Paraguay's 6.6% growth masks a fiscal crisis: $340 million owed to builders.

The first full year of Santiago Peña's government yields a balance sheet that defies simple narratives: Paraguay grew 6.6% in 2025, according to data from the Banco Central del Paraguay, a figure that ranks it among the region's expansion leaders — and yet the state owes $340 million to contractors, public debt has risen by $1.333 billion in just four months, and the IMF warns that such growth is still failing to reach the most vulnerable sectors. This is the central paradox defining Paraguay's economy today: gleaming macro figures set against a microeconomy that is creaking.

The acceleration is real. The BCP reports that economic activity grew 5.8% in the first quarter and 5.1% cumulatively over the first four months of the year, with services, energy, and the agro-industrial complex acting as the engines. The soy complex generated $2.492 billion through May, and Itaipú increased its electricity supply to the country by 20.6% in the first half of 2026. Surveyed economic agents are lifting their projections toward 5%, and some economists do not rule out surpassing that mark. The IMF, in its most recent assessment, set its official projection at 4.4% but explicitly acknowledged the strength of the inflation-targeting regime and exchange-rate flexibility as pillars of stability. Paraguay, the Fund notes, exceeds the region in economic openness by 27 percentage points.

But the same IMF that praises the macro picture is the one urging the country to deepen formalization and social protection so that growth becomes more inclusive. That is where the fracture emerges. While the BCP reports deflation, shoppers at the Mercado de Abasto in Asunción say "hepy eterei está todo" — everything is expensive. Only 17.7% of workers legally covered by the minimum wage actually receive it. The underground economy accounts for 46% of GDP. Consumer credit now represents 20% of total bank lending, a figure one former minister flatly labels a "warning signal," while guaraní-denominated interest rates are rising even as foreign-currency rates fall.

The new minimum wage, adjusted by executive decree, takes effect today — a measure that has divided the private sector. The country's industrialists' association warns that raising it without technical criteria stalls investment, while economists note that the inflationary impact will be limited but the effect on informality could prove counterproductive. The government is simultaneously processing external loans worth more than $1.6 billion and looking to close a new local bond issuance, with the domestic stock already at $1.2 billion. Public debt is paying 16.8% more in interest year-on-year, and the Caja Fiscal deficit accumulated $182 million in the first five months of the year.

President Peña delivered his annual report with emphasis on electric infrastructure projects and multi-million-dollar investments, but the press and businesspeople themselves have flagged what he did not say: the $340 million in arrears to contractors that is choking the construction sector, and a fiscal policy that some analysts describe as accounting cosmetics rather than genuine consolidation. The new Economy Minister, Óscar Lovera, will have to grapple with that pending liability from day one. The construction sector has already stated publicly that it expects his arrival to speed up payments.

On the energy front, Itaipú is sending signals that point in two directions at once: the increase in domestic supply is good news for industrial competitiveness, but energy-cession transfers dropped 32%, a direct blow to fiscal revenue. The binational is also moving forward with the certification of its first green hydrogen production unit, a bet that connects Paraguay with the global energy value chains of the coming decade but whose returns remain uncertain. Yacyretá, meanwhile, has reopened its navigation lock following corrective works, though Ayolas's fishing sector is threatening fresh protests over breaches by the binational entity.

Reform of the Caja Fiscal remains pending in Congress, with Chamber of Deputies President Raquel Alliana announcing that it will be enacted this week with modifications. Institutional tax reform — represented by the merger of the SET and Customs into the new DNIT — is already in force, with the stated goal of raising the tax burden from 10% to 12% and collecting an additional $400 million per year. However, customs revenue has fallen in the recent period, raising questions about the effectiveness of the new agency during its transition phase.

What will set the pace of the coming months is the outcome of three variables that remain open: the trajectory of the exchange rate in a context of rising debt, where economists warn that the cost of missing the fiscal target exceeds that of a guaraní depreciation; negotiations with the private sector over the pace of repayment of accumulated public debt, which is already weighing on investor confidence; and the possible arrival of El Niño, which complicates rice planting and threatens the traction the farm sector has provided to growth in the first half of the year. If the second half of 2026 sustains the momentum, Paraguay will have completed one of its longest expansion cycles. If not, the gap between the government's macro narrative and Paraguayans' daily experience will be far harder to sustain politically.

**Petropar (state-owned, unlisted)** — The Troche ethanol plant continues to generate multi-million-dollar losses for the state oil company, in what ABC Color describes as a facility that is "bleeding" the firm dry; in parallel, Petropar announced a cut in the price of regular diesel, a decision with direct impact on logistics costs for the export-oriented agro-industrial sector. The combination of cross-subsidies and loss-making assets is keeping the company's balance sheet under pressure in a year of strong energy demand.

**Itaipú Binacional (Paraguay-Brazil binational entity, unlisted)** — The binational reported a 20.6% increase in energy supply to Paraguay in the first half of 2026, though energy-cession transfers fell 32%, cutting into key fiscal revenues for Asunción; the entity is simultaneously advancing certification of its first green hydrogen production unit, a development with potential to break into European and Asian clean energy markets.