Government of Paraguay - Ba1 stable · 2019. 7. 5. · Paraguay’s economy grew by 3.7% in 2018, which is lower than the 5.0% expansion recorded in 2017. On the demand side, growth

SOVEREIGN AND SUPRANATIONAL

ISSUER IN-DEPTH3 July 2019

RATINGS

ParaguayForeign

CurrencyLocal

Currency

Gov. Bond Rating Ba1/STA Ba1/STA

Country Ceiling Baa3 Baa3

Bank Deposit Ceiling Ba2 Baa3

TABLE OF CONTENTSOVERVIEW AND OUTLOOK 1CREDIT PROFILE 2Economic strength: Moderate (-) 2Institutional strength: Low 6Fiscal strength: High (+) 9Susceptibility to event risk: Low 13Rating range 16Comparatives 17DATA, CHARTS AND REFERENCES 18

Contacts

Samar Maziad +1.212.553.4534VP-Senior [email protected]

Patrick Cooper +1.212.553.3811Associate [email protected]

Mauro Leos +1.212.553.1947Associate Managing [email protected]

Government of Paraguay - Ba1 stableAnnual credit analysis

OVERVIEW AND OUTLOOK

The credit profile of Paraguay (Ba1 stable) reflects a strong fiscal position, a conservativefiscal policy framework, and limited external vulnerability. The government envisages highercapital spending to improve infrastructure, increase competitiveness and support economicgrowth potential. The country's debt metrics are favorable when compared with the medianfor Ba-rated sovereigns. Authorities continue to build a track record of adherence to theirfiscal responsibility law, with the fiscal deficit registering within the 1.5% of GDP limit for athird consecutive year in 2018. We expect continued compliance in 2019.

Paraguay's main credit challenges include the economy’s continued dependence onagriculture-related output and overall weak governance indicators relative to peers despitea track record of prudent macroeconomic policy. Infrastructure constraints continue to be akey weakness of the country's competitiveness profile, despite the government committingthe bulk of new spending to upgrading roads and access to coasts. Low governmentrevenue intake is also a credit constraint, with overall revenue intake at around 14% of GDP,which is well below the Ba and Baa medians. That said, the government has improved taxadministration and boosted revenue collection in recent years, and is proposing furtherreforms to modernize and simplify the tax system to increase investments in health,education, and infrastructure.

The stable outlook is supported by our expectation that the authorities will maintainprudent macroeconomic and fiscal policies, while increasing investment in infrastructure.Upward rating pressure could result from continued compliance with the fiscal responsibilitylaw, completion of growth-enhancing infrastructure investments, and improvement ininstitutional and governance indicators. Striking an effective balance between growth-enhancing investment and maintaining a low debt burden is key to preserving Paraguay'sfiscal strength.

Conversely, downward pressure on the credit profile could result from a marked deteriorationin fiscal indicators and an increase in government debt, and/or a deterioration in externalaccounts and an increase in external vulnerability.

This credit analysis elaborates on Paraguay’s credit profile in terms of economic strength,institutional strength, fiscal strength and susceptibility to event risk, which are the four mainanalytic factors in Moody’s Sovereign Bond Ratings methodology.

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1179446

https://www.moodys.com/credit-ratings/Paraguay-Government-of-credit-rating-600044126

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1151027

MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL

CREDIT PROFILEOur determination of a sovereign’s government bond rating is based on the consideration of four rating factors: economic strength,institutional strength, fiscal strength and susceptibility to event risk. When a direct and imminent threat becomes a constraint, that canonly lower the preliminary rating range. For more information please see our Sovereign Bond Ratings methodology.

Economic strength: Moderate (-)

Scale VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL-

+ Final -

Factor 1: Sub-scores

Paraguay Moderate (-)

Economic strength evaluates the economic structure, primarily reflected in economic growth, the scale of the economy and wealth, as well as in

structural factors that point to a country’s long-term economic robustness and shock-absorption capacity. Economic strength is adjusted in case

excessive credit growth is present and the risks of a boom-bust cycle are building. This ‘credit boom’ adjustment factor can only lower the overall

score of economic strength.

Note: The Scorecard-indicated outcome is shown in light blue in the scale above. In case the Scorecard-Indicated outcome and Final scores are the

same, only the Final score will appear in the table above.

Factor 1: Overall score

weight 50% weight 25% weight 25%

Score for Paraguay Median of countries with Ba1 rating

SCALE OF THE ECONOMY NATIONAL INCOMEGROWTH DYNAMICS

Average real GDP (% change) Volatility in real GDP growth (ppts) Global Competitiveness index Nominal GDP (US$ bn) GDP per capita (PPP, US$)

VERY HIGH

HIGH

MODERATE

LOW

VERY LOW

GROWTH DYNAMICS

We have adjusted Paraguay's score for economic strength upwards from the scorecard-indicated outcome of “Low (+)” to a final scoreof “Moderate (-)” to reflect the limited impact of growth volatility on fiscal metrics and the banking system, as well as the progressmade in diversifying the economy. Paraguay’s nominal GDP of $41 billion in 2018 is slightly smaller than the $49 billion Ba median,whereas its wealth level, measured in GDP per capital (PPP basis), of $13,395 is in line with the $12,440 median of Ba-rated sovereigns.The economy has grown at an average annual rate of 4.2% during the last five years in line with the 4.0% for Ba-rated peers. Becauseof climate-related shocks and agriculture's significant contribution to output, real GDP growth has been more volatile than that ofpeers. Other sovereigns with a similar score for economic strength include The Bahamas (Baa3 stable) and Croatia (Ba2 positive).

Paraguay M- Median Croatia Guatemala Kazakhstan Bahamas Georgia Namibia

Ba1/STA Ba2/POS Ba1/STA Baa3/STA Baa3/STA Ba2/STA Ba1/NEG

Final score M- M- M M M- L+ L+

Scorecard-indicated outcome L+ M M H M- M- L

Nominal GDP (US$ bn) 40.8 46.4 60.8 78.5 170.5 12.6 16.2 14.5

GDP per capita (PPP, US$) 13,395.3 17,659.4 26,221.4 8,436.4 27,549.8 33,494.2 11,485.4 11,228.8

Average real GDP (% change) 4.0 3.1 2.2 3.5 3.0 0.9 4.3 2.2

Volatility in real GDP growth (ppts) 3.5 3.0 3.2 1.1 2.4 2.0 3.1 3.0

Global Competitiveness Index 3.7 4.0 4.2 4.1 4.4 -- 4.3 4.0

Peer comparison table factor 1: Economic strength

The economy has shown a degree of resilience to a regional slowdown and lower commodity prices…

Paraguay has a small and open economy with total exports and imports representing around 80% of GDP. The country is also the thirdlargest producer of soy in the world, with soy and derivate products accounting for a third of all exports. Paraguay’s most importantexport trade partner is Brazil (Ba2 stable), which accounts for one-third of the country’s exports, followed by the European Union (Aaa

2 3 July 2019 Government of Paraguay - Ba1 stable: Annual credit analysis


https://www.moodys.com/credit-ratings/Bahamas-Government-of-credit-rating-600010326

https://www.moodys.com/credit-ratings/Croatia-Government-of-credit-rating-600020489

https://www.moodys.com/credit-ratings/Brazil-Government-of-credit-rating-114650

https://www.moodys.com/credit-ratings/European-Union-credit-rating-600049532


stable), Asia and Argentina (B2 stable). Even after its two largest regional trading partners (Argentina and Brazil) fell into recession andsoy prices declined, Paraguay’s growth has remained relatively high in recent years, averaging 4.0% annually since 2015.

…but its strong, broad-based growth has started to slow down

Paraguay’s economy grew by 3.7% in 2018, which is lower than the 5.0% expansion recorded in 2017. On the demand side, growthwas primarily driven by consumption followed by investments, contributing 3.1 percentage points and 2.5 percentage points to growth,respectively. The appreciation of the guarani versus the Brazilian real (10% year-on-year) and Argentine pesos (65% year-on-year)affected border trade, resulting in a slowdown of the contribution of net exports to growth to 1.1 percentage points (compared with 2.9percentage points a year earlier). On the supply side, expansion in the service and manufacturing sectors – contributing 2.4 percentagepoints and 0.9 percentage points, respectively – supported economic growth. Whereas the agricultural sector underpinned growthin the first half of 2018, heavy rains affected an expansion of the sector in the second half of the year. While agriculture still playsan important role in the Paraguayan economy, accounting for about 18% of GDP over the last ten years, it has contributed less toeconomic activity in recent years as soy prices remain subdued and the government focuses investment and diversification efforts intothe light manufacturing and service-based industries (see Exhibit 1).

We expect economic growth to slow further to 2.0% in 2019, before rebounding to 3.5% in 2020. This year’s soybean harvest has beenaffected by a drought, followed by heavy rains, early in the planting season. As a result, the government expects soybean production tobe 25% lower in 2019. Meanwhile, soy prices remain below historical peaks (see Exhibit 4). Economic growth could further weaken as aresult of tepid growth in Brazil, impacting border trade, or slower execution of public investment.

Exhibit 1

Agriculture has contributed less to real GDP growth since 2014...(Contribution to GDP growth by sector, ppts)

Exhibit 2

The economy is growing faster than its regional peers(Real GDP growth, % year-on-year)

-6

-4

-2

0

2

4

6

8

10

12

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Agriculture Trade and Services Industry and Mining Other

Sources: Central Bank of Paraguay and Moody's Investors Service

-2

0

2

4

6

8

10

12

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F

Paraguay Latin America & Caribbean median


In May 2018, the government rebased its GDP series to use 2014 prices instead of 1994 prices. As a result, nominal GDP was estimatedaround 32% larger than under the old GDP series. At the same time, primary sector activity (such as agriculture, livestock, and mining)now accounts for a smaller share of economic activity compared to the 1994 base year. Importantly, historical growth also appears tobe less volatile under the 2014 base, as agriculture’s importance in overall economic output diminished relative to prior estimates.


https://www.moodys.com/credit-ratings/European-Union-credit-rating-600049532

https://www.moodys.com/credit-ratings/Argentina-Government-of-credit-rating-61720


Exhibit 3

Despite recent diversification, Argentina and Brazil receive majorityof exports(Share of exports by country, 2018)

Exhibit 4

Soy prices remain low after peaking in early 2014(USD/ton)

Russia8%

Argentina30%

Brazil32%

Uruguay3%

Bolivia, Chile, Colombia, Ecuador, Mexico, Panama, Peru10%

European Union8%

Asia3%

Rest of the world6%


400

500

600

700

800

900

1,000

200

250

300

350

400

450

500

550

600

Ja

n-1

4

Ap

r-1

4

Ju

l-14

Oct-

14

Ja

n-1

5

Ap

r-1

5

Ju

l-15

Oct-

15

Ja

n-1

6

Apr-

16

Ju

l-16

Oct-

16

Ja

n-1

7

Ap

r-1

7

Ju

l-17

Oct-

17

Ja

n-1

8

Ap

r-1

8

Ju

l-18

Oct-

18

Ja

n-1

9

Ap

r-1

9

Soy (LHS) Soy flour (LHS) Soy oil (RHS)


The economy is showing initial signs of diversification

Paraguay’s economy has traditionally relied on agricultural production, particularly soy, meat, as well as hydroelectric energygeneration from the Itaipú and Yacyretá dams owned jointly with Brazil and Argentina, respectively. In recent years, the economywitnessed a drive for diversification through government-led and private sector initiatives to raise the value-added of the agriculturalsector. The aim was to increase exports of processed agriculture instead of raw material and to further develop light manufacturing.Soy exports have steadily shifted from raw grains towards soy oil and flour. There are also efforts underway to develop agribusinessindustries, including organic meats and poultry aimed at non-traditional export markets in Asia, North Africa, and the Middle East.

The government's development strategy is centered on taking advantage of the country’s abundant hydroelectric energy as well asencouraging development of export-oriented light manufacturing (maquilas). The government invested heavily in the construction ofthe Itaipú and Yacyretá dams in the 1980s. Paraguay, however, only consumes roughly 10% of Itaipú's energy production and exportsthe remainder to Brazil. Paraguay is required to repay its debt to Brazil for the construction of Itaipú, and its debt repayments arecoming to an end in 2023. Both countries are in the process of negotiating energy tariffs for the post-2023 era.

In terms of the maquila sector, Paraguay primarily produces autoparts, plastics, and textiles, which make up an important part ofBrazil’s supply chain. Between 2010-18, the manufacturing sector grew at an average annual rate of 5.2%, well above the averageannual rate of 0.5% between 2000-09. This trend of expanding light manufacturing industries and integrating Paraguay into Brazil’ssupply chain is likely to continue due to Paraguay’s low labor and energy costs, and favorable tax environment. Paraguay has historicallymaintained the lowest tax burden in the region, with a 10% corporate tax rate and a 10% value-added tax (VAT) on most goods andservices.

Infrastructure investment is key to raising Paraguay’s growth potential

The quality of basic infrastructure (roads, ports, utilities, etc.) is poor, and the investment rate is low on a global comparative basis. Theaverage investment rate was 22% of GDP during the past five years. The 2018 World Economic Forum’s Global Competitiveness Indexranks Paraguay’s infrastructure at 101st out of 140 countries. That said, competitiveness has improved in recent years.

The government has made some progress on the reform agenda presented in the 2014-30 National Development Plan. The growthstrategy outlined in the plan emphasizes infrastructure investment, particularly improving transportation and electricity distribution.The authorities have launched several vital road expansions using the new public-private partnership (PPP) framework. The work willduplicate the national highway linking Asuncion with major cities, including Ciudad del Este on the border with Brazil, and connectingother local capitals. In addition, the “bi-oceanic” corridor would help Paraguay overcome some of the drawbacks of its landlockedstatus in South America.



Proceeds from the issuance of global bonds since 2013 are being used for infrastructure projects, namely roads, airports, electricityinfrastructure, and a river shipping waterway. In February 2019, the government issued a $500 million eurobond (at 5.4% and maturingin 31 years), a large part of which will be used for infrastructure financing.

Sustained economic growth and increased formalization support a reduction in poverty rates

Robust economic growth has contributed to poverty reduction over the past decade. The poverty rate has dropped significantly to 26%in 2017 from 39% in 2010 – the drop in rural poverty was even larger. Extreme poverty also fell significantly and there is an improvingtrend in income per capita for the poorest quintile of the population.

Growth in light manufacturing and the emergence of the maquila sector in Paraguay have led to increased formalization of the laborforce and to improving employment quality. According to the UN Human Development Report 2018, around 48% of people aged 25and older have at least a secondary education, lower than the Latin American and Caribbean median of 59%. Paraguay has a youngpopulation with a median age of 24.9 years, and the secondary school (three years between age 15-17) enrollment rate is 77%, wellbelow the Latin American and Caribbean median of 96%, indicating that education levels have the potential to improve and contributeto increased competitiveness.



Institutional strength: Low


+ Final -


Median of countries with Ba1 ratingScore for Paraguay


weight 75% weight 25%

Institutional strength evaluates whether the country’s institutional features are conducive to supporting a country’s ability and willingness to repay its

debt. A related aspect of institutional strength is the capacity of the government to conduct sound economic policies that foster economic growth and

prosperity. Institutional strength is adjusted for the track record of default. This adjustment can only lower the overall score of institutional strength.



Paraguay Low

POLICY CREDIBILITY AND EFFECTIVENESSINSTITUTIONAL FRAMEWORK AND EFFECTIVENESS

Worldwide GovernmentEffectiveness index Worldwide Rule of Law index

Worldwide Control of Corruptionindex Inflation level (%)

Inflation volatility (standarddeviation)

VERY HIGH

HIGH

MODERATE

LOW

VERY LOW

We have set the institutional strength score at “Low,” which is above the scorecard-indicated outcome of “Very Low (+),” to reflectParaguay's improving fiscal framework and economic policy effectiveness. Our assessment reflects the Worldwide GovernanceIndicator (WGI) scores for Paraguay (including government effectiveness, rule of law and control of corruption), which are consistentlyamong the lowest 20% of our rated sovereigns and compare poorly with Ba peers (see Exhibits 5 and 6). Paraguay’s institutionalframework, however, has improved in recent years with the passage of a number of new laws including the Fiscal Responsibility Law,the Law to Modernize the State’s Financial Administration, and the PPP Law. These reforms have contributed to an improvement of thebusiness environment, which is reflected in a higher ranking in the World Bank's 2018 “Ease of Doing Business” indicator. Paraguay’sranking has moved up to 113th in 2018 from 124th in 2010. Other sovereigns with a similar score for institutional strength includeTrinidad & Tobago (Ba1 stable) and Bolivia (Ba3 stable).

Paraguay L Median Russia Guatemala Kazakhstan Azerbaijan BoliviaCote d

Ivoire

Ba1/STA Baa3/STA Ba1/STA Baa3/STA Ba2/STA Ba3/STA Ba3/STA

Final score L L+ L- L+ L- L L

Scorecard-indicated outcome VL+ L L L+ L L VL

Gov. Effectiveness, percentile [1] 8.8 22.8 40.4 14.7 45.5 36.0 27.2 9.5

Rule of Law, percentile [1] 19.8 20.6 14.7 5.8 31.6 24.2 2.9 21.3

Control of Corruption, percentile [1] 21.3 29.4 11.7 19.8 15.4 12.5 22.7 30.8

Average inflation (%) 3.9 3.8 5.8 3.7 6.5 5.1 3.7 1.5

Volatility in inflation (ppts) 1.6 2.3 3.7 1.2 2.6 4.5 2.3 1.4

[1] Moody's calculations. Percentiles based on our rated universe.

Peer comparison table factor 2: Institutional strength

Sound macroeconomic policy framework partially offsets weak governance indicators

The government’s track record of sound fiscal management signals a higher degree of government effectiveness than suggested by thecountry’s governance indicators. Efforts to improve transparency and corruption perceptions include public sector payroll disclosuresand improved access to information. The constitutional requirement (Article 104), which was enacted in 2013, requires public officials


https://www.moodys.com/credit-ratings/Trinidad-Tobago-Government-of-credit-rating-3055

https://www.moodys.com/credit-ratings/Bolivia-Government-of-credit-rating-108200


to declare their assets. The government improved accountability of the public sector by disclosing public officials' wages, and disclosingmost of the government's assets and procurement data to the public.

In addition, the government implemented internal scorecards to monitor performances of government bodies and former PresidentHoracio Cartes' administration escalated the importance of intellectual property enforcement. A few key improvements include: (1) TheUS Trade Representative (USTR) signed a memorandum of understanding (MoU) on Intellectual Property Rights with Paraguay; (2) TheFinancial Action Task Force (FATF) removed Paraguay from the FATF’s monitoring list under its on-going global Anti-Money Launderingand Combating the Financing of Terrorism (AML/CFT) compliance process in 2012 – after the FATF had identified deficiencies inFebruary 2010, the country made significant progress in improving the framework and met the FAFT's requirements; and (3) TheUS State Department’s 2015 Investment Climate Statement Report does not flag any concerns in the areas of attitude toward FDI,restrictions on foreign exchange or investment disputes in Paraguay. The Abdo Benítez administration has also submitted 12 laws toCongress to strengthen anti-money laundering.

Paraguay’s tax revenue collection has improved since 2014 after the passage of a tax reform package and improved tax collectionefforts. The tax reform package included gradual implementation of a personal income tax (IRP); a transformation of the agriculturalincome tax (IRAGRO) from a progressive rate to a simple rate of 10% for all producers; and introduction of a new 5% agriculturalsector VAT. In May 2019, the government submitted a tax reform law to parliament which focuses on reducing exemptions, improvingtax efficiency, and widening the tax base rather than increasing the different tax rates. The government estimates that the tax reformwill generate 0.7% of GDP in additional revenues. We expect the Senate and the Chamber of Deputies to approve the tax reform law inthe third quarter of 2019.

Exhibit 5

Worldwide Governance Indicators, 2017Exhibit 6

Paraguay's governance indicator scores have remained relativelystable over time

0

20

40

60Political Stability

GovernmentEffectiveness

Rule of Law

Control of Corruption

Voice andAccountability

Regulatory Quality

Paraguay Median - LatAM Median - Low F2

Sources: Worldwide Governance Indicators, Moody’s Investors Service

0

10

20

30

40

50

60

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Government Effectiveness Rule of Law

Control of Corruption Voice & Accountability

Regulatory Quality Political Stability

Source: Worldwide Governance Indicators

Inflation-targeting monetary policy framework supports price stability

The central bank of Paraguay adopted an inflation targeting regime in 2011. In December 2014, it reduced its target from 5% to 4.5%+/- 2 percentage points, narrowing the previous 5% +/- 2.5 percentage point range. In February 2017, the target was revised againto 4% +/- 2 percentage points. Ever since, inflation has mostly remained within the target range, and inflation volatility has declinedfollowing the establishment of the regime (see Exhibit 7).



Exhibit 7

Inflation volatility has diminished and remains within the targetrange(Annual inflation metrics, % year-on-year)

Exhibit 8

Guarani has been weakening since early 2018(Guarani/USD)

0

2

4

6

8

10

12

Headline inflation Target range


3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

Sources: Central Bank of Paraguay and Haver Analytics

Inflation reached 3.2% at end-2018, down from 4.5% a year earlier. The slowdown in inflation was the result of a decline in food pricesand the appreciation of the guarani versus the Brazilian real and Argentine peso. As such, the monetary policy rate remained flat at5.25% throughout 2018. With inflation slowing down in the first quarter of 2019, the central bank cut the policy rate twice by 25 basispoints in both February and March 2019 to reach 4.75%. We expect inflation to hold around the midline of the central bank’s targetrange in 2019.

In the context of an improved monetary framework, financial dollarization has been declining from elevated levels, and hoversbelow 50% of deposits and loans, with some increase in foreign currency credit since 2011. Risks stemming from financial sectordollarization appear contained, as foreign-currency credit is typically limited to naturally hedged borrowers, particularly soy exporters.The authorities have also approved a new banking sector law, one that would allow the central bank to introduce macro-prudentialtools to manage banking sector risk, which would support the country's institutional strength.



Fiscal strength: High (+)


+ Final -


weight 50%

High (+) Score for Paraguay Median of countries with Ba1 rating

weight 50%

Fiscal strength captures the overall health of government finances, incorporating the assessment of relative debt burdens and debt affordability as

well as the structure of government debt. Some governments have a greater ability to carry a higher debt burden at affordable rates than others.

Fiscal strength is adjusted for the debt trend, the share of foreign currency debt in government debt, other public sector debt and for cases in which

public sector financial assets or sovereign wealth funds are present. Depending on the adjustment factor the overall score of fiscal strength can be

lowered or increased.




Paraguay

General government debt (% of GDP) General government debt (% of revenues)General government interest payments (%

of revenue)General government interest payments (%

of GDP)

VERY HIGH

HIGH

MODERATE

LOW

VERY LOW

DEBT AFFORDABILITYDEBT BURDENDEBT BURDEN

We have set Paraguay’s fiscal strength at “High (+)”, reflecting the country’s favorable debt metrics compared to the median of Ba-rated countries. Paraguay’s government debt-to-GDP ratio is well below the Ba median of 51%. Paraguay’s debt affordability, asmeasured by the ratio of interest payments to revenues, is high, but has declined over the past five years as interest payments torevenues reached an estimated 4.6% of revenue in 2018, up from 1.3% in 2012. Other sovereigns with a similar score for fiscal strengthinclude Malta (A3 positive) and Panama (Baa1 stable).

Paraguay H+ Median Panama Malta Kazakhstan Peru Bulgaria Azerbaijan

Ba1/STA Baa1/STA A3/POS Baa3/STA A3/STA Baa2/STA Ba2/STA

Final score H+ H+ H+ VH- VH- H H

Scorecard-indicated outcome H+ H+ VH VH VH- VH- H+

Gen. gov. debt/GDP 17.6 39.0 39.5 46.0 21.1 25.7 22.6 33.4

Gen. gov. debt/revenue 126.4 122.4 200.4 118.4 92.9 132.2 61.6 85.9

Gen. gov. interest payments/GDP 0.6 1.6 1.8 1.5 0.8 1.4 0.7 0.7

Gen. gov. int. payments/revenue 4.6 4.3 9.0 3.9 3.6 6.9 1.8 1.9

Peer comparison table factor 3: Fiscal strength

Fiscal performance is stronger than peers…

Paraguay’s fiscal position has consistently outperformed the medians for both Ba- and Baa-rated peers over the past decade (seeExhibit 9). The fiscal deficit reached 1.3% of GDP in 2018 and 1.1% of GDP in 2017. This in line with the Fiscal Responsibility Law (FRL),which requires the central government’s fiscal deficit to not exceed 1.5% of GDP. A deficit below the ceiling reflects, in part, a statisticalrevision related to the rebasing of GDP series as the 2018 budget used the previous GDP series (1994 base), which involved a lowernominal value for GDP when the budget law was passed.

Government revenue declined to 13.9% of GDP in 2018 from 14.2% a year earlier as a result of lower non-tax and income taxrevenues. On the spending side, government expenditures were 15.2% of GDP in 2018, in line with 2017 (15.3% of GDP), as an increasein current expenditures – driven by higher social spending and a larger wage bill – was largely offset by a decline in capital expenditures.


https://www.moodys.com/credit-ratings/Malta-Government-of-credit-rating-600012947

https://www.moodys.com/credit-ratings/Panama-Government-of-credit-rating-591640


We expect the 2019 fiscal deficit to reach 1.3% of GDP, slightly below the government’s estimated deficit of 1.4%. Whereas thebudgeted non-tax revenue projections appear optimistic, we expect the government to reduce its spending to contain the fiscal deficitand to continue to adhere to the FRL’s ceiling of 1.5%.

Exhibit 9

Paraguay’s fiscal position outperforms Ba- and Baa-rated peers(% of GDP)

Exhibit 10

Revenue sustained at higher levels due to tax increases andimproved enforcement(% of GDP)

-6

-5

-4

-3

-2

-1

0

1

2

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F

Paraguay Ba median Baa median

Sources: Central Bank of Paraguay, Ministries of Finance, Moody's Investors Service

4.2 3.74.1 4.6

4.0

4.0 4.5 4.4 4.2 4.0

8.3 8.8 9.3 9.4 8.99.7 9.6 9.5 9.9 9.9

0

2

4

6

8

10

12

14

16

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Tax revenue Non-tax revenue

Sources: Central Bank of Paraguay, Moody's Investors Service

…while remaining compliant with the Fiscal Responsibility Law

The government passed the FRL in 2013 and its implementation started with the 2015 Budget Law (see Box 1 for more detail onthe FRL). According to the FRL, the central government deficit should not exceed 1.5% of GDP except in years of crisis, and currentexpenditure growth should be capped at 4% plus inflation. The FRL also restricts salary increases and election year-related spending,and aims to curtail Congress’s ability to increase expenditures, while simultaneously increasing the line item for “other revenue”without actually identifying the source of that revenue. Successive governments in Paraguay have had a track record of conservativefiscal management. The passage of the FRL entrenched fiscal prudence and should create room to increase capital expenditures overtime. Adherence to the FRL, which sets limits on current spending, will open financial space to increase public investment, more so asthe government steps up its efforts to increase revenue collection.



Box 1: Fiscal Responsibility Law

In late October 2013, Congress approved Law 5098, the Fiscal Responsibility Law (FRL). The law includes the following stipulations:

» The central government’s fiscal deficit should not to exceed 1.5% of GDP beginning in 2015, or 1% of GDP in the medium term(i.e., two years from now). There is an exception to this rule to account for any economic shocks or crisis, but the deficit maynot exceed 3% of GDP even during those exceptions.

» The annual increase in public sector current primary spending cannot exceed the inflation rate plus 4%.

» Salaries will not be raised except when there is an increase in the minimum wage. The minimum wage can be increased whenthe inflation rate exceeds 10% year-over-year. When there is an increase is salaries, the maximum raise should be equivalent tothe increase in the minimum wage and be incorporated into the budget for the following year.

» Congress may no longer adjust revenue projections in the budget that are submitted by the Executive branch.

» During years when there are general elections, the central government's current primary spending from January to July may notexceed 60% of the budget for that year.

» The government will create a multi-year (three-year) budget as a reference to determine the adequate provisioning of revenueand expenditures over the medium term.

The law is aimed at strengthening fiscal institutions, and containing the increase in current spending so that the government can enhance itscapital expenditure.

In our view, increasing investment spending, while maintaining overall low deficits and government debt is a credit positivedevelopment. Striking an effective balance between growth-enhancing investment, financed through external borrowing, whilemaintaining a low debt burden is key to preserving Paraguay's fiscal strength, which anchors the sovereign credit profile.

The government has decided to shelf FRL reform for the time being, instead choosing to focus on enhancing the current framework.Specifically, the government is working on improving debt management in an effort to add flexibility to liability managementoperations. It is also adopting the OECD standard for revenue administration and imposing fines and increased penalties for tax evasionin an effort to improve overall revenue intake.

Exhibit 11

Containment of current expenditures creates fiscal space for public investment(% of GDP)

0

4

8

12

16

20

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Personal services Goods and services Interest Social benefits Other Capital expenditure

Sources: Moody's Investors Service, Banco Central del Paraguay



Government debt metrics are favorable relative to peers

Paraguay’s key fiscal and government debt metrics compare favorably to the Ba median with Paraguay's debt-to-GDP of 17.6% in 2018,well below the Ba median of 51%.

Since its first issuance in 2013, the government has accessed global capital markets multiple times. The bonds shifted the compositionof the government’s debt and reduced the share of multilateral and bilateral debt. As of April 2019, 32.3% of Paraguay’s centralgovernment debt was owed to multilateral development banks (MDBs) and bilateral creditors compared to 53.6% in 2012 (see Exhibits12 and 13). Paraguay's global bonds have long maturities (10 and 30 year maturities) and favorable interest rates (4%-6% yields). Dueto the still high portion of financing from MDBs, debt affordability is very high. Interest payments amounted to 4.6% of governmentrevenue in 2018, up from 2.1% in 2014, but will remain well below the 8.5% median for Ba-rated countries.

Paraguay has a relatively high share of foreign currency government debt (83.7% of total debt in 2018), which is a source of externalvulnerability. However, there are important mitigating factors, including a large portion of multilateral and bilateral loans with longmaturities, and a steady stream of foreign exchange revenue from electricity exports to Brazil and Argentina, generated by the Itaipúand Yacyretá dams, which creates a natural hedge on the sovereign's balance sheet.

Exhibit 12

Paraguay's central government debt level remains low(% of GDP)

Exhibit 13

Increased presence in international capital markets(Central government debt composition [% of total debt])

0

2

4

6

8

10

12

14

16

18

20

2012 2013 2014 2015 2016 2017 2018

External debt Internal debt

Sources: Ministerio de Hacienda, Banco Central del Paraguay

54%

6%

40%

34%

49%

16%

Multilateral / bilateral debt

Bonds (China Trust)

Bonds (International)

Internal debt

External Debt2018

2012

Sources: Ministerio de Hacienda, Banco Central del Paraguay



Susceptibility to event risk: Low

Scale VL- VL VL+ L- L L+ M- M M+ H- H H+ VH- VH VH+

+ Final -


Median of countries with Ba1 ratingScore for ParaguayParaguay Low

Susceptibility to event risk evaluates a country’s vulnerability to the risk that sudden events may severely strain public finances, thus increasing the

country’s probability of default. Such risks include political, government liquidity, banking sector and external vulnerability risks. Susceptibility of event

risk is a constraint which can only lower the preliminary rating range as given by combining the first three factors.

Note: In case the Scorecard-Indicated outcome and Final scores are the same, only the Final score will appear in the table above.


DEBT BURDENPOLITICAL RISK

GOVERNMENT LIQUIDITY RISK BANKING SECTOR RISK EXTERNAL VULNERABILITY RISK

Political riskGross borrowing

requirements/GDPNon-resident share

of gen. gov. debt (%)Market-implied rating

Average baselinecredit assessment

(BCA)Total domestic bank

assets/GDPBanking system

loan-to-deposit ratio

(Current accountbalance + FDIinflows)/GDP

External vulnerabilityindicator (EVI)

Net internationalinvestment

position/GDP

VERY HIGH

HIGH

MODERATE

LOW

VERY LOW

The score for susceptibility to event risk is set at “Low” and reflects “Low” political risk, “Very Low (+)” government liquidity risk, “VeryLow (+)” banking sector risk and “Low (-)” external vulnerability risk.

Political risk: Low

Paraguay Romania India Indonesia Croatia Hungary Serbia

Ba1/STA Baa3/STA Baa2/STA Baa2/STA Ba2/POS Baa3/STA Ba3/STA

Final score L L+ L L L- L+ L-

Geopolitical risk VL -- VL L VL VL VL VL

Domestic political risk L -- L+ L L L- L+ L-

Peer comparison table factor 4a: Political risk

Paraguay’s political risk is low because we do not expect political events to materially affect credit metrics, lead to significant changesin economic policies, or impair the government’s willingness or ability to service debt. However, political wrangling between theadministration and Congress over the approval of the 2017, 2018 and 2019 budgets, as well as the legislative body challengingthe issuance of international bonds, are examples of political dynamics that could stall investment plans. Weaker-than-expectedinfrastructure investment and lower private investment could decelerate efforts to diversify the economy, which would affect theeconomy's growth prospects and its resilience to shocks.

In August 2018, Mario Abdo Benitez, former senator from the Colorado Party, started his five-year term as president after winning arelatively narrow victory against his opponent, garnering 46% of the vote, just four percentage points more than his rival. Given theColorado Party's dominance in local politics, the party has held control of government in all but four of the last 70 years. We expect Mr.Benitez's administration to deviate little from the party's historically business-friendly policy framework.



Government liquidity risk: Very Low (+)

Paraguay VL+ Median Romania Guatemala Bahamas Morocco Panama Iceland

Ba1/STA Baa3/STA Ba1/STA Baa3/STA Ba1/STA Baa1/STA A3/POS

Final score VL+ VL+ VL+ L- L- VL VL

Scorecard-indicated outcome VL+ VL+ VL+ L- VL+ VL VL+

Gross borrowing req./GDP 2.0 6.2 7.6 4.1 4.8 13.9 4.3 1.4

Gen. gov. ext. debt/gen. gov. debt 83.7 44.2 45.8 42.7 36.4 20.6 80.1 23.1

Market funding stress indicator Baa3 Baa1 A3 Ba1 Ba3 Ba1 Baa1 Baa3

Peer comparison table factor 4b: Government liquidity risk

Government liquidity risk is limited given historically low fiscal deficits and low borrowing requirements. Although external debt makesup a large share of total debt, much is from multilateral lenders at concessional rates, thereby limiting external risks. The sovereign hasimproved its access to global international capital markets since its first external bond issuance in 2013.

Banking sector risk: Very Low (+)

Paraguay VL+ Median Romania Guatemala Indonesia Mexico KenyaPapua New

Guinea

Ba1/STA Baa3/STA Ba1/STA Baa2/STA A3/NEG B2/STA B2/STA

Final score VL+ VL+ L- L- VL+ L- VL+

Scorecard-indicated outcome VL+ VL+ L- L- VL+ H L-

Baseline credit assessment ba2 baa1 ba2 b1 baa3 baa3 b2 --

Total dom. bank assets/GDP 54.4 74.0 51.5 55.8 55.3 40.3 -- 39.0

Loan-to-deposit ratio 80.0 85.3 76.2 83.3 -- 90.6 -- 73.4

Peer comparison table factor 4c: Banking sector risk

Banking sector risk is set at “Very Low (+)”, reflecting the relatively small size of the banking sector, with banking sector assetsequivalent to only 54% of GDP in 2018, which limits banking sector risk.

The Paraguayan banking sector comprises 16 commercial banks, one government-owned development bank, and numerousnonbanking institutions (finance companies). Banks’ lending portfolios are concentrated in the country's large agribusiness sectorand small business lending, while non-bank lenders dominate the market for consumers loans. The four largest banks in thesystem, including two foreign-owned lenders and two domestic firms, hold 52% of deposits and 54% of loans as of April 2019. Thegovernment-owned development bank has a small market share, with 9% of the system’s deposits.

Banks remain heavily exposed to the performance of the agribusiness sector, although growth in new industries should diminishconcentration risks. We expect loan growth in 2019 of 10.4% in 2019 and 9.2% in 2020, although down from 15.2% in 2018, inline with continued resilient economic growth. Delinquencies will likely remain steady at the elevated levels of 2018, as the systemcontinues to digest the twin commodity price and exchange rate shocks of 2015. Restructured loans have not fallen as quickly asexpected and banks have built up foreclosed assets on their balance sheets, leaving asset quality vulnerable to potential volatility.Although financial dollarization remains high, foreign currency lending is largely concentrated in corporate loans to exporters thatgenerate dollar revenues, which helps mitigate foreign currency mismatches.

Regulatory changes continue to increase financial inclusion, which is positive for consumer lending, and legislation passed in recentyears is helping to foster increased corporate lending through public-private partnerships. Household debt remains low. Paraguayanbanks also maintain high liquidity ratios, report high loan-loss reserves and high capitalization ratios. However, profitability will bepressured by tighter margins for Paraguay's rated banks in 2019 after net income to tangible assets fell by 30 basis points in 2018, butremain at high levels.



External vulnerability risk: Low (-)

Paraguay L- Median India Vietnam Kazakhstan Morocco Russia Azerbaijan

Ba1/STA Baa2/STA Ba3/STA Baa3/STA Ba1/STA Baa3/STA Ba2/STA

Final score L- L- L- L L VL+ VL+

Scorecard-indicated outcome L- VL+ VL- L+ L- VL- L

(Curr. acc. bal. + FDI inflows)/GDP 1.7 0.8 -0.8 8.9 0.1 -3.2 7.4 15.9

External vulnerability indicator (EVI) 95.2 42.6 69.8 42.6 132.8 70.0 23.3 118.1

Peer comparison table factor 4d: External vulnerability risk

Paraguay has maintained a more favorable current account position over the past decade compared to Ba and Baa peers (see Exhibit14). The current account deteriorated but still reported a surplus of 0.4% of GDP in 2018, after posting a surplus of 3.1% of GDP in2017. The result was primarily due to a larger trade deficit as exports declined due to the appreciation of the exchange rate and astronger import demand. Foreign direct investment and international reserves remained relatively stable compared to 2017.

Export dependence on regional trade partners has been declining. The largest trade partners are MERCOSUR members – mostly Brazil,then Argentina, and Uruguay (Baa2 stable) – which together accounted for 50% of Paraguay’s exports in 2018, down from 56% in2009, followed by the EU, Asia, and Russia (Baa3 stable), which all accounted for 9% of total exports in 2018. Since 2011, exports toAsia and Russia have increased steadily, while exports to the EU have decreased.

While we estimate Paraguay's External Vulnerability Indicator (EVI), which relates total upcoming external debt payments to the levelof reserves, estimated at 87% in 2019, vulnerability to external shocks is moderate given the country's low stock of external debt,adequate reserve buffer, and flexible exchange rate. Gross international reserves have grown more than eight-fold over the past decadeto $7.9 billion in May 2019, about 6.8 months of imports of goods and services, from $1.0 billion in January 2006 (see Exhibit 15).

Public Private Partnership law supports increased FDI inflow

While Paraguay attracts significant foreign capital, only a small share remains reinvested in the country, with net foreign directinvestment (FDI) averaging around 1.0% of GDP over the past five years, below the Ba median of 2.8%. FDI growth has recently beenconcentrated in the construction and maquila sectors, which benefit from Paraguay’s low labor and energy costs, and a competitivetax system – Paraguay guarantees equal treatment of foreign investors under law 117/91 and permits full repatriation of capital andprofits under law 60/90. Ongoing improvements in the business environment and development of the maquila industry have keptFDI flows relatively steady. Approval of the PPP law and the government strategy to attract foreign investors to support infrastructureinvestments should provide an additional boost to FDI flows.

Exhibit 14

Stronger current account position compared to peers(Currentaccount balance, % of GDP)

Exhibit 15

Reserve position has grown eight-fold over the past decade(Gross international reserves, USD millions)

-5

-4

-3

-2

-1

0

1

2

3

4

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F

Paraguay Ba median Baa median

Sources: Moody's Investors Service, Central Bank of Paraguay

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Gold Dollar Other Currencies

Sources: Moody's Investors Service, Central Bank of Paraguay


https://www.moodys.com/credit-ratings/Uruguay-Government-of-credit-rating-15210

https://www.moodys.com/credit-ratings/Russia-Government-of-credit-rating-600018921


Rating rangeCombining the scores for individual factors provides an indicative rating range. While the information used to determine the grid mapping is mainly historical, our ratings incorporateexpectations around future metrics and risk developments that may differ from the ones implied by the rating range. Thus, the rating process is deliberative and not mechanical,meaning that it depends on peer comparisons and should leave room for exceptional risk factors to be taken into account that may result in an assigned rating outside the indicativerating range. For more information please see our methodology on Sovereign Bond Ratings.

Exhibit 16

Sovereign rating metrics: Paraguay

VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL-

+ -


+ -


+ - VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL-

+ -


+ -

VL- VL VL+ L- L L+ M- M M+ H- H H+ VH- VH VH+

+ -

Baa2 - Ba1

Ba1

Economic strength

How strong is the economic structure?

How robust are the institutions and how predictable are the policies?

Sub-factors: institutional framework and effectiveness,policy credibility and effectiveness

How does the debt burden compare with the government's resource mobilization capacity?

Assigned rating:

Institutional strength

Fiscal strength

Susceptibility to event risk

What is the risk of a direct and sudden threat to debt repayment?

Economic resiliency

Government financial strength

Sub-factors: growth dynamics, scale of the economy, wealth

Sub-factors: debt burden, debt affordability

Sub-factors: political risk, government liquidity risk, banking sector risk, external vulnerability risk

Rating range:

Source: Moody's Investors Service




ComparativesThis section compares credit relevant information regarding Paraguay with other sovereigns that we rate. It focuses on a comparison with sovereigns within the same rating range andshows the relevant credit metrics and factor scores.

Paraguay's $41 billion economy is in line with Baa-rated median, but relatively smaller than its Ba1 and Baa3 peers. On the other hand, average annual real GDP growth is morerobust, averaging 4.1% in the ten years ended 2023, which is twice the Latin America and Caribbean median over the same period. Its institutional strength is a key credit weakness,however, with World Governance Indicators trailing all of its selected peers, particularly those of Morocco (Ba1 stable) and Romania (Baa3 stable). At the same time, its fiscal strengthis a clear credit strength, with a debt burden below the Ba1 median and all selected peers. Paraguay's low interest burden is only rivaled by that of Azerbaijan (Ba2 stable) and Russia.

Exhibit 17

Paraguy key peers

YearParaguay Romania Guatemala Kazakhstan Morocco Hungary Ba1 Median

Latin America and

Caribbean Median

Rating/Outlook Ba1/STA Baa3/STA Ba1/STA Baa3/STA Ba1/STA Baa3/STA Ba1 Ba3

Rating Range Baa2 - Ba1 Baa2 - Ba1 Ba1 - Ba3 Baa2 - Ba1 Baa3 - Ba2 Baa2 - Ba1 Ba1 - Ba3 Ba2 - B1

Factor 1 M- M+ M M M M+ M M-

Nominal GDP (US$ bn) 2018 40.8 239.6 78.5 170.5 118.5 155.7 59.7 50.2

GDP per capita (PPP, US$) 2018 13395.3 26446.7 8436.4 27549.8 8932.6 31902.7 12312.0 14943.5

Avg. real GDP (% change) 2014-2023 4.1 4.0 3.5 3.0 3.5 3.3 3.0 2.1

Volatility in real GDP growth (ppts) 2009-2018 3.5 3.9 1.1 2.4 1.2 3.5 2.9 2.3

Global Competitiveness index 2017 3.7 4.3 4.1 4.4 4.2 4.3 4.1 4.1

Factor 2 L M L- L+ M M+ L+ L+

Government Effectiveness, percentile [1] 2017 8.2 33.5 13.4 44.7 35.8 64.9 44.4 37.3

Rule of Law, percentile [1] 2017 19.4 61.9 5.9 30.5 42.5 67.9 44.4 32.0

Control of Corruption, percentile [1] 2017 21.6 53.7 20.1 15.6 50.7 55.9 44.8 38.0

Average inflation (% change) 2014-2023 3.9 2.0 3.7 6.5 1.6 2.0 3.4 3.1

Volatility in inflation (ppts) 2009-2018 1.6 2.8 1.2 2.6 0.5 2.0 1.5 1.7

Factor 3 H+ M+ M+ VH- M M+ M M-

Gen. gov. debt/GDP 2018 17.6 35.0 24.4 21.1 65.1 70.8 49.1 52.3

Gen. gov. debt/revenue 2018 126.4 109.2 230.9 92.9 249.8 160.1 189.1 224.7

Gen. gov. interest payments/revenue 2018 4.6 3.7 13.6 3.6 11.4 5.7 10.2 10.2

Gen. gov. interest payments/GDP 2018 0.6 1.2 1.4 0.8 3.0 2.5 2.2 2.3

Gen. gov. financial balance/GDP 2018 -1.3 -3.0 -1.8 2.7 -3.7 -2.2 -3.6 -2.5

Factor 4 L M- M- M M M- M- M-

Current account balance/GDP 2018 0.4 -4.5 0.8 0.0 -5.4 0.5 -1.8 -2.8

Gen. gov. external debt/gen. gov. debt 2018 83.7 45.8 42.7 34.9 20.6 39.4 36.8 55.5

External vulnerability indicator (EVI) 2020F 95.2 158.2 24.4 132.8 70.0 116.3 71.0 61.5

[1] Moody's calculations. Percentiles based on our rated universe.

Source: Moody's Investors Service


https://www.moodys.com/credit-ratings/Morocco-Government-of-credit-rating-600020405

https://www.moodys.com/credit-ratings/Romania-Government-of-credit-rating-651437

https://www.moodys.com/credit-ratings/Azerbaijan-Government-of-credit-rating-806356890


DATA, CHARTS AND REFERENCESChart pack: ParaguayExhibit 18

Economic growthExhibit 19

Investment and saving

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Real GDP volatility, t-9 to t (ppts) (RHS)

Real GDP (% change) (LHS)

Sources: Banco Central del Paraguay, Moody's Investors Service

0

5

10

15

20

25

30

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gross investment/GDP Gross domestic saving/GDP


Exhibit 20

National incomeExhibit 21

Population

0

2000

4000

6000

8000

10000

12000

14000

16000

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

GDP per capita ($) GDP per capita (PPP basis, $)

Sources: Haver Analytics, Moody's Investors Service

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1.60

5.6

5.8

6.0

6.2

6.4

6.6

6.8

7.0

7.2

7.4

7.62

009

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Population (Mil.) (LHS) Population growth (% change) (RHS)


Exhibit 22

Global Competitiveness IndexRank 95 out of 140 countries

Exhibit 23

Inflation and inflation volatility

0 20 40 60 80 100 120

Guatemala (Ba1/STA)

Paraguay (Ba1/STA)

Morocco (Ba1/STA)

Azerbaijan (Ba2/STA)

Romania (Baa3/STA)

Russia (Baa3/STA)

Source: World Economic Forum

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Inflation rate volatility, t-9 to t (ppts) (RHS)

Inflation rate (CPI, % change Dec/Dec) (LHS)




Exhibit 24

Institutional Framework and EffectivenessExhibit 25

Debt burden

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Government Effectiveness[1] Rule of Law[1] Control of Corruption[1]

Notes: [1] Composite index with values from about -2.50 to 2.50: higher values suggestgreater maturity and responsiveness of government institutions.Source: Worldwide Governance Indicators

0

20

40

60

80

100

120

140

160

0

2

4

6

8

10

12

14

16

18

20

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gen. gov. debt/GDP (%) (LHS)

Gen. gov. debt/gen. gov. revenue (%) (RHS)

Sources: Ministerio de Hacienda, Moody's Investors Service

Exhibit 26

Debt affordabilityExhibit 27

Financial balance

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gen. gov. interest payment/GDP (%) (LHS)

Gen. gov. interest payment/gen. gov. revenue (%) (RHS)


-1.5

-1.0

-0.5

0.0

0.5

1.0

1.52

009

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gen. gov. financial balance/GDP (%)

Gen. gov. primary balance/GDP (%)


Exhibit 28

Government liquidity riskExhibit 29

External vulnerability risk

0

2

4

6

8

10

12

14

16

18

20

0

10

20

30

40

50

60

70

80

90

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gen. gov. debt/GDP (%) (RHS)

Gen. gov. external debt/total gen. gov. debt (%) (LHS)

Sources: Ministerio de Hacienda, Haver Analytics, Moody's Investors Service

0

20

40

60

80

100

120

140

160

0

20

40

60

80

100

120

140

160

20

09

20

10

20

11

20

12

2013

2014

2015

20

16

20

17

20

18

20

19

F

20

20

F

External debt/CA receipts (%)(LHS)

External vulnerability indicator (%)(RHS)




Rating history

Exhibit 30

Paraguay[1]

Foreign Currency Local Currency Outlook Long-term Short-term Long-term Short-term Date

Rating Raised Ba1 Ba1 Stable Baa3 -- Ba2 -- Mar-15

Rating Raised Ba2 Ba2 Positive -- -- Ba3 -- Feb-14

Rating Raised Ba3 Ba3 Stable Ba1 -- B1 -- Jan-13

Rating Raised B1 B1 Stable Ba3 -- B2 -- Dec-10

Review for Upgrade B3 B3 RUR+ -- -- -- -- Jun-10

Rating Raised B3 B3 Stable B2 -- B3 -- Apr-08

Review for Upgrade Caa1 Caa1 RUR+ -- -- -- -- Nov-07

Rating Raised -- -- -- B3 -- -- -- May-06

Rating Lowered Caa1 Caa1 Stable Caa1 -- Caa2 -- Apr-03

Rating Assigned B2 B1 Stable B2 NP B3 NP Jul-98

Bonds & Notes Bank Deposit

Government Bonds Foreign Currency Ceilings

Notes: [1] Table excludes rating affirmations. Please visit the issuer page for Paraguay for the full rating history.Source: Moody's Investors Service


https://www.moodys.com/credit-ratings/Paraguay-Government-of-credit-rating-600044126


Annual statistics

Exhibit 31

Paraguay2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019F 2020F

Economic structure and performance

Nominal GDP (US$ bil.) 22.3 27.2 33.7 33.3 38.6 40.3 36.2 36.1 39.0 40.8 41.4 43.5

Population (Mil.) 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 7.0 7.1 7.2 7.3

GDP per capita (US$) 3,622 4,347 5,299 5,151 5,883 6,050 5,353 5,260 5,610 5,791 5,787 5,996

GDP per capita (PPP basis, US$) 8,595 9,514 9,971 9,954 10,817 11,387 11,691 12,151 12,810 13,395 -- --

Nominal GDP (% change, local currency) 3.5 16.2 9.6 4.2 13.2 7.8 4.7 8.6 7.2 6.8 7.5 8.0

Real GDP (% change) -0.3 11.1 4.2 -0.5 8.4 4.9 3.1 4.3 5.0 3.7 2.0 3.5

Inflation (CPI, % change Dec/Dec) 1.9 7.2 4.9 4.0 3.8 4.2 3.1 3.9 4.5 3.2 4.0 4.0

Gross investment/GDP 18.7 23.8 24.6 21.3 22.3 22.5 22.1 20.2 21.2 23.1 21.2 21.2

Gross domestic saving/GDP 23.8 26.7 26.6 22.5 26.0 24.5 23.6 25.6 25.3 24.7 25.0 24.3

Nominal exports of G & S (% change, US$ basis) -17.3 36.0 20.1 -7.2 16.9 -2.2 -14.9 6.9 11.2 -0.4 -1.8 6.8

Nominal imports of G & S (% change, US$ basis) -22.0 46.8 22.8 -5.4 8.7 2.4 -13.8 -5.1 16.5 6.1 2.0 5.1

Openness of the economy[1] 67.4 78.0 76.4 72.6 70.6 67.6 64.5 65.4 68.7 67.4 66.5 67.1

Government Effectiveness[2] -0.9 -0.9 -0.8 -0.9 -0.9 -0.9 -0.9 -0.8 -0.8 -- -- --

Government finance

Gen. gov. revenue/GDP[3] 12.5 12.6 13.4 14.0 12.9 13.7 14.1 13.9 14.2 13.9 14.2 14.2

Gen. gov. expenditures/GDP[3] 12.4 11.6 12.7 15.2 14.1 14.6 15.5 15.0 15.3 15.2 15.5 15.5

Gen. gov. financial balance/GDP[3] 0.1 1.0 0.7 -1.2 -1.3 -0.9 -1.3 -1.1 -1.1 -1.3 -1.3 -1.3

Gen. gov. primary balance/GDP[3] 0.5 1.2 0.9 -1.1 -1.0 -0.6 -0.9 -0.5 -0.6 -0.6 -0.6 -0.5

Gen. gov. debt (US$ bil.)[3] 2.4 2.5 2.3 3.2 3.8 4.8 4.8 5.5 6.2 6.9 7.3 7.8

Gen. gov. debt/GDP[3] 9.8 8.7 7.3 9.3 10.2 12.4 14.8 15.5 15.9 17.6 18.0 18.1

Gen. gov. debt/gen. gov. revenue[3] 78.1 69.4 54.6 66.0 79.1 90.5 105.2 111.5 112.2 126.4 126.7 127.7

Gen. gov. interest payments/gen. gov. revenue[3] 3.1 2.1 1.5 1.3 1.9 2.1 3.4 4.0 4.1 4.6 4.9 5.3

Gen. gov. FC & FC-indexed debt/gen. gov. debt[3] 80.1 80.5 83.2 59.7 62.9 68.6 74.6 79.1 81.0 83.7 83.9 82.5

Sources: Moody's Investors Service, Ministry of Finance, IMF



Exhibit 32

Paraguay2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019F 2020F

External payments and debt

Nominal exchange rate (local currency per US$, Dec) 4610.0 4573.8 4439.9 4288.8 4524.0 4626.3 5806.9 5766.9 5590.5 5960.5 6200.0 6300.0

Real eff. exchange rate (% change) -8.3 1.3 11.8 -1.9 4.2 2.3 -2.3 -3.5 -0.8 3.3 -- --

Current account balance (US$ bil.) 0.6 0.0 0.2 -0.3 0.7 -0.1 -0.2 1.3 1.2 0.2 -0.3 0.2

Current account balance/GDP 2.5 0.2 0.6 -0.8 1.7 -0.1 -0.4 3.6 3.1 0.4 -0.8 0.4

External debt (US$ bil.) 15.7 16.0 15.8 16.1 15.8 16.2 15.9 15.6 15.7 15.8 17.2 19.3

Public external debt/total external debt 18.0 18.2 17.6 18.1 21.4 26.7 28.9 34.8 39.4 44.3 44.9 45.5

Short-term external debt/total external debt 25.8 27.4 27.8 29.0 29.9 29.8 30.0 29.5 30.3 31.6 31.2 30.8

External debt/GDP 70.4 58.6 46.8 48.4 41.0 40.3 44.0 43.3 40.3 38.7 41.7 44.3

External debt/CA receipts[4] 188.7 140.5 105.8 125.5 99.4 107.1 113.2 111.9 103.4 97.9 108.3 118.9

Interest paid on external debt (US$ bil.) 0.2 0.2 0.2 0.2 0.3 0.3 0.4 0.5 0.4 0.4 0.4 0.4

Amortization paid on external debt (US$ bil.) 0.3 0.3 0.7 1.7 1.4 2.8 1.6 0.9 1.3 1.2 1.1 1.1

Net foreign direct investment/GDP 0.3 1.7 1.7 2.1 0.6 1.0 0.9 1.0 1.2 1.1 1.3 1.3

Net international investment position/GDP -47.1 -36.8 -29.4 -33.3 -26.3 -27.1 -26.6 -24.1 -20.9 -21.2 -- --

Official forex reserves (US$ bil.) 3.6 3.9 4.7 4.4 5.4 6.5 5.5 6.4 7.3 7.2 7.2 7.3

Net foreign assets of domestic banks (US$ bil.) 0.3 0.2 -0.1 -0.4 -0.8 -1.2 -1.0 -0.8 -0.8 -1.1 -- --

Monetary, external vulnerability and liquidity indicators

M2 (% change Dec/Dec) 25.8 16.5 17.4 12.6 18.0 9.4 5.8 10.7 10.9 10.7 -- --

Monetary policy rate (% per annum, Dec 31)[5] -- -- 7.3 5.5 6.0 6.8 5.8 5.5 5.3 5.3 -- --

Domestic credit (% change Dec/Dec) 16.4 31.7 22.6 20.9 14.5 17.4 23.8 0.9 4.2 14.9 -- --

Domestic credit/GDP 19.3 21.9 24.5 28.4 28.7 31.3 37.0 34.4 33.4 35.9 -- --

M2/official forex reserves (X) 1.3 1.4 1.4 1.8 1.6 1.4 1.4 1.3 1.3 1.4 -- --

Total external debt/official forex reserves 432.9 405.7 332.1 369.8 295.3 250.7 290.7 244.3 214.4 219.5 246.6 277.2

Debt service ratio[6] 5.8 4.4 6.2 15.5 10.4 20.2 14.0 9.8 11.7 10.1 9.3 9.3

External vulnerability indicator (EVI)[7][8] 158.2 120.5 129.3 129.0 138.1 140.1 99.3 103.9 92.9 83.1 87.3 95.2

Liquidity ratio[9] 45.6 57.5 100.9 91.9 111.4 138.7 105.6 89.9 66.5 105.5 -- --

Total liabilities due BIS banks/total assets held in BIS banks 45.3 63.6 87.2 81.4 99.1 123.5 99.1 81.7 86.6 91.5 -- --

"Dollarization" ratio[10] 39.8 42.1 39.1 38.5 40.4 43.7 48.4 46.6 43.5 43.1 -- --

"Dollarization" vulnerability indicator[11] 56.7 65.2 62.1 74.1 76.0 78.1 89.6 82.1 74.8 75.7 -- --

[1] Sum of Exports and Imports of Goods and Services/GDP

[2] Composite index with values from about -2.50 to 2.50: higher values suggest greater maturity and responsiveness of government institutions

[3] Central Government

[4] Current Account Receipts

[5] Deposit rate

[6] (Interest + Current-Year Repayment of Principal)/Current Account Receipts

[7] (Short-Term External Debt + Currently Maturing Long-Term External Debt + Total Nonresident Deposits Over One Year)/Official Foreign Exchange Reserves

[8] Excludes non-resident deposits greater than 1 year.

[9] Liabilities to BIS Banks Falling Due Within One Year/Total Assets Held in BIS Banks

[10] Total Foreign Currency Deposits in the Domestic Banking System/Total Deposits in the Domestic Banking System

[11] Total Foreign Currency Deposits in the Domestic Banking System/(Official Foreign Exchange Reserves + Foreign Assets of Domestic Banks)

Sources: Moody's Investors Service, Ministry of Finance, IMF



Moody’s related publications

» Credit Opinion: Government of Paraguay – Ba1 stable: Regular update, 21 June 2019

» Country Statistics: Paraguay, Government of, 31 May 2019

» Outlook: Sovereigns - Latin America & Caribbean: 2019 outlook stable as growth, debt structures still favorable; political risksrising, 9 January 2019

» Rating Action: Moody's affirms Paraguay's Ba1 rating; maintains stable outlook, 21 June 2018

» Rating Methodology: Sovereign Bond Ratings, 27 December 2018

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. Allresearch may not be available to all clients.

Related websites and information sources

» Sovereign risk group web page

» Sovereign ratings list

» Central Bank of Paraguay

» Ministry of Finance

MOODY’S has provided links or references to third party World Wide Websites or URLs (“Links or References”) solely for your convenience in locating related information and services.The websites reached through these Links or References have not necessarily been reviewed by MOODY’S, and are maintained by a third party over which MOODY’S exercises no control.Accordingly, MOODY’S expressly disclaims any responsibility or liability for the content, the accuracy of the information, and/or quality of products or services provided by or advertised onany third party web site accessed via a Link or Reference. Moreover, a Link or Reference does not imply an endorsement of any third party, any website, or the products or services providedby any third party.

AuthorsSamar MaziadVice President - Senior Analyst

Patrick B. CooperAssociate Analyst



https://www.moodys.com/research/Paraguay-Government-of--CTS_600044126



https://www.moodys.com/research/Moodys-affirms-Paraguays-Ba1-rating-maintains-stable-outlook--PR_384806


https://www.moodys.com/researchandratings/market-segment/sovereign-supranational/-/005005/005005/-/-1/0/-/0/-/-/en/global/rr

https://www.moodys.com/research/Sovereign-Supranational-Rating-List--PBC_186519

https://www.bcp.gov.py/

http://www.hacienda.gov.py/sseaf/index.php?c=157


© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDITRISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THERELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITYMAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEEMOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’SRATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDITRATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAYALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDITRATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONSARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONSCOMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONSWITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDERCONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FORRETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACTYOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTEDOR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANYPERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSESAND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as wellas other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information ituses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for anyindirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use anysuch information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses ordamages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of aparticular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatorylosses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for theavoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDITRATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating,agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintainpolicies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO andrated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually atwww.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as tothe creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferredstock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it feesranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

REPORT NUMBER 1179446


http://www.moodys.com

Documents

Government of Paraguay - Ba1 stable · 2019. 7. 5. · Paraguay’s economy grew by 3.7% in 2018, which is lower than the 5.0% expansion recorded in 2017. On the demand side, growth