Last reviewed 6 December 2019

Paraguay is keen to reach out to the wider world. While current trade volumes may only be modest, there is long-term potential for business to be done. Martin Clark reports.

Putting Paraguay on the map

Located in the heart of South America, Paraguay remains a remote and largely unknown destination for UK exporters, and even for hardy British travellers.

That is in large part the result of its geography, a landlocked state surrounded by Bolivia to the north, and Latin American giants, Brazil and Argentina, on all other sides.

Its relative isolation is reflected in a modest economy, one where agriculture dominates, and where tourism numbers are just a fraction of those of its better-known neighbours.

Agricultural products dominate exports; around 87 per cent of all imports from Paraguay into the whole of the European Union (EU) are agriculture-based.

While hydro-electric power is another notable industry, Paraguay still remains very much under-developed with a significant number of its seven million population living in poverty despite impressive growth rates of the past decade or so.

Indigenous groups are still to be found in the more remote areas, such as the Ayoreo-Totobiegosode Indians living in the semi-arid Chaco region, for example.

Like many of the problems facing other groups living in areas in and around the vast Amazon basin zone, this way of life is increasingly under threat from land developers and ranchers.

That said, Paraguay’s growth has been mostly strong for over a decade, making it one of the fastest-growing economies in South America of recent times.

This has attracted greater visibility from around the world.

It has also had an effect on the capital city, Asuncion, where shiny new apartment buildings and bustling shopping malls have popped up, alongside chic hotels and new corporate headquarters.

Yet there is still plenty of catching up to do.

And geography is not the only reason for Paraguay’s lack of historic development.

For many years, the country — a former Spanish colonial outpost — has suffered from political unrest, while economic woes have been exacerbated by corruption.

Paraguay’s democracy has also been fragile in the decades since it emerged in 1989 from the long dictatorship of the late General Alfredo Stroessner, who seized power in a coup after a brief civil war.

Trawling back through the history books, there have been a catalogue of other destructive wars with most, if not all, of Paraguay’s near neighbours, which have helped shape the nation of today.

The country has not escaped involvement in South America’s notorious drugs industry, either.

Some remote areas, such as where Paraguay meets Argentina and Brazil — the so-called Triple Frontier region — have long been associated with drugs smuggling and other contraband trade.

Despite declaring independence from Spain in 1811 — now more than 200 years ago — Paraguay’s progress into the modern era has been far from easy.

Emerging economy

Paraguay’s history is reflected in the current make up of the country’s people, with most of mixed Spanish and Guarani descent, speaking the indigenous language Guarani as well as Spanish.

It is also evident in some of the colonial-era architecture of the capital city, although this is changing rapidly with new developments and construction.

While there is no major tourism industry to speak of, by comparison to Brazil or Argentina, there are some who deem this a distinct advantage.

The country may be little-known, and little-visited, but this means it has retained an authenticity that may be hard to find elsewhere.

Indeed, travel specialists Lonely Planet call it “ideal for those keen to get off the gringo trail for a truly authentic South American experience.”

A small number of adventurous British tourists make the trip to Paraguay each year, according to the UK Foreign & Commonwealth Office.

With tourism unlikely to advance significantly anytime soon, Paraguay remains dependent on its large agricultural sector — though this brings with it great volatility.

After a sustained period of impressive growth, Paraguay’s central bank slashed 2019 economic forecasts by half, to 1.5 per cent (from a previous 3.2 per cent), as a result of poor agricultural performance arising from adverse weather conditions.

The International Monetary Fund (IMF) is less hopeful, estimating just 1 per cent real growth for 2019.

It highlights the ongoing fragility of Paraguay’s economy, even after a decade or more of gains — the economy grew 3.7 per cent in 2018 — and explains why officials are keen to nurture other areas to boost development.

The central bank also cited various trade issues among its neighbour states, Argentina and Brazil, both key trade partners, as affecting growth during 2019.

All are members of the regional trade bloc Mercosur, a combined market of almost 300 million.

Expanding trade

It is here though that Paraguay is hopeful of better things ahead.

In June 2019, Mercosur signed a landmark trade deal with the EU — 20 years in the making — to slash tariffs on a whole range of products, which could be a route to ramping up overseas trade in the coming years.

Certainly there are moves to enhance trade ties from the UK side, especially in the rather unsettled climate of the Brexit era.

That includes the establishment of a new British Business Centre Paraguay, located within the British embassy in Asuncion.

The centre is a resource for business information and insight, and offers market research, as well as modern desk space and meeting rooms for hire to those interested in entering the market.

There is also an active British Paraguayan Chamber of Commerce that seeks to drive forward trade and investment on both sides of the Atlantic.

Nonetheless, total trade and investment volumes are still only small, though moving in the right direction.

Between 2015 and 2017, total imports from Paraguay to the whole of the EU increased from €1.006 billion to €1.153 billion.

In the other direction, EU exports to Paraguay increased from €610 million to €682 million.

EU exports to Paraguay are dominated by manufactured products, in particular machinery, transport equipment and chemicals.

In 2017, the EU was Paraguay's third most important trading partner, after only Brazil and Argentina.

In recent times, however, local officials have moved to deepen links with other partners around the world, notably the United States (US).

In 2019, the country welcomed US secretary of state Mike Pompeo to Asuncion; it marked the first such high-level US visit to Paraguay in 53 years, underscoring the nation’s significance as a trade partner and ally.

Japan’s prime minister Shinzo Abe and the emir of Qatar also made the long trip to Paraguay.

Paraguay also took a controversial step in 2018 and became only the third nation to open its Israeli embassy in Jerusalem, after the US and Guatemala.

Market potentials

The country is also pioneering in other ways, hosting the first ever conference of landlocked nations a few years ago, drawing together over 30 states from across the globe.

Indeed, one feted local novelist, Augusto Roa Bastos, once called Paraguay “an island surrounded on all sides by land.”

It alludes to the country’s uniqueness, and celebrates its isolation in a continent dominated by the much larger economies of Brazil and Argentina.

Against this backdrop, UK officials are working to raise the profile of British companies in what remains a promising, albeit small, long-term market.

In September, a ‘British Week’ took place to raise awareness of everything from UK culture to education.

This included university fairs held in the border city of Ciudad del Este and also in Asuncion, organised by Inova Education and the British embassy to showcase the best of UK education.

“We wanted this British Week to be an opportunity to share British culture,” said British Ambassador Matthew Hedges. “From the best universities in the world to centres of global quality for innovation and creativity, the UK has a lot to offer.”

On the other side of the Atlantic, there is also a small but little-known Paraguayan footprint in the UK, notably in the sporting world.

Paraguayan players in the high-profile Premier League include the likes Fabian Balbuena who plays for West Ham United and Miguel Almiron at Newcastle United.

There are estimated to be more than 100 Paraguayan families living in England, according to the Paraguayan embassy in London.

Looking ahead, the country is keen to be discovered by more adventurous businesses and tourists from all over the world — a clear invitation for ambitious UK exporters.

Infrastructure development, mining, IT and communications, all present opportunities alongside education and training and other services.

In certain areas, Paraguay is already well developed, with strong skills and expertise in hydropower, for instance.

It shares with Brazil the world's largest working hydropower plant; the Itaipu dam on the river Parana supplies nearly all of Paraguay’s electricity needs.

Clearly there are challenges, not least the long journey time: flights from London take around 14 hours in the air, connecting typically through Spain or Brazil.

But away from Mercosur’s better-known markets, Paraguay — this ‘island surrounded by land’ — is quietly and steadily building bridges to the wider world.

“When people think of small, economically successful landlocked countries with lots of hydro energy, they typically think Switzerland,” the IMF noted in a recent update. “But if its stellar economic performance continues, people can soon think of Paraguay.”