Paraguay's fiscal crisis hides behind growth headlines while debt service soars.

Paraguay's economy is entering a fiscal crossroads that President Santiago Peña chose not to address in his state-of-the-nation report: while activity indicators continue to show momentum that is the envy of the region, the architecture of public finances is accumulating strains that are becoming difficult to ignore.

The most revealing data point of the day is not growth, but debt. According to ABC Color, the government is processing external credits worth more than USD 1.6 billion, while simultaneously seeking to place a new sovereign bond issue in international markets, where it has accumulated more than USD 9 billion in issuances since 2013. Treasury bonds in the local market have added roughly another USD 1.2 billion. Interest payments on that public debt grew 12.9% in the most recent period — a signal that analysts should not underestimate. The Caja Fiscal is running a deficit of USD 182 million in barely five months of the fiscal year, and the Dirección Nacional de Ingresos Tributarios — the new institution merging the Subsecretaría de Tributación with Aduanas — is already warning that it will need to adjust its revenue estimates for the 2027 national budget on account of the exchange rate. The drop in customs revenue, documented by the DNIT itself, deepens the picture.

That Peña left these chapters out of his state-of-the-nation report — as ABC Color notes — is no minor detail. It is a political choice that sets the tone of Paraguay's economic debate: the official narrative rests on real but selective figures, while fiscal imbalances accumulate outside the spotlight. The IMF, which acknowledges the country's macroeconomic soundness and projects growth of 4.4% for the year — below the 5% or more anticipated by local economists and market participants surveyed by the central bank — continues to flag risks. Economic activity grew 5.6% through May, driven by services and agriculture, and the BCP reported first-quarter expansion of 5.8%. Those numbers are genuine. But they coexist with a budget already expanded by some USD 685 million for 2026, according to Última Hora, with no clarity on what sustainable financing sources will cover the gap.

The external front offers more encouraging signals. Paraguay carried out its first shipment of pork to the Philippines, a market opening that the export sector characterizes as strategic in the context of the still-under-negotiation Mercosur-European Union agreement. Within that framework, Asunción is pressing for equal quotas for its agricultural products, while Spain — whose embassy issued statements picked up by ABC Color and La Nación — is highlighting the potential of the bilateral commercial relationship. Remittances, which flow mainly from Spain, Argentina and the United States, delivered USD 732 million on an annual basis and USD 11.907 billion cumulatively since 2008, acting as a cushion for domestic demand that also energizes the real estate market.

In energy, the week was marked by activity at Itaipú, whose spillway remained open for a week before closing its gates, in an episode that illustrates water management in a volatile hydrological context. More worrying is the warning from expert Javier Giménez, cited by ABC Color, who notes that Paraguay is going through a "crucial" stage in order to avoid a medium-term energy crisis — in a country whose historic competitive advantage rests precisely on access to cheap electricity. ANDE, for its part, is weighing a tariff adjustment whose exact timing has yet to be determined, but which the market takes as inevitable.

On the domestic front, the debate over the minimum wage has produced irreconcilable positions. Asimcopar warns that hikes without technical criteria stifle investment, while economists consulted by the local press argue that the inflationary effect of moderate wage increases tends to be contained. Complaints from small and medium enterprises against the "populist holiday" decreed by Peña — with estimated losses running into the millions — add a discordant note to the growth narrative. The Paraguay-Paraná waterway adds another source of uncertainty: the oilseed producers' chamber Cappro is demanding clarity on tariffs and services under the new concession, while export associations warn that the cost of the toll will erode the country's competitiveness. A missing dredger in the river system, according to Última Hora, is already generating concrete losses across the entire logistics chain.

The arrival of CIRSA, the Spanish entertainment and gaming group, with an investment that La Nación describes as "global," represents the kind of signal the government seeks to project: a legal environment that attracts international capital. Paraguay leads the region in economic sentiment according to Fundación Getulio Vargas, coming in 27 points above the Latin America and Caribbean average on its economic openness index. Those assets are real. The question that dominates the horizon over the coming weeks is whether the reform of the Caja Fiscal — which Chamber of Deputies President Raquel Llanes Alliana has promised will be approved with amendments before the week is out — will manage to close the pension sustainability gap without eroding the political consensus that has underpinned macroeconomic stability. The Ministry of Economy, led by new minister Óscar Lovera, is also preparing a package of seven additional economic bills. The question investors with an appetite for Paraguayan sovereign bonds are asking is whether the institutional framework is solid enough to translate that agenda into concrete results before the financial costs of debt begin to compress fiscal space irreversibly.

**CIRSA (not listed on international exchanges; Blackstone subsidiary)** — The Spanish entertainment and gaming group has landed in Paraguay with an investment described by La Nación as "global," consolidating its expansion into emerging markets in Latin America at a time when Paraguay's legal certainty is being singled out as a differentiating factor by international operators in the sector.

**Petropar (state-owned company, not publicly listed)** — The state oil company ruled out a broad-based reduction in fuel prices for July and gave no signal of imminent hikes, maintaining a selective scheme that has cut only the price of regular diesel; the decision comes days before the mandatory biodiesel blend takes effect — imposed by the Ministry of Industry and Commerce despite industry pushback — raising operating costs for freight transport in a country whose logistical competitiveness depends critically on river and land freight.