Paraguay's robust growth masks silent fiscal crisis as Treasury reserves collapse.

The tension between an economy expanding at an enviable pace by regional standards and public finances quietly deteriorating defines the most revealing moment of Paraguay's current juncture, and today's data crystallizes it with unusual precision.

The Banco Central del Paraguay confirmed that economic activity accumulated growth of 5.7% through August, a figure that positions the country as the fastest-growing economy in Latin America according to the most recent IMF and ECLAC estimates — the latter raising its projection to 4.5% for the full year. J.P. Morgan, for its part, highlighted the guaraní's advance against the dollar, which led appreciations among Latin American currencies on the back of robust export flows. International reserves surpassed $11 billion, up 13.1% so far in 2026, and bank deposits grew 9% as of end-September, according to BCP data. External trade posted a surplus of $712 million in the third quarter, with the soy complex alone generating $2.492 billion in foreign exchange through May. Optimism among surveyed economic agents points to growth close to 5% for the year.

But beneath that shining surface, the state's accounts tell a different story. Caja Fiscal funds have fallen to levels not seen since 2009. Central government wage spending grew 9.9%, while public debt interest payments climbed 12.9%, with salaries, pensions and debt service absorbing nearly 70% of public financing. In a debate among economists reported by ABC Color, it was openly acknowledged that returning to the fiscal deficit ceiling set by law will not be feasible within ten years. The Ministry of Economy and Finance itself opened the door to missing the fiscal cap set for 2028 in what it termed a "risk scenario," though Minister Óscar Lovera — who took part in meetings with the World Bank and the IMF abroad — insisted that fiscal adjustment is only for the public sector, not for the economy as a whole. The bicameral commission reviewing the 2027 General National Budget began its deliberations amid institutional tensions: the national university requested an additional $61 million, and the Executive warned Congress that no funds are available for increases.

The contradiction between robust growth and fiscal fragility is compounded by the Ueno Bank crisis, whose institutional and financial weight is beginning to spread. Business associations are demanding that the Instituto de Previsión Social withdraw its funds deposited at the entity. The head of the Unión Industrial Paraguaya expressed fears that the crisis could affect the economy and employment, while it emerged that Ueno's stakes in other companies surged 8,000% — a figure that raises serious questions about the institution's management. Carmen Marín's resignation from the Banco Central's board, together with the appointment of a new member at the Banco Nacional de Fomento following Santiago De Filippis's departure, signals a phase of institutional reshuffling in the financial sector that markets will watch closely.

The guaraní's appreciation, though hailed by J.P. Morgan as a sign of sound fundamentals, divides the local business community. The Unión de Gremios de la Producción complained to the economic team that the dollar is "falling without a parachute," and banana producers reported direct losses. Cattle ranchers proposed financial instruments to provide greater exchange rate stability. President Santiago Peña ruled out BCP intervention to halt the slide, though the ministry acknowledged it is monitoring the situation and summoned trade groups to analyze the impact. The sixth increase in diesel prices so far in 2026, finalized in recent days by private flag retailers, adds inflationary pressure at a time when Petropar, the state refinery, received a single bid in its tender for aviation fuel, underscoring the scant competition in the hydrocarbons market.

In the energy sector, ANDE created by resolution a specific tariff for artificial intelligence centers, set between $48.91 and $56.39 per MWh, with expectations of receiving some $10 million monthly once the first center is fully operational. The tariff exceeds the one currently applied to cryptocurrency mining, though doubts persist about whether the awarding process was competitive. An agreement between Itaipú and a U.S. firm adds another dimension to the country's energy strategy, though analysts warn that Paraguay urgently needs an independent electricity regulator to provide certainty to large industrial consumers seeking clear rules through 2037.

Three things bear watching in the coming weeks: the evolution of the Ueno Bank crisis and its potential contagion to the broader financial system; the finalization of the 2027 Budget in the bicameral commission, which will test the government's fiscal coherence; and exchange rate behavior, where tension between the guaraní's export-driven strength and the demands of the productive sector could force some policy action that the Executive, for now, publicly rules out.