ASUNCION, Paraguay — Paraguay is a Latin American nation with a population of 6.8 million people. In 2013, it experienced the largest economic growth among all Latin American nations – an impressive 13 percent. Yet still, nearly 30 percent of the population lives in poverty. So the situation begs the question, why is Paraguay poor?
Even with growth soaring, Paraguay was ranked towards the bottom of South American nations when it came to reducing poverty over the last decade. Paraguay has been one of the poorest and most unequal nations on the continent for a long time.
The total poverty rate — defined by the World Bank as those with an income of less than $3.10 a day — of Paraguay rose in 2016 from 26.6 percent to 28.8 percent. The extreme poverty rate, those with an income less than $1.90 a day, also rose from 5.4 percent to 5.7 percent.
Lack of Taxes
Part of this rise is due to a lack of taxation. Paraguay did not have an income tax until 2013, and even then, the across-the-board rate was 10 percent and few were actually expected to pay it. Tax collection in Paraguay is only equivalent to about 18 percent of gross domestic product, which is less than African nations like Congo or Chad. No taxes means no spending for antipoverty projects.
A lack of taxes may also be driving the increasing inequality. 77 percent of the land in Paraguay is controlled by 1 percent of the nation’s landowners. The booming agriculture industry is highly mechanized and does not offer a lot of jobs to workers.
Agriculture and Natural Resources
While poverty has declined in urban communities, it runs rampant in rural areas. Forty percent of the rural population lives in poverty. Rural workers may have little access to land, markets, technology and financial resources. Other causes of rural poverty may include a deterioration of natural resources and a loss of soil fertility. Women and indigenous people are also more likely to be impoverished.
However, those asking themselves “Why is Paraguay poor?” may be heartened to hear that some progress has been made. Over the long term, the overall poverty rate has fallen from 44 percent in 2003 to about 30 percent today. Last year’s increase in the poverty rate may be an anomaly, since the poverty rate had fallen consistently the past five years before.
In 2005, the government introduced a program that gave families living in extreme poverty a small cash stipend. That program now includes over 75,000 families. The Minister of Technical Planning, Jose Molinas, said on a radio show that the government has a plan to reduce extreme poverty to less than 3 percent, but no goal for the reduction of total poverty.
Hopefully, the growth of the cash stipend program and the success of neighboring countries in reducing poverty will encourage the government of Paraguay to focus on eliminating all levels of poverty in the nation.
– Brock Hall