Paraguay ‘took off’ from Brazil and contained economic damage from pandemic – Paraguayan Finance Minister

RIO DE JANEIRO, BRAZIL – Paraguay’s economy shrank the least in Latin America in 2020; BBC News Brazil spoke with Paraguay’s Finance Minister Oscar Llamosas Díaz, who said the nation has achieved “a detachment from its neighbors.”

The coronavirus pandemic has caused the largest drop in Latin American economies in 120 years, according to recent data from the Economic Commission for Latin America and the Caribbean (ECLAC).

On average, says the organization, the retraction was 7.7%, and the recovery of about 3.7%, expected this year, will not be enough to return the region to pre-pandemic economic levels.

In the first year of the pandemic, 2020, Brazil’s economy contracted by 4.1%, according to a survey by the International Monetary Fund (IMF). But despite its historic link to the Brazilian market, Paraguay registered a much smaller retraction: 0.6%, according to official data.

It was the economy with the smallest decline among Latin American countries, ECLAC pointed out. For comparison, Argentina’s economy shrank by 10.5%, Uruguay’s by 5.9%, and Peru’s by more than 11%.

In other times, say Paraguayan analysts, the behavior of the Brazilian economy – and also of Argentina – would have influenced Paraguay’s performance.

However, during the pandemic, Paraguay “detached” itself from the economy of Brazil and the region, says Paraguayan Finance Minister Oscar Llamosas Díaz, in an interview with BBC News Brazil.

The Paraguayan economy is expected to register a growth rate of 4% in 2021, he said. He pointed out, however, that there are sectors of the country that continue to depend on its neighbors.

“These are the cases of the trades on the borders with Argentina, which are closed (by Argentine determination), and with Brazil that despite the reopening of the borders, registers a drop in movement,” he said.

In “macro” terms, however, Paraguay “has achieved this detachment from its neighbors, to a large extent. Last year, at the very beginning of the pandemic, Paraguay closed its borders with Brazil and Argentina. But the measure is not to be resumed,” the minister said.

“We have learned many things in the last year and one of them is that today the virus, sooner or later, enters our countries. What we wanted last year was to buy time to strengthen the health system,” said economist Llamosas Díaz.

According to international organizations, as in other countries, the stimulus measures, including social plans for the most vulnerable and fiscal plans in the services and business fields, among others, have contributed to mitigate the negative impact of the pandemic.

He recognizes, however, that the scenario is one of “uncertainties” and that the results of 2021 will depend on the pandemic, since public hospitals register practically full occupation of beds and vaccine doses arrive slowly.

“The government sent an emergency law to the Congress to strengthen the sanitary system, a sector that was abandoned for years, and we tripled the total number of beds. But still today the sanitary system is working practically at its maximum level,” he said.

Help from the State

With almost 70% of its population in the informal economy, the government chose, in the first moment of the pandemic, to distribute aid to all people over 18 who are informal workers or elderly people without resources.

To prevent lines from forming, said the minister, the program named in Guaraní Pytyvõ (help/help) was implemented, which consists in delivering resources through cell phones or, in the case of those who don’t have a cell phone or computer, using their ID to buy food and medicine, for example.

“At first, we reached seven out of ten workers. Today, this help is more focused. But we are maintaining support, for example, for the businesses at the border, which are feeling the impact of the restrictions very strongly. But if the pandemic situation worsens, we will have to help the different sectors again”, he said.

He recalled that Paraguay has a Fiscal Responsibility Law that had initial targets not met in 2020 and this year due to the need for resources in the pandemic.

In 2010, he recalled, Paraguay had about 39% poor, and almost ten years later, in 2019, this rate was about 23%.

“With the pandemic, poverty rose to 26%, but without the provisional or permanent aid that the government distributes, it would have been around 29%,” he said. The high rate had been falling, following eight straight months of economic expansion, when the pandemic broke out.

A country of about 7.3 million inhabitants that shares the Itaipu hydroelectric plant with Brazil and the Yacyretá hydroelectric plant with Argentina, Paraguay has three fundamental engines for its economy – farming, ranching, and public works.

These sectors, due to their international (agribusiness) and internal (public works) dynamics, do not depend on the performance of the economies of Brazil or other neighbors. “These were fundamental pillars for our economy last year, a pandemic year,” said the minister.

Paraguay is among the largest producers and exporters of soybeans in the world, and among its customers for the meat it produces are Chile, Taiwan and Israel. It was in the commodities cycle, between about 2000 and 2014, that Paraguay strengthened its “economic independence from Brazil,” analysts say.

Source: G1