Paraguay's 6.6% growth masks a debt trap swallowing state coffers faster.

The data point that matters most today isn't GDP growth — which the Banco Central del Paraguay confirmed at 6.6% for 2025 — but rather the accumulation of signals revealing an economy expanding under internal contradictions that are increasingly difficult to ignore.

The Ministerio de Economía y Finanzas, an institution created at the very outset of Santiago Peña's administration as the first law enacted by his government, finds itself at the center of nearly every economic debate of the day. With new minister Óscar Lovera just settled into the role and upcoming meetings with international organizations in France on the agenda, the government is presenting a narrative of macroeconomic solidity that the International Monetary Fund partially endorses, though not without reservations. The IMF acknowledged the strength of the Paraguayan economy and praised its inflation-targeting regime and flexible exchange rate, but simultaneously instructed the country to deepen labor formalization and strengthen social protection to achieve more inclusive growth — a signal that Washington sees the same gaps as domestic critics.

Economic activity grew 5.8% in the first quarter according to the BCP, and accelerated in April on the back of services, energy, and agriculture, leading some economists to project full-year expansion above 5%. The soy complex, ever the backbone of Paraguay's export model, generated USD 2.492 billion through May, while family remittances contributed USD 732 million on an annual basis, sustaining domestic consumption and energizing the real estate market. The hotel sector, according to the Ministerio de Industria y Comercio, is shaping up as an engine of investment and employment. All of this reads, in the official headlines, as a success story.

Yet today marks the effective date of the minimum wage adjustment — a decision that has stirred political controversy — amid an unresolved economic debate. While Asimcopar, the chamber of small and medium-sized enterprises, warns that an increase lacking technical criteria will curb investment and push up informality, economists consulted by ABC Color agree that the impact on prices will be limited though not negligible. This tension is emblematic of a labor market where the informal economy still represents roughly 46% of GDP, according to historical data from Última Hora, and where the growth of consumer credit — already raising alarms among former ministers — reflects households borrowing to sustain a standard of living that real wages fail to guarantee. Shoppers at the Abasto market, quoted by ABC Color, put it bluntly: "Hepy eterei está todo" — everything is extremely expensive — in open contradiction with the Banco Central's deflation report.

Public finances tell their own story of strain. Paraguay is processing external loans totaling more than USD 1.6 billion while public debt grew by USD 1.333 billion in just four months, with interest service rising between 12.9% and 16.8% depending on the metric. The Caja Fiscal recorded a USD 182 million deficit over five months. The government has USD 5.6249 billion in budget execution but has drawn on just 49.28% of available funds — a symptom of the bureaucratic paralysis leaving construction sector contractors gasping under an accumulated debt of USD 340 million that the state has yet to settle. CAPACO is calling on the country to triple its infrastructure investment; the tender for the Concepción-Vallemí-San Lázaro highway at G. 820 billion and the rising cost of the Chaco'i-General Bruguez stretch on PY12 illustrate both the ambition of the public works agenda and its escalating costs.

The energy sector adds further complexity. Itaipú transfers for energy cession fell 32%, hitting revenues the state had already booked. The Troche ethanol plant — operated by Petropar — is accumulating losses that, according to ABC Color, are literally bleeding the state-owned company dry. Petropar cut the price of regular diesel but not that of gasoline, raising questions about the coherence of fuel policy. At the same time, Itaipú is moving forward with the certification of its first green hydrogen production unit, positioning the country within a global clean energy trend that could redefine its long-term export profile. Electric vehicle imports jumped 65%, though the total fleet remains one of the smallest in the region.

On the external front, the Dirección Nacional de Ingresos Tributarios — created through the merger of SET and Customs, the Peña administration's flagship institutional bet — is going through its worst moment in terms of customs collection: Silvio Pettirossi airport is down 41% and the Port of Santa Helena down 78%, while imports rose 7% but revenue collection fell 17%. The paradox is glaring and points to structural enforcement problems within the new agency. Director Óscar Orué pledged to raise the tax pressure from 10% to 12% of GDP; current figures suggest the road will be steeper than advertised. As for the Mercosur-European Union agreement, Senacsa noted that Paraguay has relatively little to lose if no deal is reached on beef quotas, a position that contrasts with official enthusiasm about the treaty's potential.

What warrants close monitoring in the coming weeks is the reform of the Caja Fiscal, which according to Senate President María Martínez de Alliana would be enacted with modifications in the days ahead. Its scope will determine whether the government can contain the pension deficit without triggering social conflict. Equally relevant is the outcome of the MEF's bid opening for new Treasury bonds — the local market already absorbs roughly USD 1.2 billion in sovereign paper — and the government's ability to translate the USD 5.6 billion in budget execution into actual public works before pressure on contractors and floating debt erodes private sector confidence in the soundness of public accounts.

**Petropar (state-owned company, not publicly traded)** — The state oil company cut the price of regular diesel but left gasoline prices unchanged, in a decision its president has not explained on transparent technical grounds. The Troche ethanol plant, operating under its umbrella, is registering continuous multi-million dollar losses that weigh on the company's consolidated balance sheet, with direct exposure to international oil prices and government pricing policy.

**Itaipú Binacional (Paraguay-Brazil binational entity, not publicly traded)** — Transfers to the Paraguayan state for energy cession fell 32%, reducing a fiscal flow that the national budget had assumed as stable. In parallel, the entity is moving forward with the certification of its first green hydrogen production unit, an initiative with export potential that ties Paraguay to European clean energy demand under the Mercosur-EU agreement currently under negotiation.