Paraguay: From landlocked to land of opportunity

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Paraguay has a bright future. With abundant natural resources, a young population, and a stable macroeconomic backdrop, it is positioned for success. However, to fully realize its potential, it needs a new approach in its growth strategy: prioritizing productivity, resilience, and sustainability.

The World Bank's new report, "From Landlocked to Land of Opportunity," recognizes Paraguay's remarkable economic progress over the past two decades, thanks to institutional reforms that have prioritized macroeconomic stability and an open trade and investment regime. At the same time, the report warns that, like other countries in the Latin American region, the pace of growth and poverty reduction has slowed down in the last decade.

To address these challenges, the report presents three recommendations:

1. Build resilience: Although Paraguay has undergone structural changes, the economy remains dependent on natural resources and is therefore vulnerable to external shocks, including climate risks. Diversifying exports, including services, and continuing to deepen the financial and capital markets are key steps to mitigate the impact of these shocks.
2. Boost productivity: Increasing productivity, particularly in the manufacturing and service sectors, is essential to create more quality jobs and encourage economic diversification. This requires facilitating the entry of new businesses and the exit of those that are no longer productive, investing more and better in the education and skills of the workforce, and improving access to finance, especially for micro and small enterprises.
3. Ensure sustainability: Sustainable management of natural resources is key to long-term growth and climate resilience. Improving access to finance and training would boost the use of sustainable technologies and practices in the agricultural sector, especially among smallholders. At the same time, strategic management of the electricity sector would allow Paraguay to take advantage of its abundant clean energy to diversify its economy.

The report also highlights the crucial role that public institutions play in promoting these transformations in the economy. This includes improving the quality of public services, strengthening the rule of law, and improving governance.

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