Paraguay Governance Diagnostics: About

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Paraguay experienced decreased economic growth in the past decade due in part to the banking sector crises in 1995 and 1997 as well as lowered profitability from trade with Argentina and Brazil (Paraguay’s main trade partners). Fiscal deficits also rose from the use of fiscal resources to bail out depositors in bankrupt commercial banks, an unprecedented deficit of the social security system, and poor performance of public enterprises. Although Paraguay invested more than its neighbors, it experienced a lower economic growth rate. Possible explanations for the apparent low productivity of investment include (1) a large part of the economy-almost half by one estimate-is informal and informal activities are unable to take advantage of economies of scale, the protection of property rights or attract foreign investment; (2) investors take unjustifiable risks using leveraged funds; (3) Paraguay has invested heavily in housing, which does not create productive capacity; (4) Paraguay's low level and quality of infrastructure services, especially telephones and water supply and sewerage. See the World Bank Paraguay country website.

Realizing that one of the many benefits of a governance program is the attraction of foreign investment that arises from increased credibility, President Gonzalez Macchi sought WBI support in establishing an governance and anti-corruption strategy. In the summer of 1999, a Paraguayan Steering Committee was created and by October the diagnostic work was well underway. Read the Paraguay Country Assistance Strategy (CAS).

In 2004 the Consejo Impulsor del Sistema Nacional de Integridad (CISNI) and the institution in charge of the statistical information in Paraguay -Dirección General de Estadística, Encuestas y Censos (DGEEC) embarked on a follow-up of the Governance and Diagnostic work carried in 1999. This effort will provide information to the Government of Paraguay to monitor progress made on the areas of governance and anti-corruption since 1999 and it will provide information to update the governance strategy - Plan Nacional de Integridad- drafted in that year. The World Bank has been supporting the process with technical assistance.