Dionisio Borda is new president Fernando Lugo’s choice as the finance minister in his government which takes over on August 15. He is not a newcomer to the job.
He had a two-year spell under President Nicanor Duarte Frutos, Paraguay’s outgoing leader, from 2003 to 2005. He takes up the job a second time when the International Monetary Fund is expressing happiness about the economy – record growth of 6.75% last year and expectations of at least 5% this year.
The government budget is in good shape, with a surplus equivalent to 1% of gross domestic product (GDP). At the end of May, foreign currency reserves stood at more than $3bn, up from $600m five years ago.
Mr Borda has a very clear vision of what his poor and disorganised country needs. “We need a professional, trained civil service. What we have at the moment is real chaos. It is politicised and inefficient,” he says.
Fertile land
Paraguay needs a complete reform of government. “There are 10 ministries and, in parallel, 14 secretariats all depending on the president’s office and none working in co-ordination. There’s only one relationship which does work well, and that’s between the central bank and the finance ministry.”
He turns to the need for diversification of the country’s resources. “At present, the economy is doing very well with two lines we’re very strong on, soya and beef. Prices are high and the money’s flowing in,” he says. “But it is time for us to take advantage of the other natural assets and add value by processing them.
“This place has an enormous potential in oleaginous crops, for example. We have a fantastically fertile country, which can grow every sort of cereal: maize, wheat, barley. We can produce fruit for canning and we can turn out all sorts of sauces, which are already being sold in Europe. We have to further establish and diversify our productive platform.”
Low taxes
The government’s tax take is very low by world standards. “It is only 12% of GDP and that’s nothing,” Mr Borda exclaims. “When president Lugo mentioned that fact to Spanish prime minister Zapatero, Zapatero said: ‘Well, the Paraguayan state doesn’t really exist then.’
“There is a lot of tax evasion and there is no tax at all on personal income. There are laws proposed every year to bring in a 10% income tax, but action on it is always postponed.”
Government income is boosted slightly by royalties and Brazil’s payments for the electricity from the Itaipú hydroelectric scheme, but even so, it doesn’t reach 20% of GDP. The government pays out a pension to just over one in 10 of the population.
“The government’s first and overriding priority will be the poor,” says Mr Borda. “We’re not against prosperity but the prosperity must be more fairly shared.”
With the government so chronically short of funds for essential welfare and infrastructural investment, Mr Borda says there has to be collaboration with the private sector. “We have to have a system of public-private partnership,” he says.
Short-term income
Paraguayan banks are used to lending short-term and getting an income stream from government paper while taking no risk. The incoming minister wants to change that by increasing the resources of the government’s Financial Agency for Development with borrowing from Japan, the Inter-American Development Bank and other sources. The Agency will, in turn, lend to banks and co-operatives, allowing them to make longer-term loans to their customers.
The country must make more of its natural advantages, to attract more investment, Mr Borda says. Paraguay is a food producer, it has great quantities of energy and it has a young and inexpensive workforce. “Our challenge is to better educate and train that workforce,” says Mr Borda.
