— Germany’s deputy ambassador says bilateral ties with Paraguay are at a high point, with room to expand trade, investment, and tourism
— The EU-Mercosur trade deal, signed in Asunción in January, could unlock significant new commercial opportunities between the two countries
— Paraguay’s investment-grade credit ratings and 6% GDP growth in 2025 position the country as one of South America’s most attractive emerging markets
Germany and Paraguay are deepening trade and investment ties at a moment when both nations stand to gain from the EU-Mercosur free trade agreement signed in Asunción earlier this year. In a televised interview on Paraguay TV’s Tribuna program, German deputy ambassador Jörg Herrera described bilateral relations as flourishing, with strong prospects for growth across commerce, tourism, and development cooperation. The Rio Times, the Latin American financial news outlet, examines what this diplomatic momentum means for one of South America’s fastest-growing economies.
Herrera emphasized that the two countries share deep historical roots stretching back 200 years of German immigration to Paraguay. He pointed specifically to Mennonite communities in the Chaco region, where cultural and educational bonds remain strong, including German-language instruction in local schools.
Germany and Paraguay Eye Expanded Trade
While bilateral trade reached €145.9 million ($158 million) in 2023, German investment in Paraguay remains limited. Herrera acknowledged this gap but expressed confidence that the EU-Mercosur trade deal that Paraguay unanimously ratified on March 17 would open new doors on both sides.
The agreement, which would create the world’s largest free trade zone covering 720 million consumers, aims to eliminate tariffs on more than 90% of bilateral goods. Germany currently exports machinery, chemicals, and vehicles to Paraguay while importing beef, soybeans, sesame, and charcoal.
Herrera argued that tariffs ultimately raise consumer prices and hinder development, holding up the EU’s internal free trade model as proof that open markets deliver broader prosperity. The deputy ambassador’s comments echoed those of German President Frank-Walter Steinmeier, who visited Asunción in March 2025 and called the Mercosur agreement both an economic and geopolitical milestone.
Paraguay’s Investment-Grade Rise
The diplomatic warmth arrives as Paraguay enjoys an economic surge. The country’s GDP grew 6% in 2025, according to its central bank, and is projected to expand 4.2% in 2026. In June 2024, Moody’s elevated Paraguay to investment-grade status at Baa3, followed by S&P’s upgrade to BBB- with a stable outlook in December 2025.
Paraguay’s flat 10% corporate tax rate and its Maquila export regime — which charges just 1% on value added — have drawn growing attention from international investors. Major projects include green hydrogen initiatives and a $4–5 billion cellulose plant that could transform the country’s export profile in coming years.
Tourism and Development Cooperation
Beyond commerce, Herrera highlighted Paraguay’s untapped potential in ecotourism, a segment increasingly popular among European travelers seeking authentic, sustainable experiences. He noted that improved air connectivity and infrastructure could position the landlocked nation as an attractive destination for German visitors drawn to its natural reserves and strategic location at the heart of South America.
On development cooperation, Herrera explained that traditional German aid is transitioning as Paraguay’s economy matures. However, projects continue through Germany’s international development agency GIZ and its state-owned development bank KfW, alongside embassy-funded microprojects of up to $20,000. These initiatives support indigenous communities in the Chaco with clean water systems and rural education programs.
Outlook for Germany and Paraguay Relations
The diplomatic push comes at a pivotal juncture. With the EU-Mercosur deal moving toward provisional application despite French opposition and a pending European Court of Justice review, Paraguay stands to benefit from reduced tariff barriers with Europe’s largest economy. Germany, in turn, gains a stable, fast-growing South American partner at a time when supply chain diversification has become a strategic priority.
For a country of just 6.4 million people, Paraguay has engineered a remarkable transformation from overlooked frontier market to investment-grade destination. Whether German companies follow the diplomatic signals with capital remains the defining question for the relationship’s next chapter.