Economy of Paraguay

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Paraguay has a market economy characterized by a large informal sector. Agriculture dominates the economy, but unequal land distribution has resulted in a large class of peasant farm laborers. A large portion of the population is uninvolved in the formal economy, instead existing as subsistence farmers. In recent years, the economy has grown as a result of increased agricultural exports, especially soybeans. Reforms in fiscal and monetary policy also have improved Paraguay’s economy. Inflation has dropped, and the currency has appreciated gradually. Nevertheless, urban unemployment and underemployment have been problems throughout Paraguay’s history. Paraguay has the economic advantages of a young population and vast hydroelectric power but has few mineral resources, and political instability has undercut some of the economic advantages present. The government welcomes foreign investment.[2]

Contents

Structure of the economy

The most important component of the Paraguayan economy is the farming sector, which contributed 27% to GDP in 2006. The participation of commerce was 20.2%, and that of other services, including government, 38.4%. Industry’s part (including mining and construction) was about 20%.

After years of economic crisis, between 1999 and 2002, the Paraguayan economy grew at between 2.9 and 4.1% per year from 2003 to 2006. For 2007, the estimated growth is about 6.4%. Inflation in 2007 reached 6.0%.

Most enterprises are small, micro and individual ones, including subsistence jobs like street vendors. Only 4% of the Paraguayan labor force works in companies with more than 50 employees.

In June 2007 external foreign exchange reserves amounted to US$ 2153 million, and the foreign official debt US$ 2154 million, close to parity.

Fiscal surplus is provisionally reported as 0.5% of GDP in 2006 and 2007.

Paraguay’s economy (GDP) grew 5,8% in 2008, fastest growing sector being agriculture with 10,5% growth[3]

Agriculture accounts for about 20 percent of Paraguay's annual gross domestic product (25 percent in 2004) and virtually all of the country's export earnings. It is Paraguay’s largest and most consistent source of employment, employing about 45 percent of the working population. In addition to those engaged in the formal agricultural sector, thousands of Paraguayan families survive through subsistence farming.[2]

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