Robust GDP growth masks widening fiscal and institutional cracks in Paraguay.

The guaraní has strengthened once again against the dollar this week, and the explanation offered by the local financial market reveals a structural tension lurking beneath the glow of the growth headlines: Paraguay is posting robust macroeconomic data, but its institutions and public finances are accumulating frictions that could undermine the apparent solidity of the model.

According to economists consulted by ABC Color, the absence of the BCP's liquidity window was a decisive factor in the exchange rate's decline at the start of the week, accelerating a trend that had already been pressuring the greenback. The MEF simultaneously placed PYG 230.527 billion in Treasury Bonds on the local market in an auction where it managed to bring down interest rates, though analysts caution that part of that outcome reflects the smaller volume of debt issued rather than a substantive improvement in sovereign risk perception. Domestic Bonds in circulation already represent 2.45% of GDP and 7.5% of total public debt, while the stock of instruments in the local market reaches approximately USD 1.2 billion — a base the government is looking to expand with new issuances, ABC Color reports.

The macro backdrop surrounding these operations is, on the surface, favorable. The BCP confirmed that the economy grew 6.6% in 2025 and has now strung together twenty-four consecutive months of expansion above 4%, with the first quarter of the current year closing at 5.8% and the first four months running at a 5.1% pace. The IMF, for its part, acknowledged the strength of the Paraguayan model and projects that the country will grow at nearly double the global average, positioning it as one of the regional leaders. Even so, the same institution urged authorities to improve tax efficiency, broaden the tax base and tackle eleven pending tasks ranging from the fiscal deficit to the fight against money laundering — a list that precisely traces the outer limits of the current model.

Those limits are visible in the central government's accounts. Wage spending rose 9.9% year-on-year, interest payments on public debt climbed 12.9%, and former ministers and specialists who took part in the debates on the 2027 General Budget are warning of widening deficits, weaker effective public investment and what former minister Ferreira bluntly termed "financial window-dressing." The PGN 2027 is drawing intense parliamentary scrutiny this week: lawmakers have called MOPC to account over subsidies and public-private partnership contracts, while public debt and the shape of the deficit are being debated. The health sector will receive more resources despite having only limited execution of the 2026 budget, illustrating the gap between allocation and institutional capacity that the IMF has also flagged.

The case of ANDE and Atome fits squarely into this institutional narrative and could escalate into a USD 40 million financial dispute. If Atome fails to meet the commitments set out in the addendum to its contract before September 30, ANDE will demand execution of the guarantee. The absence of official information on the technical meeting held between the two parties only deepens the opacity of the process. This episode connects directly with another warning making the rounds in local business circles: industry associations caution that the so-called "Rivas case" and the institutional failures it exposes could dent the perception of legal security and, through that channel, deter investment.

The energy sector is not the only one accumulating signs of state dysfunction. Petropar is at the center this week of yet another postponement of the tender for the aviation fuel business, while sugarcane growers are demanding solutions from the state-owned company over supply problems, and its "political pricing" is singled out by the private sector as a source of market distortions. The question circulating within the industry is how much longer Petropar can hold prices artificially low in the face of rising international fuel costs.

President Santiago Peña's administration responded with an announcement of deep industrial reforms from the Ministry of Industry and Commerce, which also said it would seek to expand financing for investments in the manufacturing sector. Peña additionally announced credit lines and the merger of the MIC with the National Secretariat of Tourism. DNIT, meanwhile, is preparing a bill to modify taxes on electric vehicles, in line with energy-transition trends that Paraguay cannot afford to ignore.

Remittance flows, which exceed USD 732 million annually according to ABC Color, continue to serve as a meaningful cushion for consumption and the real estate market. Unions, meanwhile, are pushing for a PYG 500,000 increase to the minimum wage, and IPS has yet to approve the aguinaldo payment for retirees and pensioners — a delay that adds social tension to a quarter already loaded with uncertainty.

In the coming weeks, the focal points will be multiple and converging: the outcome of the ANDE-Atome dispute before the September deadline expires, the final approval of the PGN 2027 and the magnitude of the deficit the MEF is prepared to acknowledge, the designation of the new Economy Minister — Peña is weighing five profiles, according to La Nación —, the government's ability to contain the deterioration in monthly economic activity that some indicators are already describing as a sharp downturn, and the monetary authority's response to the appreciation pressure on the guaraní at a time when the Fed is holding rates high, with a direct impact on the cost of Paraguay's external financing. The EU-Mercosur agreement, in which Paraguay is demanding equity in access quotas, adds a long-term commercial dimension that the government will need to manage more proactively if it aspires to translate GDP growth into structural transformation.