Moody’s Affirms Paraguay’s Investment-Grade Rating for a Third Year, Outlook Stable
Paraguay · Economy
Key Facts
—Rating affirmed. Moody’s reaffirmed Paraguay’s Baa3 sovereign rating with a stable outlook in its regular update on 30 July 2025.
—Double investment grade. Paraguay now holds investment-grade status from both Moody’s and S&P Global Ratings, which upgraded the country to BBB- in December 2025.
—Robust growth. Paraguay’s economy expanded by 5.9% year-on-year in the first quarter of 2025, driven by private consumption and a 12.7% jump in fixed capital formation.
—Fiscal discipline. Public debt remains around 42% of GDP, well below the median for regional peers, while the government targets a fiscal deficit of 1.9% of GDP in 2025.
—Market access. In February 2026, Paraguay issued its first US$1 billion equivalent sovereign bond in guaraníes aimed at international investors, a direct consequence of its improved credit profile.
Paraguay’s investment-grade rating from Moody’s has entered its third calendar year without a wobble, cementing a quiet but consequential macroeconomic victory that sets the landlocked nation apart from most of its South American neighbours.
A rating journey that began in mid-2024
Moody’s Ratings first elevated Paraguay to investment grade on 26 July 2024, lifting the long-term sovereign rating from Ba1 to Baa3 and shifting the outlook from positive to stable. The agency cited robust economic growth and greater resilience to external shocks as the primary drivers behind the historic decision.
On 30 July 2025, Moody’s published its regular credit opinion reaffirming the Baa3 rating and stable outlook, a move that Paraguay’s Ministry of Economy and Finance still references as the agency’s latest sovereign rating action. With no subsequent downgrade or outlook change, the country entered 2026 still firmly seated on the first rung of the investment-grade ladder.
What Moody’s sees in Paraguay’s economy
The affirmation rests on a foundation of hard numbers that would be the envy of many larger Latin American economies. Real GDP grew by 4.2% in 2024, and the first quarter of 2025 delivered an even more striking 5.9% year-on-year expansion, the fastest quarterly pace since mid-2024.
Gross fixed capital formation, a proxy for business confidence, rose 12.7% in the same period and has now posted six consecutive quarters of positive growth. Moody’s expects real GDP to expand by around 4.0% in 2025 and 3.5% in 2026, figures that align closely with Paraguay’s estimated potential output.
Inflation, long a source of anxiety across the region, is behaving. The Central Bank of Paraguay tightened its inflation target from 4.0% to 3.5% in December 2024, and by May 2025 headline inflation stood at 3.6%, with 24-month expectations anchored around the new goal.
Fiscal prudence anchors the Paraguay investment-grade rating
Paraguay’s public debt-to-GDP ratio hovers around 42%, a figure that sits comfortably below the median for Baa-rated sovereigns and regional peers alike. Moody’s also flags an interest-to-revenue ratio of 12%, which it considers broadly in line with similarly rated countries.
The government posted a monthly fiscal surplus equivalent to 0.2% of GDP in May 2025, trimming the cumulative deficit to just 0.3% of GDP. Under the Fiscal Responsibility Law, the administration of President Santiago Peña is targeting a full-year deficit of 1.9% of GDP for 2025, with a path toward 1.5% in 2026.
The International Monetary Fund, in its January 2026 staff report, noted that Paraguay is advancing on fiscal consolidation objectives and that sovereign spreads have fallen to regional lows. The IMF’s Policy Coordination Instrument and Resilience and Sustainability Facility continue to provide an institutional anchor that Moody’s explicitly values.
A rare double investment-grade stamp in South America
Paraguay’s credit story is no longer a single-agency affair. S&P Global Ratings upgraded the sovereign to BBB- with a stable outlook on 17 December 2025, meaning the country now holds investment-grade status from two of the three major rating agencies.
Fitch Ratings, the remaining holdout, affirmed Paraguay at BB+ but shifted its outlook from stable to positive in October 2025, signalling that a three-agency investment-grade consensus may be within reach. Market commentary suggests Paraguay became only the sixth Latin American sovereign to achieve investment-grade status once S&P joined Moody’s.
This dual endorsement places Paraguay in a select regional club alongside names such as Chile, Peru, and Uruguay, while much of South America still grapples with sub-investment-grade ratings or negative outlooks.
Capital markets reward the quiet macro win
Investors have noticed. On 24 February 2026, Paraguay completed its first US$1 billion equivalent sovereign bond issuance denominated in guaraníes and aimed squarely at international buyers, with US$661 million earmarked for budget financing and US$339 million allocated to liability management.
The transaction was explicitly linked to the country’s improved credit profile and its second investment-grade rating. Earlier market reactions had already pointed in the same direction: when Moody’s announced the initial upgrade in July 2024, Paraguay’s dollar bonds due 2044 rose by about one cent to 97 cents on the dollar, ranking among the best performers in emerging markets that day.
For international investors and expats watching Latin America, the signal is clear. Paraguay is no longer a frontier afterthought but a sovereign borrower that can tap global capital markets in its own currency on competitive terms.
What to watch next for Paraguay’s credit trajectory
The stable outlook from Moody’s assumes continued economic diversification, sustained foreign direct investment, and no material slippage in fiscal discipline. Risks flagged by the agency include exposure to commodity price swings and climate-related shocks, both of which are manageable at current debt levels but warrant monitoring.
A potential upgrade from Fitch would complete the trifecta and could further compress sovereign borrowing costs. The next Moody’s credit opinion, expected in the second half of 2026, will be scrutinised for any shift in tone on growth sustainability or institutional reform momentum.
For now, Paraguay’s investment-grade rating stands as a hard-won and carefully defended asset, one that reflects years of macroeconomic discipline rather than a fleeting commodity windfall.
Frequently Asked Questions
What is Paraguay’s current Moody’s rating?
Moody’s rates Paraguay’s sovereign debt at Baa3 with a stable outlook, according to its most recent credit opinion published on 30 July 2025. This represents the first rung of investment grade and has remained unchanged since the initial upgrade from Ba1 in July 2024.
How many investment-grade ratings does Paraguay now hold?
Paraguay holds investment-grade status from two of the three major rating agencies: Moody’s (Baa3, stable) and S&P Global Ratings (BBB-, stable). Fitch Ratings currently rates Paraguay at BB+ with a positive outlook, one notch below investment grade.
Why did Moody’s affirm Paraguay’s investment-grade rating?
Moody’s cited robust economic growth, low public debt of around 42% of GDP, a credible fiscal consolidation path under the Fiscal Responsibility Law, and a track record of institutional reforms supported by IMF programmes. The agency also noted Paraguay’s resilience to external shocks and its growing economic diversification.
Read More from The Rio Times