2017 Index of Economic Freedom

Paraguay

overall score62.4
world rank80
Rule of Law

Property Rights38.2

Government Integrity32.6

Judicial Effectiveness23.3

Government Size

Government Spending83.0

Tax Burden96.2

Fiscal Health95.1

Regulatory Efficiency

Business Freedom62.4

Labor Freedom28.5

Monetary Freedom78.3

Open Markets

Trade Freedom76.6

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 7.0 million
  • GDP (PPP):
    • $61.0 billion
    • 3.0% growth
    • 5.0% 5-year compound annual growth
    • $8,708 per capita
  • Unemployment:
    • 4.9%
  • Inflation (CPI):
    • 2.9%
  • FDI Inflow:
    • $282.7 million
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The agriculture, retail, and construction sectors continue to be driving forces for economic growth in Paraguay. One of the region’s lowest tax burdens enhances competitiveness. However, the informal economy remains large, and private-sector growth is hindered by institutional weaknesses that undermine the rule of law. Foreign investment is not subject to screening, and foreign entities are permitted to own property.

Despite some improvement, a persistent lack of transparency at all levels of government hurts investor confidence and slows the emergence of a broader-based private sector. State-owned enterprises are present in several sectors of the economy, and most operate as monopolies.

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Background

Paraguay is a major producer of hydroelectricity, and the Itaipú dam on the Paraná River is the world’s largest generator of renewable energy. President Horacio Cartes of the historically dominant Colorado Party was elected to a five-year term in 2013. He has made progress in public-sector reform and has increased investment in infrastructure, but conservative factions within his party are expected to oppose his plans for further structural reforms and are likely to challenge any attempt to reelect him in 2018. Economic growth depends heavily on exports of electricity and soybeans. Attempts to reduce smuggling and counter suspected terrorist groups in the triborder area with Brazil and Argentina have not been successful.

Rule of LawView Methodology

Property Rights 38.2 Create a Graph using this measurement

Government Integrity 32.6 Create a Graph using this measurement

Judicial Effectiveness 23.3 Create a Graph using this measurement

A lack of consistent property surveys and registries often makes it difficult to acquire title documents for land. Cases languish for years in the court system without resolution, and offenses often go unpunished due to political influence in the judiciary. Corruption is widespread. Officials at all levels of government, the judiciary, and the police frequently engage in corrupt practices with impunity, particularly in the Ciudad del Este area.

Government SizeView Methodology

The top personal income and corporate tax rates are 10 percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 13.5 percent of total domestic income. Government spending has amounted to 23.8 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.5 percent of GDP. Public debt is equivalent to 23.8 percent of GDP.

Regulatory EfficiencyView Methodology

The overall regulatory framework remains less than fully conducive to more dynamic entrepreneurial investment and production. Labor regulations are outmoded and restrictive. The government subsidizes major state-owned entities performing a wide range of activities, from public utilities to commercial activities, that include fuel importation and distribution, telecommunications, and the production of alcoholic beverages and cement.

Open MarketsView Methodology

Trade is important to Paraguay’s economy; the value of exports and imports taken together equals 82 percent of GDP. The average applied tariff rate is 4.2 percent. In general, foreign and domestic investors are treated equally under the law. State-owned enterprises distort the economy. Financial intermediation has gradually been improving as credit to the private sector has grown and the number of nonperforming loans has declined.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada78.50.5
2Chile76.5-1.2
3United States75.1-0.3
4Colombia69.7-1.1
5Uruguay 69.70.9
6Jamaica 69.52.0
7Peru68.91.5
8Panama 66.31.5
9Saint Vincent and the Grenadines65.2-3.6
10Saint Lucia65-5.0
11Costa Rica 65-2.4
12El Salvador 64.1-1.0
13Dominica63.7-3.3
14Mexico63.6-1.6
15Guatemala 631.2
16Dominican Republic62.91.9
17Paraguay 62.40.9
18Trinidad and Tobago61.2-1.7
19The Bahamas61.1-9.8
20Nicaragua 59.20.6
21Honduras 58.81.1
22Belize58.61.2
23Guyana58.53.1
24Barbados54.5-13.8
25Brazil52.9-3.6
26Argentina50.46.6
27Haiti49.6-1.7
28Ecuador49.30.7
29Suriname48-5.8
30Bolivia47.70.3
31Cuba33.94.1
32Venezuela 27-6.7
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