Development Progress | Economical and Social Developments | World Bank Assistance | Contacts
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. back to top
ECONOMIC AND SOCIAL DEVELOPMENTS Economic Developments
Paraguay’s economy today is fundamentally agrarian, with over 40 percent of the population living in rural areas according to official statistics. Agriculture and agribusiness represent also about 40% of output and employment and account for almost all registered exports. Inside agriculture, there are sharp differences between modern farming practices observed by agricultural enterprises (mainly producing grain at productivity levels that rival the most productive nations in the world) and cooperatives (beef, dairy), and the incipient practices of (most) small farmers (i.e., with less than 50 ha. of land). Income per capita has been almost stagnant over the past 20 years, but real GDP growth resumed at a 3.8 percent rate on average for the 2004-2006 period. 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 adjustment has been underpinned by a comprehensive fiscal reform that helped to formalize key industries, such as commerce on informatics products in the country’s main trading place for MERCOSUR (namely Ciudad del Este). Also contributing to the good performance over the past few years has been a positive external outlook, as prices for key commodities exported by Paraguay (e.g., soy bean and beef) has grown significantly over the past few years – and the country has had a relative good weather during the harvest times—particularly for the 2006/2007 harvest. As a result, registered and unregistered exports have doubled between 2001 and 2006. Unfortunately, the recent economy recovery has not been based on a significant expansion of the capital base of the country. FDI (at US$130M in 2006) remains low and well below the amount of funds the country receives on worker’s remittances from abroad (to the tune of $280M). At the microeconomic level, however, the past few years of regional and country stability have fostered a number of noticeable developments in industries and services, including in areas such as grain processing, beef, textiles, organic sugar, bio-fuels, and some unsophisticated manufacturing, such as motorcycle assembling. Private investment in cellular telephony and ports has been strong even if small in the overall macroeconomic context. Social Developments
Paraguay’s poverty rate increased to 46% of the population in 2002 and has since then fallen to about 38% in 2005 in part due to the recovery and in part to efforts to increase the targeting of social spending—and a concerted effort to spend more on education. However, the human base to support growth and diversification is in need of stronger development. With the increases in public spending, the coverage of the education system has improved for all levels since 1995. More needs to be done to increase coverage, particularly for secondary and, at the same time, quality and equity issues needs to begin to be addressed forcefully. On the health side the agenda is very significant Paraguay’s maternal mortality rates are among the worst in Latin America and progress has been minimal. Furthermore, as much as a third of the population might not have access to regular health care. Water and sewerage coverage is low, particularly in rural areas (but coverage on sewerage too is very low for urban areas). back to top
WORLD BANK ASSISTANCE TO PARAGUAY The 2004-2007 Country Assistance Strategy (CAS) was approved on December 16, 2003, aiming at restoring confidence in the economy and to support reforms in areas, such as the financial sector, rural development, health, and education. At the moment the portfolio of the Bank consist of three operations: The Pilot Community Development ($9 million) is contributing to improve living conditions and social inclusion for rural and marginal urban communities in three departments on the southern border of Paraguay (Itapúa, Misiones and Ñeembucú). The program supports income-generating opportunities for poor communities, as well as capacity building to enable local institutions and beneficiary organizations to identify, design, and implement community development activities. With a total amount of US$11.8 million, the Bank is financing small grants for demand-based income-generation projects related to agricultural activities, artisan workshops, eco-tourism, services (such as laundries), processing facilities, and community markets.
The Secondary Education Reform ($24 million). The Secondary Education Improvement Project (US$24.5 million) is helping the Ministry of Education to improve the coverage, quality and efficiency of lower secondary education in Paraguay. 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 are to be built under the project.
The Road Maintenance Project ($74 million) seeking 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 above three World Bank-financed projects have a total value of US$107 million in commitments, of which US$87.6 million remain undisbursed as of September 10, 2007. In addition to loans, the Bank has mobilized grants for the institutional strengthening of Congress ($0.4m) and the Ministry of Finance ($0.3m); to improve management of indigenous lands ($1.7m); to support social development in two municipalities ($0.9m); to promote development in indigenous communities ($1.6), and to improve biodiversity and forestry ($0.3m from the Institutional Development Fund, and $0.3m and $0.9m from the Global Environment Fund). On the analytical, the Bank has recently completed a Land Tax Study, and is preparing an Integrated Fiduciary Framework (jointly with the Interamerican Development Bank) and an Education Attainment Assessment. Projects under preparation include an additional financing for the Pilot Community Development Project (US$9M), a Sustainable Rural Investment project (US$35M), a Modernization of the Water Sector project (US$60M), a Forestry Development Project (size to be determined), and a Land Management Project (size to be determined). Recent Involvement
In the recent past, the program of the Bank in Paraguay has supported government initiatives in the following 2 areas: Water and Sanitation Significant progress has been made in providing water service to rural areas. The Fourth Rural 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 have been built and seven water supply systems have 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
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CONTACTS
Yanina Budkin, Communications Officer for Argentina, Chile, Paraguay and Uruguay
Tel.: (54-11) 4316-9700
Fax: (54-11) 4313-1233
E-mail: ybudkin@worldbank.org Diego Ambasz, Public Information Coordinator
Tel.: (54-11) 4316-9700
Fax: (54-11) 4313-1233
E-mail: sip@worldbank.org In Paraguay
Ruth González Llamas
Tel.: (595 21) 664 000
Fax: (595 21) 664 002
email: rgonzalez2@worldbank.org
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Updated October 2007
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