Paraguay Leads South America Growth in 2026; US Deportees Arrive

A country most international investors do not follow closely is about to outperform every other economy in South America in 2026 — and is simultaneously becoming the most reliable regional partner Washington has. The combination is deliberate.

The Rio Times, the Latin American financial news outlet, reports that Paraguay growth for 2026 will lead South America by a wide margin. The World Bank’s April 2026 Latin America and the Caribbean Economic Update identified Paraguay as “one of the region’s fastest growing economies,” citing “strong agricultural exports and a stable macro framework.”

The IMF’s latest World Economic Outlook puts the projection at 3.8% for 2026, more than double the South American regional average of 1.8%. Paraguay’s own Central Bank, headed by Carlos Carvallo, forecasts 4.2%. Either way, the country is outperforming Brazil, Argentina, Peru, Chile, and Colombia on headline growth — and it is doing so without a commodities boom.

Why the Paraguay growth story is different this cycle

President Santiago Peña, a 45-year-old former IMF economist who took office in August 2023 on the Colorado party ticket, has been explicit about the comparison. “Paraguay now boasts the highest growth rate in South America. Paraguay continues to thrive in a region that isn’t growing,” he said.

The 2006-2008 Paraguay boom had coincided with high commodity prices across the region, and Paraguay at the time grew alongside — but below — many Latin American peers. The current cycle is the opposite. Soy prices are weaker, the global commodities context is not favourable, and Paraguay is nevertheless outgrowing its neighbours.

Standard & Poor’s confirmed the read in late 2025 when it upgraded Paraguay to investment grade, citing fiscal discipline and macro stability. Moody’s had already granted investment grade in July 2024, and Fitch followed.

Paraguay became the only landlocked South American country with three investment-grade ratings from major agencies.

The fiscal numbers support the ratings. The central government’s fiscal deficit returns to its legal ceiling of 1.5% of GDP beginning in 2026. Public debt is forecast to decline to 39.2% of GDP by 2027.

What Paraguay growth translates to in income terms

Paraguay’s nominal GDP reaches US$60.5 billion in 2026 according to the IMF. For a population of 7.1 million, GDP per capita climbs from US$7,692 in 2025 to US$9,372 in 2026 — an increase of 21.8% in a single year in current-dollar terms.

The caveat is equally clear. Paraguay remains well below Uruguay, Chile, and Argentina on GDP per capita, and percentage leadership over long periods partly reflects starting from a smaller base. International Monetary Fund “Selected Issues” analysis has linked the post-2000s growth pickup to rebound dynamics after the late-1990s turmoil, a favourable external backdrop, and specific policy improvements rather than to any sustained productivity miracle.

Still, the trajectory is unusual. Paraguay is in advanced OECD accession talks, with the target of joining the organisation before the end of Peña’s current term in 2028. That would make it the third OECD member from Latin America after Mexico, Chile, Colombia, and Costa Rica.

The US cooperation track that lands on the same week

On Thursday April 23, Paraguay received its first deportation flight from the United States under the migration cooperation agreement signed in August 2025. The initial group of 25 Spanish-speaking migrants were not Paraguayan citizens — they were third-country nationals expelled from the US under the Trump administration’s mass deportation programme.

Paraguay’s Foreign Ministry framed the decision in sovereignty terms. “Each case has been evaluated individually, in full respect of national sovereignty, immigration laws, and international law,” the Ministry said in a statement. The underlying MOU, between the US Departments of Homeland Security and State and the Paraguayan National Commission for Stateless Persons and Refugees, was published in the US Federal Register in December 2025.

The migration agreement is the visible layer. The deeper layer is defence.

On December 15, 2025, Paraguay signed a framework agreement for US military presence on its territory. On March 11, 2026, the Paraguayan Chamber of Deputies approved a defence agreement permitting temporary US military and civilian personnel inside the country’s borders.

And last October, Paraguay repealed its visa-free entry for Venezuelans, citing “security reasons” after the US strikes in Venezuela that preceded Nicolás Maduro’s removal on January 3. That was not a macro decision. It was a geopolitical one.

Why Washington’s attention is rational

The US deployed diplomatic and economic capital on Paraguay for concrete reasons. The country borders Brazil, Argentina, and Bolivia — three of the four largest economies in South America — and has increasingly been used by Chinese-linked actors as a tri-border commercial gateway. A US-cooperative Paraguay is a check on that.

Paraguay is also one of the very few countries that maintains diplomatic relations with Taiwan rather than with the People’s Republic of China. That choice gives Washington unusual leverage in trade and technology discussions. Peña has been publicly consistent in defending the Taiwan relationship despite commercial pressure.

The result is a small country with an oversized geopolitical profile. Peña’s government combines conservative economic management, closer alignment with the Trump administration than almost any other elected government in the region, and a growth trajectory that makes the alignment look like reward rather than concession.

What to watch in Paraguay growth and US policy

Three variables will define the Paraguay story over the next twelve months. The first is soy.

Paraguay’s top export remains dependent on global soy prices and on the waterways that move grain to export terminals. A sustained price decline or another drought cycle reaches the growth headline directly.

The second is OECD accession. A confirmed accession before 2028 would anchor the investment-grade story and unlock European institutional allocations that currently skip the country.

The third is how much broader the US cooperation track gets. A single deportation flight is symbolic. A recurring monthly schedule, a sustained US military rotational presence, and Peña’s public positioning on Venezuela, Cuba, and Taiwan together define whether Paraguay becomes Washington’s central regional partner or remains a useful but secondary one.

For investors and chancelleries tracking Latin America, Paraguay is the quiet outlier that is no longer quiet. Its macro numbers beat the region, and its ratings match or exceed most of its neighbours.

Its government has chosen the most pro-Washington posture in South America, and Washington is visibly reciprocating. That combination — positive macro with aligned geopolitics — is currently unique in the region.

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