Paraguay's growth engine runs on empty tax coffers.

The 10.4% drop in customs revenue accumulated so far this year reveals a concrete fissure in Paraguay's fiscal model just as President Santiago Peña's administration attempts to consolidate a more modern institutional architecture. That contradiction—robust GDP growth coexisting with tax revenues that fail to keep pace—defines the country's economic moment more precisely than any other data point.

Economic activity grew 5.6% through May, driven by services and agriculture, and market agents are already projecting expansion close to 5% by year-end, a figure that nearly doubles the global average and which the IMF and Moody's have highlighted as evidence of macroeconomic strength. Paraguay has just been reclassified as an upper-middle-income country by the World Bank, and Economy Minister Óscar Lovera, who took office amid the turbulence generated by his predecessor's departure, is traveling to Paris to meet with international organizations in search of backing for the government's fiscal strategy. Seen from the outside, the picture looks orderly.

But the customs detail complicates everything. The Dirección Nacional de Ingresos Tributarios—the new entity created precisely by the Peña administration through the merger of the Subsecretaría de Tributación and the Dirección Nacional de Aduanas—faces its first major institutional test with the numbers working against it. Óscar Orué, now director of the agency, pledged to raise the tax burden from 10% to 12% of GDP and generate roughly $400 million in additional annual revenue. The customs decline puts that target in doubt, at least in the short term, and slows the DNIT's broader momentum at a politically delicate moment for the reform. Critics of the merger—among them the well-known specialist Nora Ruoti—had pointed precisely to the risks of concentrating power in a single entity without adequate checks and balances. Former Customs Director Julio Fernández had warned that the loss of operational autonomy could complicate the 5,000 daily procedures the agency handles.

This week the government resorted to a signal of openness to offset the revenue pressure: the DNIT will announce, effective September, a reduction in interest rates for installment tax payments, a measure intended to broaden voluntary compliance. At the same time, the MEF opened the bidding period for a new debt issuance via Treasury bonds, whose outstanding balance in the local market already stands at roughly $1.2 billion. The government is looking to move toward the Stock Exchange with these issuances—a decision local analysts consider transformative for the capital markets—although the paradox is evident: interest payments on public debt have already grown between 12.9% and 16.8%, tightening fiscal room to maneuver precisely as customs revenue recedes.

The MEF report acknowledges that fiscal revenues "barely advance" despite 4.5% GDP growth, a gap that reflects the structural persistence of the informal economy. According to the Instituto Nacional de Estadística, informal employment exceeded 1,753,000 people in the second quarter—an increase in absolute terms even as the unemployment rate fell. Underemployment, in contrast, rose, suggesting that the labor market is generating more positions but of lower productive quality and lower contribution to the tax base. Paraguay continues to rank among the countries with the highest labor informality in Latin America and the Caribbean, a drag that no tax reform can resolve on its own.

Adding to this are contradictory signals on the energy and price fronts. Fuel prices have accumulated increases of up to 39% across four adjustments since the start of the year—the most recent this week, led by private brands although Petropar has remained on the sidelines—feeding cost pressures in the productive sector just as the BCP confirms fresh deflation in July, supported by price declines in two specific categories. One expert warned that Paraguay is racing against the clock in the face of a potential energy crisis by 2030, while ANDE engineers have announced legal action if the tariff requested by Atome is approved, and the binational Itaipú cut $38.7 million earmarked for school meals and municipalities, which will aggravate tensions with subnational governments that have already received $1.6 million less in royalties. Fishermen in Ayolas, affected by the lack of response from Yacyretá, are announcing protests starting Monday.

On the external front, the foreign minister of Taiwan—Paraguay's only formal diplomatic ally in Asia—spoke publicly about efforts to increase imports of Paraguayan soybeans, a politically valuable signal though of limited commercial reach compared with the weight of Mercosur markets. The EU-Mercosur agreement keeps Paraguay in a peculiar position: the government is demanding equal access quotas, aware that its status as a small economy within the bloc could leave it lagging in the benefits of the pact.

Family remittances, which total nearly $500 million through May and reach $732 million in annual estimates, remain a quiet mainstay of consumption and the real estate market. Together with services growth, they are the cushion sustaining aggregate activity while the gap between GDP expansion and tax collection remains unclosed.

What to watch closely in the coming days: the outcome of the bond issuance on the Stock Exchange and the signal it sends about local appetite for sovereign debt; the debate in Congress on the reform of the fiscal pension fund, which the President of the Chamber of Deputies, Raquel Llano de Alliana, has assured will be enacted with modifications this week; ANDE's decision on its tariff adjustment, which could become another inflationary vector; and, above all, August's revenue data, which will tell us whether the customs decline is cyclical or the first symptom of a deeper problem in the Peña government's new tax architecture.