ASUNCIÓN, Paraguay — The small, landlocked country of Paraguay has long been one of the poorest and least developed in South America. For decades it has been plagued by corruption and political instability. Poverty in Paraguay has been widespread. While all of these problems remain, the country has been making some notable improvements.
Over the past decade Paraguay has become one of the fastest growing economies in Latin America and in 2013 its economy grew at a rate of 14.2 percent. The statistics for 2014 have not yet been calculated, but indicators suggest it has sustained its impressive growth. This growth has been fueled by soy bean exports and hydro-electric power projects.
Many Paraguayans have yet to benefit from this growth and remain very poor, but there are many reasons to hope that this will soon change. Paraguay has made significant progress lowering its poverty rate, which has fallen from 32 percent to 24 percent in three years between 2011 and 2014. This in turn marks a 20 percent reduction from 2003, when 44 percent of the population lived in poverty. Paraguay is on track to meet several Millennium Development Goals by reducing its poverty rate by around half between 2000 and 2015.
Last month, U.N. Secretary General Ban Ki-moon visited Paraguay and praised the country for its progress and for sticking to the targets set by the MDGs. A lot of the success can be attributed to foreign aid projects. The World Bank has been very active in assisting Paraguay in its fight to reduce poverty. The World Bank’s current portfolio between its two branches totals more than $600 million and officials expect that will soon increase to exceed $1 billion.
The World Bank has just approved a $100 million loan to help Paraguay improve social welfare programs and expand its social safety net for the poor. The Paraguayan government has said that fighting poverty and income inequality is one of its top priorities. It has set a goal to raise income levels among the poorest 40 percent and further reduce the poverty rate by nine percent by 2018.
Many have expressed concern about the rising levels of income inequality since the economic boom and the uneven distribution of the boom’s benefits. The good news is that the government and foreign aid donors are working to address this problem. But while all of this is significant progress, there is still a lot more that needs to be done. Most notably, Paraguay’s rate of tax collection is incredibly low and this hampers the government’s efforts to develop and reduce poverty. This makes it very dependent on foreign aid and until this changes and tax collection improves Paraguay’s successes will be limited.
– Matt Lesso