Paraguay President Seeks 8% Growth on Investment SurgeJose Enrique Arrioja and John Quigley
Paraguay President Horacio Cartes said he will seek annual economic growth of as much as 8 percent on a sustained basis by boosting infrastructure and agriculture investments in one of Latin America’s poorest countries.
Cartes, a former tobacco magnate who took office Aug. 15, said he wants $2.5 billion annually in public and private investment to boost the land-locked nation’s $26 billion economy. The world’s fourth-largest soybean exporter, Paraguay is seeking private investment in irrigation, ports, airports and highways, while the government will target health, education and rural roads, he said in an interview.
“We prefer to have a target of 7 to 8 percent growth, on a permanent basis,” Cartes said yesterday in New York, where he is attending the United Nations General Assembly meeting. “It’s almost an obsession. We are confident we can have a good pace of expansion,” he added, while declining to offer a growth target for 2013 and 2014.
Paraguay’s economy will expand 11 percent this year thanks to “excellent” agricultural yields, the International Monetary Fund said in June, after contracting more than 1 percent in 2012. Growth is expected to slow to 4.6 percent next year, the IMF said.
In his first month in office, Cartes imposed a tax on commodities including soybeans, corn, wheat and sunflowers which Finance Minister German Rojas said is expected to generate about $250 million annually by 2015.
Debut Bond Sale
The poorest member of the Mercosur trade bloc with Argentina, Brazil, Uruguay and Venezuela, Paraguay sold $500 million of 10-year bonds to yield 4.625 percent in January in a transaction that marked the country’s debut in the international bond market.
Paraguay’s bonds have lost 7.3 percent since Jan. 21, compared with a 6.9 percent decline in Latin American dollar debt, according to JPMorgan Chase & Co. indexes. The country is rated BB- by Standard & Poor’s, putting it in the same category as Angola and Vietnam.
The government can tap unused credit lines with multilateral banks to finance infrastructure plans, Cartes said, ruling out more bond sales this year. Under a law passed in 2012, the government must earmark over 80 percent of the revenue generated by hydroelectric energy sales to Brazil from the Itaipu dam to infrastructure and education. That totaled about $550 million last year, according to the United Nations.
Cartes also said he wants to improve the investment climate in Paraguay, which ranked 103rd out of 185 economies in the World Bank’s annual “Ease of Doing Business” report.
“We need to create a country in which it is easy to invest, easy to move money, with all the controls, where bureaucracy will not be a big hurdle,” Cartes said. “We want to modernize.”