Paraguay's energy surplus becomes deficit within three years, rattling growth story.

The energy crisis looming over Paraguay in less than three years now represents the country's most pressing strategic concern, overshadowing even the growth figures that Santiago Peña's administration has legitimate reasons to celebrate. Private-sector voices warn that the energy Paraguay long considered virtually inexhaustible—thanks to its privileged position as co-owner of the world's two largest hydroelectric dams—could run short for domestic consumption within a horizon of just thirty-six months unless the energy market is opened to private investment. At the same time, business associations have called for a national mobilization against power outages and the subsidies granted to cryptomining companies, an industry with intensive electricity consumption that has fueled an increasingly heated political and social debate. The Administración Nacional de Electricidad, meanwhile, has signaled that it will announce a tariff adjustment in the coming months, adding pressure on households and businesses at a time when falling inflation supports consumption but the quality of public spending remains under scrutiny.

This tension between an expanding economy and infrastructure threatening to become a bottleneck neatly captures Paraguay's structural dilemma. According to the Banco Central del Paraguay, GDP grew 6.6% in 2025 under the so-called "war economy," a fiscal austerity framework that President Peña highlighted in his state-of-the-nation address but which, according to ABC Color, omitted mention of both that concept and the fiscal deficit, whose very existence remains a matter of political dispute. Market participants, however, are more upbeat: private expectations surveys point to growth of around 5% for the current cycle, in line with the revised projection from the International Monetary Fund, which trimmed its Paraguay estimate to 4.4% while emphasizing the country's macroeconomic strength. The IMF also confirmed that Paraguay will grow at nearly double the regional average, a view Moody's had backed by maintaining the sovereign's credit rating. Economic activity accumulated a 5.6% increase through May, driven by services and the agricultural sector, with soybeans as the main engine following a strong harvest.

On the fiscal front, pressure on public accounts persists. Interest payments on public debt grew between 12.9% and 16.8% depending on the measure, while the Ministerio de Economía y Finanzas—the entity that replaced the former Ministerio de Hacienda under the Peña administration—is processing external credits worth more than USD 1.6 billion and is seeking to close a new sovereign bond placement in international markets. More than 90% of outstanding Treasury Bonds are held by the local financial system and the Fondo de Garantía de Depósitos, a concentration that reduces immediate external refinancing risk but constrains development of the domestic capital market. On that front, the modernization of the local stock exchange aims to double its weight in the economy by 2030, an ambitious target for a market that still operates within narrow margins. The 2026 General Budget, for its part, already carries increases of roughly USD 685 million relative to the current fiscal year, a figure analysts read as a signal of pressure on fiscal balance.

Economic diplomacy with Taiwan—Paraguay's sole formal partner at the expense of recognizing Beijing—produced two significant developments this week. The Taiwanese ambassador announced an additional USD 200 million for the Che Róga Porã housing program, while the foreign ministry in Taipei pointed to concrete progress in the process of importing Paraguayan soybeans. The price Taiwanese consumers pay for Paraguayan beef cuts has become a market benchmark, in a context where the cattle sector is preparing to project itself globally as a country brand. In parallel, CAF—the Latin American development bank—announced the expansion of its private financing arm in Paraguay, a move that could diversify capital sources for infrastructure and sustainable production projects at a moment when the Unión Industrial Paraguaya is highlighting green production as a competitive differentiator.

The Paraguay-Paraná waterway adds its own tensions: river-transport associations have warned of a potential tariff increase stemming from the dredging projects currently under tender and have demanded greater transparency in the contracts, a process with direct implications for the cost of grain and beef exports. Itaipú, in addition to cutting USD 38.7 million earmarked for school meals and municipalities—hitting subnational finances that are already reporting a USD 1.6 million drop in royalties—is financing the Bioceanic Route bridge, a project whose cost has escalated significantly according to local press reports. The bridge's budget has climbed notably, in what analysts identify as a recurring pattern in the management of megaprojects funded with resources from the binational entities.

On the regulatory front, the government reduced the mandatory biodiesel blend in diesel fuel, although the Ministerio de Industria y Comercio confirmed that the fuel price increase "cannot be reversed." The Dirección Nacional de Ingresos Tributarios registers 1,315,787 taxpayers, though nearly one in three is listed as temporarily suspended, a gap that illustrates the limits of tax formalization even as the VAT base already exceeds one million active registrations. Óscar Orué has pledged to raise the tax take from 10% to 12% of GDP and generate an additional USD 400 million in annual revenue, a promise that hinges on reducing that high rate of temporary suspensions.

What to watch closely in the coming weeks is the passage of the Caja Fiscal reform—expected to include modifications according to Congress president Silvia Alliana—the announcement of the seven-law economic package the executive is preparing, and above all any concrete signal on opening the energy market, which is shaping up as the most urgent structural decision of the second half of Peña's term. The call for citizen mobilization against power outages adds a layer of political pressure the government cannot afford to ignore.

**CAF – Banco de Desarrollo de América Latina (multilateral institution, not publicly listed)** — The institution announced the expansion of its private-sector financing division in Paraguay, aiming to channel capital toward productive projects and infrastructure in one of South America's fastest-growing markets. The move extends CAF's footprint beyond traditional sovereign lending, in line with the strategy the institution has deployed in Colombia and Peru.

**CIRSA (private company, headquartered in Barcelona, Spain)** — The Spanish gaming and entertainment group has arrived in Paraguay with an investment its executives describe as a vote of confidence in the country's legal certainty, entering a regulated sector that is actively seeking to attract international operators.