an average of 61.5%); while sewerage coverage is barely 8.1% of the entire country and
close to zero in rural areas
WORLD BANK ASSISTANCE TO PARAGUAY
The World Bank has recently approved the Country Partnership Strategy for the years
2009-2013. It proposes to allocate $ 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:
a) Modernization of the status of public administration.
b) Equity and equal opportunity for the less privileged groups.
c) Generation of employment and economic growth.
At the moment the portfolio of ongoing operations in Paraguay includes six Investment
Operations for community development, infrastructure and rural development, as well as
additional funding for the Community Development Project. These commitments total
US$308.5 million.
• The Community Development Pilot Project (US$9 million) helps improve the living
conditions and social inclusion of marginal rural and urban communities in three
Departments on the southern border of Paraguay (Itapúa, Misiones and Ñeembucú). The
World Bank finances small grants for income-generation projects relating to agricultural
activities, artisan workshops, eco-tourism, services (such as laundries), processing plants
and community markets.
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The Bank’s Board of Executive Directors has approved US$9 million in additional
funding to expand the Project’s coverage to another eight of the country’s departments.
This operation is awaiting the approval of the National Congress.
• Reform of Secondary Education (US$24 million) the Project collaborates with the
Ministry of Education to improve the coverage, quality and efficiency of lower secondary
education. Besides surpassing the expected 10 percent gain in test scores for
mathematics, the progression rate of students moving from grade 7 to grade 8 increased
from 82 percent in 1995 to 94 percent in 1999, and the share of students repeating grade 7
declined from 2.4 percent in 1999 to 1.3 percent in 2001. The project also supported the
free provision of 1.67 million textbooks for all grade 7-9 students in mathematics,
science, Spanish and Guaraní, and social studies. In addition, 29,360 teachers and school
directors were trained, and about 2,950 new classrooms were built under the project.
• The Road Maintenance Project (US$74 million) 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. The approach is
critical for Paraguay, which relies almost entirely on roads for transport in domestic and
international goods.
• The Project for Sustainable Rural Development (US$37.5 million) aims at helping
improve the standard of living of small producers and indigenous communities in the
Departments of San Pedro and Caaguazú. The initiative will support community
organizations and foster self-government to improve the management of natural resources
and thus contribute to the socio-economic development of the population.
This Project was approved by the Bank’s Board of Executive Directors and of the
National Congress.
• The Project for Modernization of the Water and Sanitation Sector ($ 64 million) aims to
improve the governance of the sector, improving water services and increase access to
sewerage services in the metropolitan area of Asunción. The project also seeks to
increase access to sustainable water and sanitation in rural areas.
This project was approved by the World Bank Executive Board, is pending approval by
the Congress.
• The Project to Support Development Policy Public Sector ($ 100 million) seeks to
diminish the impact of the global economic crisis and at the same time improve the
functioning of the state. The initiative will support four key areas: Improving the
functioning of the tax system, efficiency in public sector financial control, particularly of
public enterprises, quality of public expenditure management and human resources
policy.
This project was approved by the World Bank Executive Board, is pending approval by
the Congress.
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In addition to loans, the Bank has mobilized grants to:
• Improve the management of indigenous land (US$1.7 million)
• Support social development in two municipalities (US$900,000)
• Promote development in indigenous communities (US$1.6 million)
On the analytical, the Bank recently concluded the preparation of:
• Policy Notes. Economic and Social Development Options: Challenges and Priorities for
Growth with Equity and Good Governance.
• Evaluation of Achievements in Education.
• Integrated Fiduciary Framework (jointly with IDB).
• Paper on Real Property Tax.
Projects in preparation include: a Project for the Modernization of the Water Sector
(amount to be determined); a Forest Development Project (amount to determined); and a
Land Management Project (amount to be determined).
Closed Projects
In the recent past, the World Bank program in Paraguay provided support to government
initiatives in two areas:
• Water and Sanitation. Significant progress has been made in the provision of drinking
water services to rural areas. The Fourth Water Supply and Sanitation Project, for a total
amount of US$40 million, has helped the Government expand water provision to rural
populations. It is expected that this program will help to increase water and sanitation
coverage from 20 percent to 30 percent in rural areas. By June-2007, 300 water systems
had been built and seven water supply systems had been expanded or remodeled. Sixty
of these water systems are operating in indigenous communities. In addition nearly
25,000 latrines have been built. A key feature of this program of support is its emphasis
on fostering competition in the water supply market, with five private service providers
operating today, while all other rural water systems are managed by the beneficiary
communities which are responsible for operation and maintenance of the systems.
• Rural Development. The US$47 million Natural Resources Management Project is
helping to solve major agricultural and natural resource problems in the rural areas of
Alto Paraná and northern Itapúa. It also assists small farmers and indigenous
communities living in the area in the creation of sustainable and diversified agricultural
production systems. The program encourages the participation of rural communities in
the management of natural resources and the appropriate use of land. To this end, the
project benefited 13,077 small farmers who received training to prepare participatory
micro-catchments plans. As a result, 51 micro-catchments plans were completed,
covering 17,206 rural estates distributed over 264,577 hectares. The goal is for farmers to
improve productivity and adopt natural resource conservation measures.
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For more information on World Bank assistance to Paraguay, including lending
breakdown and project reports, see:
Proposed Projects
All Projects
CONTACTS
Yanina Budkin, Senior Communications Officer for Argentina, Chile, Paraguay and
Uruguay
Tel.: (54-11) 4316-9700
Fax: (54-11) 4313-1233
E-mail: [email protected]
In Paraguay
Ruth González Llamas
Tel.: (595 21) 664 000
Fax: (595 21) 664 002
email: [email protected]
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