2018 Index of Economic Freedom


overall score62.1
world rank82
Rule of Law

Property Rights38.3

Government Integrity28.3

Judicial Effectiveness28.2

Government Size

Government Spending82.2

Tax Burden96.1

Fiscal Health97.1

Regulatory Efficiency

Business Freedom62.2

Labor Freedom29.9

Monetary Freedom72.4

Open Markets

Trade Freedom76.1

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 6.9 million
  • GDP (PPP):
    • $64.4 billion
    • 3.0% growth
    • 4.9% 5-year compound annual growth
    • $9,396 per capita
  • Unemployment:
    • 5.4%
  • Inflation (CPI):
    • 4.1%
  • FDI Inflow:
    • $273.6 million
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Paraguay’s economic freedom score is 62.1, making its economy the 82nd freest in the 2018 Index. Its overall score has decreased by 0.3 point, with moderately lower scores for monetary freedom and government integrity outweighing improvements in judicial effectiveness and fiscal health. Paraguay is ranked 17th among 32 countries in the Americas region, and its overall score is above the regional and world averages.

The government of Paraguay plans to attract investment by improving infrastructure, reforming the inefficient public sector, and increasing private participation in state-run enterprises. Investment projects have faced resistance from unions, the leftist opposition, and some traditional elements of the Colorado Party. The agriculture, retail, and construction sectors continue to be driving forces for economic growth. 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.



Paraguay was established in the 19th century, along with Bolivia and Uruguay, as a buffer between regional powers Brazil and Argentina. It is one of the world’s largest producers of hydroelectricity, one-quarter of which is generated by one of the world’s largest dams, the Itaipú dam, jointly owned and operated by the Paraguayan and Brazilian governments. President Horacio Cartes of the historically dominant Colorado Party will complete his five-year term in 2018, an attempt to amend the constitution to permit him to run for reelection in 2018 having failed. Economic growth depends on exports of electricity and soybeans. Attempts to reduce smuggling and scrutinize suspected terrorist groups in the tri-border area with Brazil and Argentina have not been very successful.

Rule of LawView Methodology

Property Rights 38.3 Create a Graph using this measurement

Government Integrity 28.3 Create a Graph using this measurement

Judicial Effectiveness 28.2 Create a Graph using this measurement

Historically, private property has been respected in Paraguay as a fundamental right, but a lack of consistent property surveys and registries often makes it difficult to acquire title documents for land. External influences often compromise the judiciary’s nominal independence. Cases languish for years in the court system without resolution. Corruption remains widespread in all branches and at all levels of government.

Government SizeView Methodology

The top personal income and corporate tax rates are 10 percent. Other taxes include value-added and property taxes. The overall tax burden equals 13.8 percent of total domestic income. Over the past three years, government spending has amounted to 24.4 percent of total output (GDP), and budget deficits have averaged 1.0 percent of GDP. Public debt is equivalent to 24.7 percent of GDP.

Regulatory EfficiencyView Methodology

Business freedom in Paraguay compares favorably with business freedom in Brazil or Argentina, but the overall regulatory environment does little to inspire or facilitate entrepreneurial activity. Labor regulations are outmoded and restrictive. The government subsidizes a wide variety of large state-owned entities and controls electricity tariffs.

Open MarketsView Methodology

Trade is significant for Paraguay’s economy; the combined value of exports and imports equals 82 percent of GDP. The average applied tariff rate is 4.4 percent. Nontariff barriers impede trade. In general, government policies do not significantly interfere with foreign investment. However, the investment regime lacks efficiency, mainly because of government bureaucracy. The level of financial intermediation has been improving gradually.

Country's Score Over Time

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Regional Ranking

rank country overall change
2United States75.70.6
4Uruguay 69.2-0.5
5Jamaica 69.1-0.4
8Saint Vincent and the Grenadines67.72.5
9Saint Lucia67.62.6
10Panama 670.7
11Costa Rica 65.60.6
14Guatemala 63.40.4
15The Bahamas63.32.2
16El Salvador 63.2-0.9
17Paraguay 62.1-0.3
18Dominican Republic61.6-1.3
19Honduras 60.61.8
20Nicaragua 58.9-0.3
22Trinidad and Tobago57.7-3.5
32Venezuela 25.2-1.8
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