Name: Republic of Paraguay Population: 6.8 million (UN, 2008) Capital: Asuncion Other major cities: Ciudad del Este, Concepcion, Encarnacion Area: 15,048 sq miles Currency: Guarani GNI per capita: $1,670 Main exports: Soy beans, cereals, beef, timber, leather, apparel Language: Spanish (main), Guarani (spoken by 90%) Religion: Roman Catholic (89%) Life expectancy: 70 years (men), 74 years (women) WB Development Indicators
Paraguay is a landlocked country bordering Argentina, Brazil and Bolivia, in South America. It takes its name from the Parana River, which produces the greatest amount of hydroelectric power in the world.
After the ouster in 1989 of dictator Alfredo Stroessner, who ruled with an iron fist for more than three decades, his Colorado Party remained in power until 2008, but the country could still not find any political stability.
Fernando Lugo, of the Patriotic Alliance for Change party ('Alianza Patriótica para el Cambio') achieved a historic victory in April 2008, defeating the ruling party candidate and ending 61 years of conservative rule.
Lugo, a former Catholic bishop in one of Paraguay's poorest areas until stepping down in 2006, ran a campaign promising to tackle inequality and corruption.
The commercialization of agriculture, population growth and forest clearances have led to a dramatic increase in the number of landless families.
On taking office, President Lugo vowed to deliver on land reform -a key issue in a predominantly agrarian economy. But he has seen protests staged from both landowning farmers and landless peasants alike who are impatient with the lack of a clear plan.
Economic growth has been the highest since the 70s in the last five years and perspectives for the future are relatively favorable, hence it is a historic opportunity to improve social indicators.
At the macroeconomic level, the fiscal position is in order, inflation has remained moderate 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 $4.4 billion in 2008).
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 adjustment has been underpinned by a comprehensive fiscal reform that helped to formalize key industries, such as the re-exportation of computing products.
Challenges
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.
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; while sewerage coverage is barely 8.1% of the entire country and close to zero in rural areas.
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:
COUNTRY PARTNERSHIP STRATEGY
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 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, and they include:
The Community Development Pilot Project helps improve the living conditions and social inclusion of marginal rural and urban communities in three departments on the southern border of Paraguay. The World Bank finances small grants for income-generation projects relating to agricultural activities, artisan workshops, eco-tourism, services, processing plants and community markets. Furthermore, US$9 million in additional funding has been approved for coverage to another eight of the country’s departments.
Through the project Reform of Secondary Education the World Bank collaborates with the Ministry of Education to improve the coverage, quality and efficiency of lower secondary education. The plan also supports the free provision textbooks for all grade 7-9 students in mathematics, science, Spanish and GuaranÃ, and social studies. In addition, teachers and school directors were trained, and about 2,950 new classrooms were built under the project.
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.
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 Caaguazú. 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.
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 Asunción. The project also seeks to increase access to sustainable water and sanitation in rural areas.
In addition to loans, the Bank has mobilized grants to improve the management of indigenous land, support social development in two municipalities and promote development in indigenous communities.
On the analytical, the Bank has 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 be determined); and a Land Management Project (amount to be determined).
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. 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. The goal is for farmers to improve productivity and adopt natural resource conservation measures.
Paraguay is a landlocked country bordering Argentina, Brazil and Bolivia, in South America. It takes its name from the Parana River, which produces the greatest amount of hydroelectric power in the world.
At the macroeconomic level, the fiscal position is in order, inflation has remained moderate and there is greater intermediation of savings through the financial system.
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.
An initiative for 
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. The goal is for farmers to improve productivity and adopt natural resource conservation measures.
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