Paraguay should expedite its economic production diversification

RIO DE JANEIRO, BRAZIL – Among these unfavorable phenomena, the positive aspect could be the increase in the end prices of grains due to the lower expected supply, as the reduction will affect the main producers in this part of the continent, such as Brazil and Argentina, as well as Paraguay.

The various sectors active in the country’s economy estimate that this year the gross domestic product (GDP) will grow by only 3.7%, a slight decrease from the 4% previously expected.

This was stated by spokespersons of the Central Bank of Paraguay (BCP) last week when releasing the results of the Expectations of Economic Variables survey conducted in January to the main agents of the Paraguayan economy.

The reduction reflects the impact on the economy of the drought affecting rural production and its consequences in several sectors.

It is a fact that soybean production will decrease significantly, which according to production associations could reach up to 50% in some locations.

However, there are also some more optimistic forecasts, such as that of the United States Department of Agriculture (USDA), which in its latest report projected a decrease of 1.5 million tons in soybean production for Paraguay in the 2021-22 season compared to its previous report. The U.S. agency estimates a production of 8.5 million tons instead of 10 million for the current crop. This represents a 15% reduction in the harvest of the most important product in domestic agriculture.

Although it is too early for a final estimate, specialists estimate that this year soybeans will cost more and could reach around US$500 per ton instead of the average of US$400 paid in 2021.

They state that the lower supply of grains could lead to higher international prices, potentially offsetting the loss due to the lower harvest.

Former Finance Minister Santiago Peña pointed out that this is the worst moment for agriculture due to the extreme drought affecting the country, which will make this a difficult year for Paraguayans. He added that the outlook is not encouraging. However, he argued that the situation cannot be entirely blamed on the weather, since the lack of clarity in economic management has repercussions on people’s economic situation.

Faced with such prospects, it is important to focus on diversifying the country’s economic activity, which cannot depend so much on agriculture and livestock, while articulating a dynamic industrial process. Paraguay should not be overly dependent on agriculture and livestock and should be able to achieve more secure growth in other areas.

The critical situation caused by negative climatic phenomena should draw attention to the need to diversify production. It is unwise to depend too heavily on a single sector that is largely subject to climatic factors which are becoming increasingly challenging.

This is one of the main challenges that Paraguay faces, which must consider other alternatives and begin to design a nation with more industries. One of Paraguay’s strengths is its large production of electric energy that it does not fully use and exports to neighboring countries at a very low price.

It should use it for industries to process raw materials. It should cease to export products with no added value, but instead items produced in its plants that create jobs and distribute benefits to many.