Paraguay - Economic development

To a considerable extent, Paraguay has a government-controlled economy; government agencies fix prices, control distribution, regulate production and exportation, and exercise monopolistic rights over much of the economy. In recent decades, and particularly since the International Monetary Fund (IMF) stabilization program went into effect in the late 1950s, some controls have been loosened. In the wake of the free-exchange system have come moves to eliminate government subsidies, such as that for wheat. In agriculture there is an annual plan for acreage quotas, but the principal problem has been one of meeting the quotas rather than of the surpluses. The establishment of the National Development Bank created a source of medium- and long-term credits favorable to agriculture and industry. Price controls and marketing quotas are particularly significant to the cattle industry. Paraguay has sought to develop closer economic ties with Brazil, the United States, and Western European nations, largely to reduce the country's dependence on trade with Argentina.

Economic planning is the responsibility of the Technical Planning Secretariat for Economic and Social Development, established in 1962. The first national plan covered 1965–66; the second, 1967–68. The third plan, a medium-term, five-year program for 1969–73, was replaced by a 1972–77 development scheme calling for a 26% increase in public investment in agriculture. Regional development, also given high priority, was to be accomplished through Paraguay's utilization of its water resources in the Itaipú hydroelectric project; a parallel development program for the Alto Paraná region was retarded by delays in the Yacyretá power project. The 1977–81 development plan aimed to achieve a more equitable distribution of social resources. A plan announced in September 1986 provided for comprehensive reform in exchange rates and in investment and fiscal policies. Government economic reforms during the 1990s were generally subsumed by opposition parties. Reforms in 1999 centered on a diversification of the economy, away from the reexportation business, and on fighting corruption, which the government's Comptroller office estimated to have cost $2.3 billion in 1997.

Foreign debt rose in early 2003 to $2.28 billion, inflation rose to 14.6%, and the currency lost over 50% of its value against the US dollar in 2002. In the early 2000s, the country's economy was marked by slow economic growth, increasing unemployment, and rising poverty rates. Paraguay was in arrears with the World Bank and the Inter-American Development Bank in 2003. The IMF that year encouraged the country to revive its privatization program and to strengthen the banking system.