The economic impact of the crisis due to the COVID-19 pandemic on Paraguay’s growth was modest – one of the smallest in the Latin America and the Caribbean (LAC) region – as gross domestic product (GDP) contracted annually by only 0.6%. In addition, poverty has been unchanged in the last few years. The modest shock has not much affected the poverty and extreme poverty rates (19.7% and 6.2%, respectively, in 2020 based on the latest international comparable estimations), which are lower than in LAC (30.9% and 10.0%, respectively). Just before the crisis, Paraguay’s public expenditures on health stood at 6.7% of GDP, similar to LAC (6.8%) but much lower than Organisation for Economic Co-operation and Development (OECD) countries (8.8%). However, in the last decade, Paraguay made significant progress, as public expenditures on health grew by two percentage points of GDP, catching up with the region, which recorded a modest increase of 0.3 percentage points. In 2020, 38.4% of people declared being satisfied with the quality of health care, a proportion lower than in LAC (48.2%) and considerably lower than in the OECD (70.7%). The perceived quality has decreased by more than 15 percentage points in the last decade, compared to a decrease of almost ten percentage points in LAC and an increase of more than one percentage point in the OECD. Between March 2020 and May 2021, schools were fully closed for 32 weeks, compared to 26 weeks in LAC and 15 weeks in the OECD. In 2020, 87.2% of citizens thought that the government was corrupt, up by seven percentage points in a decade. Paraguayans share the concern with other Latin Americans, as 72.4% of people in the region have similar negative perceptions, much more than in the OECD (58.8%).

Paraguay introduced a significant set of measures to mitigate the negative impact of the COVID-19 crisis, targeted to alleviate the burden of the pandemic and contain the highly regressive impact on the most vulnerable households, workers and firms. Through Law N 6524/2020, Paraguay provided cash transfers for food and hygiene products to help families not covered by traditional social protection schemes. The new law entailed subsidised exemptions and payment deferrals for public services. Concerning workers, Paraguay introduced additional subsidies for those who lost their jobs during the pandemic, especially informal workers, and granted severance and suspension payments to formal employees. To help mitigate the impact of the crisis on firms, Paraguay performed transfers and guarantees so that national institutions could provide financing for small and medium-sized enterprises.

Going forward, Plan de Recuperación Económica Ñapu´a Paraguay is focused on three short-term goals: i) increasing social protection; ii) investment and employment; iii) financing of economic growth and medium-long term goals which consist of structural reforms aimed at the transformation of the State. Accordingly, the plan recognises that current institutions must be strengthened and the well-being of citizens placed at the centre of the economic development model. Proposals for the Transformación del Estado aim to move Paraguay towards a new social contract that reduces existing equality gaps and pursues a sustainable future.

Paraguay’s international co-operation projects within and beyond the region have channelled collaboration with various partner countries and international organisations to overcome the challenges brought about by COVID-19. Within LAC, in the framework of the Southern Common Market (MERCOSUR) Structural Convergence Fund, a working network was built to provide health support and the development of acute diagnostic and serological tests. Paraguay also engaged with the Governments of Chile Colombia, Mexico, Uruguay, Argentina and Brazil in the exchange and strengthening of medical personnel among other cooperation initiatives. Additionally, the Latin American Development Bank (CAF) is supporting Paraguay in funding the Ñapu´a Paraguay plan for economic recovery. Beyond LAC, Paraguay’s partners such as the European Union, the United States, Chinese Taipei, Qatar, UAE, India among other institutions, have redirected their co-operation efforts to projects that support key sectors of the economic and social recovery. These include the consolidation of social protection schemes, strengthening water and sanitation systems (e.g. providing water supply for towns in the Paraguayan Chaco), supporting small and medium-sized enterprises, quality education for all children, campaigns against gender-based violence, and the improvement of youth training opportunities.


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