Paraguay – Landlocked and Economically Struggling

Francisco A. Laguna

Paraguay is the second smallest of the Southern Cone countries, but its economy is far less robust than any of its neighbors or other members of Mercosur, including the smaller Uruguay.

Photo Credit: Felipe Mendez via Wikipedia Commons

Photo Credit: Felipe Mendez via Wikipedia Commons

Historically, Paraguay has been marked by long periods of political upheaval and international isolation.  During the 20th Century, the country had 34 presidents, mostly deposed, and a 35-year dictatorship.  In 1993, the country elected its first civilian leader in over 40 years, and it was hoped that it would continue on a more stable path.  The 21st Century, however, has been characterized by more political turmoil with the 2012 impeachment of left-wing president (and former Roman Catholic Bishop) Fernando Lugo over a series of land reform decisions interpreted largely as a means of redistributing wealth.  The impeachment, which Lugo characterized as a coup because he was not given sufficient time to address the charges, resulted in the suspension of the country’s Mercosur membership until this month’s presidential elections (April 21).

paraguayParaguay has mainly a commodity-based economy, exporting soybeans, feed, cotton, meat, edible oils, wood and leather products.  The country’s export markets are mostly regional with 44.9% of 2011 exports going to other Southern Cone countries.  Currently, Paraguay is the world’s 4th largest exporter of soybeans, and the majority of soybeans grown are strains developed by Monsanto.  Last month, Monsanto agreed to waive royalties on certain strains of soybeans sold to Paraguay as of 2014.  The move ends a dispute between the corporation and associations of farmers that included an unsuccessful lawsuit brought by the farmers to block Monsanto from collecting royalties based on the fact that the company’s patent on the genetically modified seeds had expired.

Photo Credit: Ekim via Wikipedia Commons

Photo Credit: Ekim via Wikipedia Commons

In addition to agriculture, Paraguay’s economy is also fueled by Ciudad del Este, on the border with Argentina and Brazil, which is an important free commercial zone.  Brazilians routinely travel to Cuidad del Este to take advantage of lower prices and tax-free shopping.  The trade between the city and Brazil has been criticized as feeding Brazil’s informal economy because Brazilian vendors bring in millions of dollars in contraband from Paraguay to sell underground.

Despite the soybean boom, nearly 35% of Paraguayans live below poverty levels (2010), and the economic divide between social classes is wide and entrenched: 77% of the country’s arable land is owned by 2% of the population.  This social reality is exacerbated by high levels of corruption which often keep the lower classes from attaining any relevant measure of success.  To succeed socio-economically, Paraguay must address the issue of poverty.  Today, a group of peasants, calling themselves “sintierras” (“those without land”), invaded lands owned by the government in the interior department of San Pedro in protest over inequality.

TransLegal assists our clients in the Southern Cone and in Mercosur countries with the registration of products, including genetically modified organisms, novel foods, products derived from genetically modified organisms, pharmaceuticals and ingredients for pharmaceuticals and cosmetics.  We also assess country requirements for accessing genetic patrimony under the Convention for Biological Diversity and the Nagoya Protocol.  Contact us about your questions concerning Paraguay.

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