The finance minister of Paraguay, German Rojas, is keep to continue the country's impressive economic performance of recent years, but is fully aware that to do this the state of its crumbling infrastructure must be addressed.

Despite its economy experiencing impressive growth over the past few years, Paraguay is in urgent need of modernising its infrastructure if it is to maintain this pace of development. The country's gross domestic product (GDP) grew by more than 13% in 2013, a figure it also hit in 2010. While economic growth figures were not quite as strong in the intervening years – reduced public spending, a severe drought and foot-and-mouth disease hit the agriculture-dependent country – the Latin American nation, nestled between Brazil, Argentina and Bolivia, has been one of the few global success stories in the aftermath of the crisis. GDP growth for 2014 is expected to be about 5%, according to the World Bank.

However, deficiencies in Paraguay's infrastructure network pose a threat to this growth, especially as the country's economy relies on exports. Its roads network is badly connected and poorly paved, the rail network is virtually non-existent, and the waterways are in need of improvement to accommodate heavier cargos and cope with periods of drought.

The private road 

The country's right-of-centre government, fronted by Horacio Cartes, a wealthy businessman elected president in April 2013, is keen to improve the situation and Mr Cartes has expressed a desire to involve the private sector in the process. This is a view shared by finance minister Germán Rojas. Large public investments will be made both in the energy and transport sectors, says Mr Rojas, who has previously held positions both in the private sector – he served as vice-chairman of Sudameris Bank – and in public office, having headed the country’s central bank, among other roles.

Testament to this commitment is the country’s first public-private partnerships (PPP) law, passed at the end of 2013; the first batch of tenders, which are expected for the first half of 2015, will focus on roads and airports.

“From other countries’ experiences we know that it takes time [to develop PPP programmes] – we want to launch these projects quickly, but we also want them to be successful,” says Mr Rojas. Officials in Paraguay are also mindful of lessons learnt at home, as attempts in recent years to privatise some public-run services have been undermined by corruption scandals.

Mr Rojas says: “We want people to realise that Paraguay is a good investment, a good place in which to do business.” The World Bank’s latest Doing Business report places Paraguay in 92th place; in a Latin American context that puts it ahead of Brazil in 120th position, but behind Colombia (34th) or Mexico (39th).

The public path

But even without private investors, Paraguay’s public finances could play a larger role in the country's infrastructure spending – the public debt-to-GDP ratio is just 18%, according to Mr Rojas. The sovereign is also able to raise funds internationally at improving yields. Following its upgrade to BB in June 2014, just short of investment grade, by rating agency Standard & Poor’s, Paraguay issued a $1bn-denominated bond with a maturity of 30 years and a yield of 6.1% at the beginning of August. Its debut issue on the international bond market, in January 2013, has since improved its terms: the yield on the $500m, 10-year notes went from the initial 4.625% to 4.46% in mid-2014.

Paraguay’s latest bond surprised observers as its roadshow coincided with Argentina’s looming technical default at the end of July. Argentina is one of Paraguay’s main trade partners, so its default was expected to have an impact upon its neighbour's economic performance.

Indeed, both Paraguay and Argentina are founding members of Mercosur, the economic and political bloc formed with Brazil and Uruguay, of which Venezuela and Bolivia are also members. Some have pondered, however, whether Paraguay's priorities and goals fit in with those of the rest of the Mercosur bloc; the open-market, pro-foreign investment Pacific Alliance grouping of Chile, Peru, Colombia and Mexico is touted by some as a better fit. But while focusing on growth and fostering open-market policies, Mr Rojas does not forget diplomacy. “The priority for Paraguay will remain Mercosur, but this doesn’t mean we will not be open to other deals,” he says.


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