What’s Going On in Paraguay?

Ever spent much time in Paraguay? Me neither. Ever spent much time thinking about Paraguay? Negative. The only foray into Paraguay I’ve ever been able to make was a five minute trip across the border to see a part of Itaipú dam, one of the largest hydroelectric generation facilities in the world.

In the world of Latin American politics and business, Paraguay always seems to get lost in the shuffle. As much as it is a neighbor to powerful places like Brazil and Argentina, and as much as it is arguably the most central piece of the South American puzzle, it is on the way to nowhere and in the way of nobody. The country’s isolation, combined with regional distrust and condescension, conspire to make this little landlocked country is one of the most forgotten and seldom-explored corners of the vast South American continent.

But this wasn’t always the case, and indeed one of the continent’s bloodiest post-colonial wars was fought against Paraguay because of its strategic position. The Triple Alliance war, beginning in 1865, resulted in a devastation that set the country firmly on a tragic path, killing 60% of the country’s population and nearly 90% of its men. For a real tear-jerker, read the Economist’s fabulous piece on the war and its consequences, published in last year’s Christmas issue.

Over time, I’ve learned a few interesting and surprising facts about the “small” South American country (it’s the size of California). Some curious and notable historical happenings include:

  • The most serious pre-18th century challenge to Spanish authority in Latin America
  • One of the most successful communal governments including indigenous populations, which Voltaire once called “a triumph of humanity”
  • The establishment of the first Nazi party chapter in South America
  • The world’s first country fully powered by renewable energy (and produces 1,000% of its demand – exporting the rest)
  • A 2012 coup d’etat that went virtually unnoticed outside of Latin American circles, but caused a regional brouhaha, all provoked by news the former-priest president had fathered a child

Its economy isn’t boring either. only a few years ago, Paraguay posted the highest GDP growth rates in the region. In 2010 alone, the country’s small economy grew 13%, one of the highest rates in the world. The next few years were rougher on the country with GDP contracting last year by 3%. But the IMF is predicting a rebound, with an 11% growth forecast for 2013 alone. A lot of this growth (and fluctuation) is tied to grain and cattle prices, two of the country’s few  productive sectors.

China has taken notice, and in the last few years has grown from a marginal player in the country’s economy to its largest trading partner. And commodity exports from Paraguay are far less sensitive to China’s slowdown than others in the region (looking at you Brazil and Chile). Fewer buildings might mean less copper and iron ore, but people still have to eat the grains and meat Paraguay has in spades.

Few people think that Paraguay is the next big story in Latin America, but there’s room to believe that the country’s excellent resource base, combined with the spillover effects of a broader base of trade partners, might make it a interesting place to watch. Or at least an interesting place to study history.

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2 responses to “What’s Going On in Paraguay?

  1. When have ever a “country’s excellent resource base, combined with the spillover effects of a broader base of trade partners,” worked to make a country the next big story? if anything we have learnt that spillover effects in Latam dont work. You clearly havent spent much time in Paraguay and you still clearly dont get it!

    • Hey there CPPS, thanks for your comment. I didn’t say that it worked to make it the next big story, rather that all of these trends made it an interesting place to watch. Paraguay has tons of other problems that are evident to even the most casual observer, but my comment wasn’t to highlight that the country was about to take off, rather that there’s more than meets the eye.

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