Paraguay's 6.6% growth masks fiscal crisis and consumer despair.

The most revealing contradiction defining Paraguay's economy right now isn't any single data point: it's the coexistence of a GDP that the Central Bank projects at 6.6% for 2025 with public debt that grew by $1.498 billion in just six months, a fiscal deficit that a former vice-minister calls the "worst fiscal management since 2003," and consumer confidence sitting squarely in pessimism territory. Growth is real, but its benefits are not reaching the public accounts—or citizens' pockets—at the same pace.

This tension has become the dominant theme as Santiago Peña's government marks three years in office, a period that began with ambitious institutional reforms—the creation of the Ministry of Economy and Finance in August 2023 and the merger of the Undersecretariat of Taxation with Customs into the new Dirección Nacional de Ingresos Tributarios—and now faces its greatest credibility test before the markets. According to ABC Color, economists agree that credibility will be the decisive variable: Paraguay retains its investment grade rating, Treasury bonds in the local market total around $1.2 billion, and the IMF acknowledges the country's macroeconomic strength while warning of growing risks. The government, which is seeking to place new debt through bond issuance—the MEF has already opened the window for receiving creditor bids—needs that credibility to remain intact precisely when fiscal signals are at their most ambiguous.

The budgetary diagnosis is severe. Salaries, retirement benefits, pensions, and debt service account for nearly 70% of the rigidity in the General Budget of the Nation. Wage spending in the central government grew 9.9% and interest payments on public debt rose 12.9%, while the Caja Fiscal deficit through July is already approaching $250 million. A $280 million debt did not appear in the MEF's records, according to statements by former minister César Barreto reported by ABC Color, deepening doubts about the quality of available fiscal information. The government itself acknowledges that a return to the 1.5%-of-GDP deficit ceiling established by the Fiscal Responsibility Law will not happen before 2028—a timeline the former vice-minister cited by ABC Color considers optimistic. The MEF, for its part, rules out new taxes and instead announces a review of tax exemptions, a politically more comfortable measure but one with less immediate yield.

On the currency and monetary front, the guaraní is undergoing an appreciation that analysts describe as "exceptional" relative to its fundamentals. The Central Bank has responded by buying reserves and cutting rates, a combination that seeks to temper the currency's strength without sacrificing the anti-inflationary anchor. This appreciation has a dual reading: it reflects the solidity of foreign exchange flows—the soy complex injected $3.513 billion into the economy through July and remittances from abroad total $732 million annually—but it also compresses export competitiveness at a moment when weather and costs are pressuring the upcoming Mercosur agricultural campaign.

The energy sector concentrates another long-term tension that has now turned urgent. Paraguay has energy supply secured only through 2030, and new power plants will take 10 to 14 years to come online, according to specialists cited by ABC Color. The Corpus Christi dam, planned jointly with Argentina at an estimated investment of $5 billion, is the highest-stakes bet but remains without definitive agreements. Meanwhile, Atome Energy has proposed to ANDE a tiered tariff of up to $37 per megawatt-hour for a solar plant in Villeta—a signal that private interest in renewable energy exists but is still waiting for clear regulatory conditions. State-owned Petropar, for its part, is moving forward with a plan for five aviation fuel plants amid opacity surrounding its private partner, an operation that ABC Color flags as of questionable legitimacy and that illustrates the corporate governance problems still afflicting state-owned enterprises.

On the monetary policy front, President Peña formalized the renewal of Liana Caballero on the board of the Banco Central del Paraguay, a signal of institutional continuity that markets view positively amid fiscal turbulence. The BCP projects the economy will close 2025 with 6.6% growth, driven by agricultural expansion, industry, and private consumption partly financed by an acceleration in credit. Activity accumulated 5.3% expansion in the first five months of the year, and the optimism of economic agents points to annual growth close to 5%, in line with World Bank projections that place Paraguay as the second-fastest-growing economy in the region during 2025.

What remains to be defined in the coming months is whether the pace of growth is enough to stabilize public accounts before markets demand a higher risk premium. The MEF is preparing the 2027 Budget with a comprehensive review of all state programs and priority for health spending, whose accumulated debt—generated by a financing mechanism that the minister himself explained before Congress—was one of the triggers of the current confidence crisis. The Caja Fiscal reform, which according to the president of the Chamber of Deputies Alliana will be passed this week with modifications, will be the first concrete test of whether the government has the political capacity to execute the adjustments that economists consider indispensable. The EU-Mercosur agreement, in which Paraguay is demanding parity in quotas for access to the European market, adds an external variable that could positively influence the diversification of foreign direct investment, whose sectoral composition has been improving according to the MEF. Everything converges toward a second half of the year in which fiscal credibility will be as important as growth for sustaining Paraguay's positioning before international markets.

**Petropar (state-owned, not listed)** — The Paraguayan state oil company is advancing a plan for five aviation fuel plants through a partnership with a private partner whose identity and financial soundness have drawn public scrutiny; ABC Color reports that doubts about the alliance persist even after Petropar disclosed the partner's name. The company also faces questions for keeping consumer fuel prices above international crude quotations in a domestic market lacking effective competition in refining.

**Atome Energy (AIM: ATOM)** — The British renewable energy company submitted to the Administración Nacional de Electricidad (ANDE) a tiered tariff proposal of up to $37 per megawatt-hour for the supply from a solar plant located in Villeta, according to ABC Color. The proposal comes amid a national energy urgency, with Paraguay facing a supply horizon guaranteed only through 2030.