Strong guaraní currency erodes Paraguay's industrial competitiveness despite robust growth.

The guaraní became Latin America's best-performing currency this week, driven by robust foreign exchange inflows from the export sector, and that currency appreciation is generating a tension that cuts across the Paraguayan economy: the very fundamentals that make the macroeconomic indicators shine are beginning to erode the competitiveness of key industrial sectors.

According to ABC Color, the guaraní led regional currencies, and the dollar fell again at the start of the week after having already closed lower the previous week. The currency's strength reflects, in part, the export vigor that the Banco Central del Paraguay (BCP) has been documenting: the economy posted cumulative growth of 5.7% through the end of August and closed 2025 with growth of 6.6%, a figure the BCP itself described under the concept of a "war economy," in reference to the fiscal and monetary discipline applied. The World Bank projects Paraguay will grow 4.7% in 2026, remaining above the regional average, while the IMF also positions the country as one of the most dynamic in the region despite a slower global context.

But the strong guaraní is challenging the motorcycle industry, which, according to ABC Color, is demanding exchange rate predictability given the pressure that appreciation is placing on its margins. It is an illustrative symptom of a structural contradiction that several economists have pointed out this week: Paraguay is growing, but the distribution of that growth and its sustainability face serious questions. An economist cited by ABC Color warned that weaker institutional security reduces the arrival of large investments, while a former minister described the report presented by the BCP to Congress as "kachiãi" and "pererĩ" — Guaraní terms referring to something confusing and inconsistent — warning of a loss of confidence. The head of the Unión Industrial Paraguaya (UIP), for his part, expressed concern that the crisis between the BCP and Ueno Bank could affect the economy and employment.

That banking crisis is, at this moment, the story with the greatest potential for systemic damage. The BCP detected maneuvers by Ueno Bank to conceal links with related companies, and the institution manages more than USD 800 million in public deposits, including Itaipú funds, according to ABC Color. Ueno's stake in "other companies" surged 8,000%, according to the same source, a figure that signals an expansion of related exposures that the regulator had not managed to flag in advance. A meeting convened by President Santiago Peña and the BCP with representatives of the banking system sought to contain uncertainty, although participants revealed a still-incomplete picture of the situation. The Ueno crisis is, in essence, a stress test for Paraguayan financial supervision at a moment when the country is trying to project itself as a regional investment destination.

On the fiscal front, the outlook combines signals of order with structural pressures that specialists consider underestimated. The Ministerio de Economía y Finanzas (MEF) placed PYG 230.527 billion in Treasury Bonds in the local market this week, where the total stock of this instrument now reaches approximately USD 1.2 billion, and paid USD 83 million to suppliers. However, salaries, pensions and debt service represent nearly 70% of public financing, central government wage spending grew 9.9%, and debt interest payments increased 12.9%. Specialists cited by ABC Color warned about deficit, debt and lower public investment in the 2027 Presupuesto General de la Nación (PGN) bill, which this week faces its round of defenses before the Bicameral Commission of Congress. The Universidad Nacional (UNA) requested an additional USD 61 million, and the Ministerio de Obras Públicas (MOPC) was questioned by lawmakers over subsidies, public-private partnership contracts and public works. The MEF projects it will only bring the budget back on track in 2028, after paying accumulated debts, which implies at least two more years of pressure on public accounts.

In the energy sector, Atome notified the termination of its contract with the Administración Nacional de Electricidad (ANDE), although it maintains its international arbitration offensive against the Paraguayan State, a dispute that underscores the legal risks Paraguay faces when investment contracts fail to materialize. In parallel, large energy consumers are demanding clear rules through 2037, a sign that long-term regulatory certainty remains a deficit that discourages larger-scale industrial investments. In Ayolas, Paraná River flooding anticipated by Yacyretá forced an acceleration of agricultural production sales, a reminder that climate and hydrological vulnerability remains an unresolved risk factor for an economy that depends significantly on its primary exports, although the BCP has noted that dependence on soy and beef is gradually being reduced.

On the commercial front, the MIC stated that Paraguay will not accept a distribution of quotas in the Mercosur-European Union agreement that would hold back its development, a stance that reflects Asunción's growing negotiating confidence but also the difficulty of guaranteeing symmetrical conditions for a small economy within a heterogeneous bloc. President Peña also announced the merger of the MIC with the Secretaría Nacional de Turismo (Senatur) and the opening of new credit lines for the productive sector, a move that is part of a series of institutional reforms that began with the creation of the Ministerio de Economía and the merger of the Subsecretaría de Tributación with Customs under the new Dirección Nacional de Ingresos Tributarios (DNIT), whose director promised to raise the tax burden from 10% to 12% and add some USD 400 million in additional annual revenue. The DNIT is also preparing a bill to modify taxes on electric vehicles, in line with the energy transition agenda and with the appeal represented by Paraguayan electricity, the third cheapest in the world at the residential level with a cost of just USD 0.056 per kilowatt-hour.

The coming days will concentrate attention on three simultaneous fronts: the evolution of the Ueno Bank crisis and the measures the BCP adopts to protect public deposits and system stability; the budget debate in Congress, where the tension between rigid current spending and the need for productive public investment will become more visible; and the behavior of the exchange rate, whose appreciation, if consolidated, could begin to affect not only the motorcycle industry but a broader swath of the manufacturing sector that competes with cheaper imports.