Paraguay’s experienced steady economic growth over the past decade averaging around 4% annually. The economy has been gradually diversifying beyond the agriculture sector, which still plays a large role. Agriculture presents strong opportunities to boost production and processing of key crops where Paraguay is globally competitive such as soy, corn, beef and timber. The energy sector is also a focus as Paraguay aims to become a regional “green energy hub” with significant hydropower generation capacity and prospects for further renewable energy investments. Infrastructure is another promising area as economic expansion increases demand for better transportation networks, leading to infrastructure projects in roads, ports, airports, railroads and telecommunications.
Paraguay’s Tourism presents an underdeveloped sector with potential as a way to develop rural areas through ecotourism, drawing visitors to natural attractions like the famous Iguazu Falls and indigenous communities. Manufacturing and industry have also seen some foreign investment attracted through special economic zones and tax incentives, particularly in food processing, chemicals and auto parts. Overall, Paraguay’s stable macroeconomic environment, low costs, strategic location and trade agreements make it an appealing emerging market destination with prospects across industries.
Peru continues to face challenges due to political instability, corruption, and social conflict. Political instability has led to a downgrade in Peru’s sovereign credit ratings, with five presidents since 2020, and a high level of contentiousness between various branches and independent bodies at the national level. Corruption is a major problem in Peru, with the country ranking 101st out of 180 countries in Transparency International’s 2022 Corruption Perceptions Index. Social conflict is also a major concern within Paraguay’s boundaries, with 162 active conflicts reported in Peru as of February 2023. More than half of these conflicts (95) occurred in the mining sector, which represents approximately 15 percent of Peru’s GDP.
The private sector in Peru also faces challenges due to the country’s cumbersome and inefficient government. Business owners often find it difficult to resolve disputes with the government, and the judicial system is often slow to hear cases and issue decisions. Court rulings and the degree of enforcement are often inconsistent and unpredictable, and allegations of political corruption and outside interference in the judicial system are common. To mitigate these challenges, the U.S. Commercial Service recommends including an arbitration clause in commercial agreements.
