Paraguay's 6.6% growth masks a fiscal crisis and collapsing consumer purchasing power.

The International Monetary Fund this week adjusted its growth forecast for Paraguay to 4.4% for 2025, but it was the gap between that number and the reality lived by consumers at the Mercado Abasto that set the most revealing tone in Paraguay's economic debate: while the Central Bank reports deflation and President Santiago Peña's government celebrates a first quarter that grew 5.8% — and a 2024 that closed with 6.6% expansion — shoppers at the popular markets insist that "hepy eterei está todo," meaning that everything is expensive. That fissure between the macroeconomy and everyday perception concentrates today the most significant tension in the local economic landscape, and several of the data points circulating this week illuminate it from different angles.

President Peña's annual report, delivered in recent hours to Congress and the business community, was celebrated and questioned in parallel. The president highlighted progress on the electrical grid, investment volumes and poverty reduction, and invoked the IMF's recognition of the country's soundness. Business leaders from the construction sector and from micro, small and medium-sized enterprises responded politely but without ambiguity: they value the macro indicators, but demand faster structural reforms, resolution of a debt to contractors that according to ABC Color exceeds 340 million dollars and that the government has begun to pay in installments — the Ministry of Economy disbursed roughly 66 million dollars to suppliers this week — and urgent action against the bureaucracy and legal uncertainty that hold back private investment. The Capaco chamber was even more direct: Paraguay needs to triple its infrastructure investment.

That mismatch between the official narrative and the productive sector's urgencies has a fiscal layer that the government preferred not to display in its presentation. Analysts note that Peña failed to mention the fiscal deficit or the so-called "war economy" that has eroded household purchasing power. The Caja Fiscal accumulated a 182-million-dollar deficit in the first five months of the year, interest payments on public debt grew between 12.9% and 16.8% depending on the measure, and the State is arranging new external loans exceeding 1.6 billion dollars while having executed only 34.3% of already-contracted bilateral loans, leaving 396 million unused. An economist consulted by ABC Color was blunt: the cost of missing the fiscal target is far higher than that of allowing an eventual depreciation of the guaraní, a signal that pressures on the exchange rate are far from resolved.

The credit market adds another angle of alarm. Consumer credit now accounts for 20% of the total banking portfolio, a milestone that some read as a sign of economic vitality — GDP expansion sustaining stronger household confidence — but that a former minister expressly labeled a "warning signal." Rates in guaraníes rose while those denominated in foreign currency fell, suggesting that partial dollarization of credit is gaining ground just as the guaraní faces pressure. Three out of every four workers in the poorest decile do not earn the minimum wage, and effective coverage of that minimum wage reaches barely 17.7% of the labor force, according to ABC Color figures. The recent minimum wage adjustment, resisted by employers — Asimcopar warned that increases without technical criteria hold back investment — could generate additional pressure on prices and informality without resolving the underlying structural problem.

On the external front, Paraguay this week completed its first shipment of chicken meat to Taiwan, a relevant market opening for the poultry sector. In parallel, the government is pushing in the Mercosur-European Union negotiations to secure equitable access quotas, a demand that gains urgency amid expectations that the agreement, once ratified, will reshape regional trade flows. In the energy sector, Itaipú closed the gates of its spillway after a week of opening, while advancing certification of its first green hydrogen production unit, a project that ties the binational to the global energy transition agenda. Australian-origin firm Atome, for its part, continues to seek a solution with ANDE to unblock its plans in that same space, while the state utility suspended a 6.4-million-dollar tender for a solar plant — another sign of the bureaucratic hurdles businesses point to.

The second half of the year is shaping up, in technical terms, more favorably than the first, with the soybean complex contributing 2.492 billion dollars through May and the services and energy sectors adding momentum. The World Bank ranks Paraguay as the second-fastest-growing economy in the region in 2025. But what investors should watch closely in the coming weeks is the reform of the Caja Fiscal — which Congress could pass with modifications this week according to statements by Senate leader Blanca Alliana — the evolution of the exchange rate, and whether new Economy Minister Óscar Lovera manages to put together a payment plan for suppliers that clears the risk of paralysis in the construction sector. The IMF, which alongside its projections urged the government to deepen labor formalization and expand social protection, made clear that the growth Paraguay shows in the headlines is not yet reaching, with the same force, those who need it most.

**Atome Energy (LSE: ATOM)** — The Australian company listed in London reiterated its willingness to reach a "mutually acceptable solution" with ANDE to move forward with its green hydrogen project in Paraguay, without disclosing timelines or concrete terms of the negotiation. The dispute with the state electricity distributor is holding up an investment with export potential to European and Asian markets.

**Itaipú Binacional** — The Paraguayan-Brazilian hydroelectric plant closed the gates of its spillway after a week of opening due to high water levels, and is advancing certification of its first clean green hydrogen production unit. The move positions Itaipú as an emerging player in the global clean energy chain, at a moment when institutional demand for certified hydrogen is growing in Europe and Asia.