PARAGUAY At the start of a new era
MEETING THE CHALLENGES THE MAN ELECTED AS PARAGUAY'S NEW PRESIDENT PROMISES REFORM AND A FRESH APPROACH TO PUT THE ECONOMY BACK ON COURSE. THERE IS MUCH TO DO, BUT THE SMALL LATIN AMERICAN NATION HAS ENORMOUS POTENTIAL WAITING TO BE DEVELOPED

NEW TEAM Changes are expected in economic policy

HOPES are high that Paraguay, a nation of 5.8 million people at the center of South America, is witnessing the dawn of a new era.

The focus of these hopes is Nicanor Duarte Frutos, a 46-year-old lawyer, whose victory in the May presidential election is regarded by many as the best chance in recent years of resolving the political, social, and economic challenges facing the country.

Mr. Duarte begins his five-year term as President with the declared intention of giving Paraguay a fresh start. He is not part of the traditional economic or political hierarchy, and has promised to reform the Colorado party, which has ruled the country without interruption since 1947. He has sworn to fight corruption, crack down on tax evasion, and put the nation’s finances in order.

An advocate of free-market policies, Mr. Duarte’s major task is to revitalize the Paraguayan economy.
As a clear sign that he has no intention of repeating the mistakes of the past, he is bringing in a new economic team, drawn from neither his own party nor the opposition. Mr. Duarte aims at nothing less than the introduction of a new model of economic development to put the nation back on course.

The key sectors of Paraguay’s economy are agriculture, manufacturing, and the import re-export trade. At the same time, it is the world’s biggest exporter of electricity, and there is considerable potential for development of the tourism industry.

A major advantage is Paraguay’s strategic location at the center of South America, bordered by Argentina, Bolivia, and Brazil. Together with Brazil, Argentina, and Uruguay, it is a member of the southern common market, Mercosur, and, as such, part of a market of 200 million people.

The country is ideally situated as a low-cost base for international corporations wanting to export to its Mercosur neighbors. Low wage and energy costs, and low tax rates add to its attraction as a location for assembly and distribution facilities.

Paraguay’s “Maquila Law” allows foreign companies to import raw materials and machinery with almost no duties under a system of temporary admission, in order to process, finish or add value to goods for re-export to regional and international markets.

The country is generally open to foreign investment, with no formal restrictions. Foreign investors receive equal treatment to local investors, and full repatriation of capital and profits is guaranteed.

The need for infrastructure development opens opportunities for U.S. goods and services—especially in power transmission and distribution, basic telecommunications, road, port, and civil aviation systems, potable water, and sewage treatment.

Central to Paraguay’s economic growth is the development of the agricultural sector, the mainstay of the economy—contributing 28 percent of GDP—and the largest export sector. Industry depends heavily on agriculture, the most important products being beef, vegetable oils, textiles, beverages, and processed goods derived from timber and leather.

Paraguay principally exports soybeans, cotton, timber, and meat products, carrying out most of its trade within Mercosur. Brazil, is the destination for almost a third of the country’s exports. Other crops include sugarcane, tobacco, fruits, and vegetables.

Paraguay already ranks as the third largest soybean exporter, accounting for more than 6 percent of the world total. According to the Paraguayan Cereal and Oilseeds Chamber of Exporters (Capeco), cereals and oilseeds (soybean, wheat, corn, and sunflower) account for 52 percent of agricultural GDP. Cheap land, high yields and low production costs have attracted billions of dollars in investment, and production has quadrupled since 1989.
Livestock rearing, mostly cattle, is also important, with some 8 million cattle being raised on mostly natural pastureland. Primary meat products are beef and veal, chicken, duck, goose, horse, lamb, pork, and turkey.
Forestry is another significant resource, and conservation and replanting has become a national priority in a drive to rebuild national timber reserves.

However, the sector of the economy with the greatest potential is hydroelectric power. Paraguay is a major producer and exporter of electricity, and co-owns two of the largest hydroelectric dams in the world.
Argentina and Brazil rely on Paraguay’s two large hydroelectric plants, Itaipu and Yacyreta, to meet 40 percent and 25 percent of their electricity demand respectively. Paraguay exports approximately 90 percent of the electricity it generates—almost 50 billion kilowatt hours.

CATTLE raising is an important activity, with around 8 million cattle being reared on largely natural pasture

The huge Itaipu dam, on the Paraná River along the border with Brazil, its joint owner, has been ranked along with the Golden Gate Bridge and the Empire State building as one of the seven marvels of the modern world.
The plant is in the process of adding two additional generating units to its existing 18 and its total installed capacity of 12,600 MW. The Yacyreta plant, with 20 turbines and an installed capacity of 3,200MW, is jointly owned with Argentina.

A project approved by the governments of Paraguay and Bolivia to build a 3,300-mile pipeline across Paraguay, to transport natural gas from Bolivia to Brazil, could be completed by 2005.

The plan envisages the construction of a 200 MW thermoelectric plant at Loma Lata, about halfway along the pipeline, and a 750 MW thermoelectric plant outside the Paraguayan capital, Asunción.