Moody’s Affirms Paraguay’s Investment-Grade Rating for a Third Year, Outlook Stable
Paraguay · Economy
Key Facts
—Moody’s Rating. Paraguay holds a Baa3 sovereign rating with a stable outlook, affirmed for a third consecutive year in January 2026.
—Double Investment Grade. S&P Global Ratings upgraded Paraguay to BBB- in December 2025, giving the country a second investment-grade anchor.
—Growth Engine. Real GDP expanded by 6.6% year-on-year in the third quarter of 2025, driven by agriculture, manufacturing, and services.
—Fiscal Discipline. The government posted a monthly fiscal surplus of 0.2% of GDP in May 2025 and is targeting a deficit of just 1.9% of GDP for the full year.
—FDI Magnet. Large-scale foreign direct investment in forestry and manufacturing is anchoring medium-term growth prospects, according to Moody’s.
Moody’s Ratings has affirmed Paraguay’s investment-grade rating at Baa3 with a stable outlook for a third consecutive year, cementing the landlocked nation’s status as one of Latin America’s quietest macroeconomic success stories.
A Three-Year Streak That Defies Regional Trends
In a region where sovereign credit ratings have often drifted downward, Paraguay has engineered a remarkably steady ascent. Moody’s first elevated the country to Baa3—its lowest investment-grade rung—on 26 July 2024, and has now left that assessment untouched through two subsequent annual reviews, the latest published on 23 January 2026.
The consistency is what sets Paraguay apart. While larger neighbours have battled negative outlooks or outright downgrades, Asunción has quietly locked in three years of investment-grade status with a stable outlook, a feat matched by only a handful of Latin American sovereigns including Chile, Mexico, Uruguay, and Colombia.
What Moody’s Sees in the Paraguayan Economy
The January 2026 credit opinion paints a picture of an economy firing on multiple cylinders. Moody’s projects real GDP growth of 5.8% for 2025 and 4.0% for 2026, underpinned by private consumption, investment, and exports—a pace that places Paraguay at the top end of the regional growth table.
The third quarter of 2025 delivered a particularly strong print, with the economy expanding 6.6% year-on-year compared to 3.6% in the same period a year earlier. Agriculture surged 9.5%, manufacturing rose 7.4%, and the electricity and water sector climbed 8.3%, reflecting broad-based momentum rather than a single-sector story.
Gross fixed capital formation, a proxy for business investment, jumped 12.7% in the first quarter of 2025 alone, marking six consecutive quarters of positive growth. Moody’s explicitly ties this investment cycle to large-scale foreign direct investment projects in forestry and manufacturing, which it views as structural anchors for medium-term expansion.
The Fiscal Anchor Behind the Paraguay Investment-Grade Rating
Credit analysts care as much about the balance sheet as the growth headline, and here Paraguay delivers a rare combination of discipline and low leverage. The government recorded a monthly fiscal surplus of 0.2% of GDP in May 2025, trimming the cumulative deficit to a negligible 0.3% of GDP.
Moody’s considers the country on a credible path to meet its 2025 deficit target of 1.9% of GDP, with further convergence to 1.5% in 2026 under the Fiscal Responsibility Law. Public debt relative to GDP remains well below the median of other Baa3-rated sovereigns, and the government is actively reducing the share of foreign-currency obligations to limit exchange-rate vulnerability.
For international bond investors, this translates into a low-debt, fiscally conservative issuer in a neighbourhood where such traits are scarce. The stable outlook signals that Moody’s sees no near-term risk of erosion in these fundamentals.
Double Investment Grade and the S&P Upgrade
Paraguay’s credit story gained additional firepower in December 2025 when S&P Global Ratings lifted the sovereign to BBB- with a stable outlook, conferring a second investment-grade designation. S&P cited expected investment growth of 17% for the year and a trajectory that would see investment reach 27% of GDP during the 2026–2028 period, up from an average of 24% in the prior three years.
The double investment-grade status matters because many global institutional investors require ratings from at least two major agencies before allocating capital to a jurisdiction. Fitch Ratings still holds Paraguay at BB+, one notch below investment grade, but raised its outlook to positive in October 2025, suggesting a third IG designation could be on the horizon.
President Santiago Peña, who took office in August 2023, has publicly framed the rating affirmations as validation of his administration’s economic stewardship. The political stability underpinning this narrative is itself a factor cited by both Moody’s and S&P in their assessments.
What the Paraguay Investment-Grade Rating Means for Investors and Expats
For portfolio managers and direct investors, the rating trajectory lowers the perceived risk premium on Paraguayan assets. Sovereign bonds benefit from inclusion in investment-grade indices, while corporate borrowers in Asunción can access cheaper cross-border financing on the back of the sovereign ceiling, which Moody’s sets at A3 for foreign-currency debt.
The real-economy read-through is equally tangible. S&P’s projection of GDP per capita rising to roughly $9,000 by 2027, from under $7,000 in 2024, signals expanding domestic purchasing power and a deepening consumer market—factors that matter to anyone considering a business footprint or a residential move to Paraguay.
For expatriates already on the ground or contemplating relocation, the stable macro backdrop supports property values, banking-system reliability, and the general predictability of daily economic life. Paraguay’s low cost of living and favourable tax regime have long attracted frontier-minded foreigners; the investment-grade stamp adds a layer of institutional credibility that was missing a decade ago.
The Regional Lens: A Quiet Macro Winner
Latin America’s sovereign credit landscape has been marked by fiscal stress, political volatility, and post-pandemic scarring. In that context, Paraguay’s trajectory stands out not for dramatic reform announcements but for steady, technocratic execution that has delivered results.
The country has achieved what many larger economies in the region have not: a quiet accumulation of credibility that is now priced into its sovereign debt and increasingly into its broader investment narrative. The challenge ahead is to maintain that discipline as global interest rates shift and commodity cycles turn.
With Fitch potentially joining Moody’s and S&P in awarding investment grade, and with FDI continuing to flow into forestry and manufacturing, Paraguay is positioned to remain a talking point for Latin America investors well beyond 2026.
Frequently Asked Questions
What is Paraguay’s current Moody’s sovereign rating?
Moody’s rates Paraguay at Baa3 with a stable outlook, its lowest investment-grade tier. The rating was first awarded on 26 July 2024 and has been affirmed without change through the latest credit opinion dated 23 January 2026, marking three consecutive years at investment grade.
How does Paraguay’s credit rating compare to other Latin American countries?
Paraguay is one of only a handful of Latin American sovereigns to hold investment-grade ratings from two major agencies, alongside Chile, Mexico, Uruguay, and Colombia. S&P Global Ratings upgraded Paraguay to BBB- in December 2025, while Fitch Ratings maintains a BB+ rating with a positive outlook, one notch below investment grade.
What economic factors support Paraguay’s investment-grade rating?
Moody’s cites sustained economic growth of 5.8% in 2025, a low debt-to-GDP ratio well below the median of Baa3-rated peers, and a credible fiscal path toward a deficit of 1.5% of GDP by 2026. Large-scale foreign direct investment in forestry and manufacturing, along with six consecutive quarters of rising gross fixed capital formation, further underpin the stable outlook.
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