Paraguay
Selected Issues and Statistical Annex
Author: International Monetary Fund
Publication Date:
11 Feb 1998
eISBN:
9781451832341
Language:
English
Keywords:
ISCR; CR; private sector; foreign currency; banking system; financial system; debt service; current account; minimum wage; down payment; Ecuadoran firm; capital expenditure
Download PDF (3.4 MB)

This Selected Issues paper and Statistical Annex on Paraguay analyzes the financial crisis of June 1997. The lingering effects of the 1995 financial crisis and the subsequent deterioration of performance of several Paraguayan domestic banks resulted in a new crisis in 1997. The paper highlights that 9.7 percent of private foreign currency deposits left the banking system during June 13 to July 18, 1997. This paper also examines the Southern Cone Common Market and its implications for Paraguay.

Abstract

This Selected Issues paper and Statistical Annex on Paraguay analyzes the financial crisis of June 1997. The lingering effects of the 1995 financial crisis and the subsequent deterioration of performance of several Paraguayan domestic banks resulted in a new crisis in 1997. The paper highlights that 9.7 percent of private foreign currency deposits left the banking system during June 13 to July 18, 1997. This paper also examines the Southern Cone Common Market and its implications for Paraguay.

Paraguay: Basic Data

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Sources: Paraguay authorities; and Fund staff estimates.

Calculated at G 2,169 per U.S. dollar.

Including changes in inventories.

As a percent of liabilities to the private sector at the beginning of the period.

Including value added on entrepôt trade.

I. The Financial Crisis of June 19971

A. Background

Lax entry requirements associated with the liberalization and deregulation of financial markets initiated in Paraguay in 1989, led to a proliferation of new banks and finance companies, many of which were seriously undercapitalized. These new institutions operated in an environment of weak supervision, with a deficient legal and regulatory framework, in the presence of a large underground economy. Poor banking practices, including inadequate internal models of risk evaluation, and high levels of related credit, led to mounting delinquent loans, liquidity problems, and ultimately insolvency. The authorities were generally hesitant to take preventive action because of political considerations, preferring, whenever possible, to grant financial assistance and regulatory forbearance.

A first crisis occurred in May 1995, when the Central Bank of Paraguay (BCP) intervened in four insolvent banks (holding around 12 percent of the deposits in the banking system) and in a number of smaller financial institutions due to their inability to clear overdrafts at the central bank. The interventions uncovered a plethora of fraudulent activities, including extensive lending to related parties and sizable unrecorded (“black”) deposits.

Following the crisis, there was a substantial withdrawal of deposits from private domestic banks; however, a run on the entire banking system or a lasting rupture of the payments system was avoided due to the presence of other banks—mainly foreign owned—that continued to be perceived as safe, and to massive liquidity support from the BCP. The BCP extended full deposit coverage to on–book deposits of the intervened institutions at a cost of around US$360 million (4 percent of GDP), about 80 percent of which was channeled to the intervened banks and may be considered unrecoverable. Subsequently, and despite a Presidential veto, the Supreme Court upheld a law, requiring the BCP to restitute up to G30 million per account (around US$14,000) to holders of off–balance sheet deposits in intervened banks. This measure, which begun to be implemented in August 1997, will cost approximately US$22 million, in addition to the damage done to market discipline and the moral–hazard problems it created. Moreover, clean–up of the financial system required in the aftermath of this crisis was not completed, and institutions with significant deficiencies were allowed to remain in operation.

B. The Current System

The financial sector in Paraguay includes a large number of inefficient small sized institutions, overly concentrated in short–term lending (also more than 70 percent of deposits is sight and checking accounts). The index of financial deepening—M3 equals 25 percent of GDP—is low when compared with other Latin American countries2. There is, however, a dichotomy between domestic and foreign owned banks. Contrary to their domestic counterparts, foreign institutions are by and large profitable lending to the larger and safer enterprises and attracting funds at lower cost. While foreign banks have a higher share of private sector deposits, domestic banks have been favored, and in some instances been propped up, by deposits of the public sector.

The main problems that led to the financial distress episode of 1995 were not addressed and the system has since then deteriorated further, as can be gauged by the evolution of basic financial ratios (Figure 1). In particular, domestic banks (private and public) experienced a marked deterioration of their capital base, profitability, liquidity, provisioning, and loan delinquency ratios. Related credit, excessive loan concentration, overvalued assets, nonexecutable guarantees, and outright fraud resulted in a high level of nonperforming loans that substantially depleted the equity cushion of a number of banks in the system.

Figure 1.
Figure 1.

Paraguay: Banking System Indicators, September 1996 - June 1997

Citation: IMF Staff Country Reports 1998, 015; 10.5089/9781451832341.002.A001

Sources: Paraguayan Authorities and Fund staff estimates.

The current problems owe less to deficiencies in the legal framework—since the new central bank charter of 1995 and the new Banking Law of June 1996 encompass a by and large adequate legal framework for the sector—than to the practice and implementation of the legislation3. In particular, the Superintendency of Banks is overstretched and lacks resources, both in quantity and in quality, to fulfill its legal duties. Further, current legislation does not provide for differential treatment and resolution strategies separating institutions where liquidity and solvency problems arise from idiosyncratic shocks to their portfolios from those where the cause is contravention of regulatory norms.

C. The Crisis in June 1997

The lingering effects of the 1995 financial crisis and the subsequent deterioration of performance of several Paraguayan domestic banks resulted in a new crisis in 1997. In June, the BCP was forced to intervene in the biggest Savings and Loans association, Ahorros Paraguayos, the largest private domestic bank, Banco Unión (representing around 8.5 percent of the deposits in the banking system), and a smaller bank, Banco de Inversiones de Paraguay S. A. (BIPSA), in view of these institutions’ inability to honor their short term obligations to depositors and to cover substantial overdrafts at the central bank. If unable to reconstitute their capital, these institutions will face liquidation. By end–August progress had been made in discussions on the recapitalization of Banco Unión.

The interventions triggered a systemic run on deposits, but following the presentation to Parliament of a draft emergency legislation aimed at increasing insurance coverage of deposits—from the equivalent of 10 minimum monthly wages (about $2,500) stipulated in the banking law to 50 minimum wages—calm returned to the system.4 Nevertheless, due in part to rumors that the government was about to nationalize foreign currency deposits, there were sizeable withdrawals of foreign currency deposits from all banks (Table 1). Some of these funds left the country, some were converted into local currency deposits, and the remainder filtered into currency in circulation.

Table 1.

Private Sector Deposits in the Banking System

(1997)

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Source: Superintendency of Banks.

From June 13 to July 18, 9.7 percent of private foreign currency deposits left the banking system.5 As during the 1995 crisis, there was a significant exodus of domestic currency deposits to quality/safety, out of domestic banks and into foreign banks. In all, the banking system lost 4.5 percent of all private sector deposits. Depositors in the intervened institutions were allowed to withdraw funds up to the 10 minimum monthly salaries, allowed by the law.

The difficulties in the banking system are not circumscribed to the intervened banks. Six domestic banks, including the two intervened ones, accounting for about one fourth of the system’s deposits—and including about half of the deposits of the Social Security Fund (IPS)—are at risk and have an estimated combined negative capital of at least $110 million. Some of these institutions are under close supervision and are benefiting from rehabilitation programs with the BCP, while others have been recapitalized by ceding ownership to pension funds—the IPS and the Bank Employees’ pension fund—which in fact assumed the losses of these banks. The authorities have been reluctant to proceed with the liquidation of banks, even though there are signs of over–banking in Paraguay. Legal and political obstacles to close insolvent institutions are high, leading the authorities to prefer the option of rehabilitation through central bank loans, regulatory forbearance, and accounting flexibility, rather than force operational restructuring of viable institutions or implement an orderly exit of insolvent ones.

D. Cost of the Crisis

The liquidity shortages experienced by many distressed institutions during the month of June prompted the BCP to provide $115 million (1.2 percent of GDP)6 to the financial system, through overdraft and other short–term liquidity facilities. About 50 percent of the total assistance was channeled to the three intervened institutions.

In order to sterilize the inflow of liquidity and limit the potential for an inflationary outburst in the economy the central bank reduced foreign currency holdings7 and placed short–term securities (Letras de Regulación Monetaria - LRM) through open market operations. Liquidity control was also helped by a significant amount of excess reserves held at the central bank by the banking system. Nevertheless, base money, which had grown by 12.6 percent year on year by end–May (in line with the target in the monetary program), surged to a 22.5 percent annual rate of growth by end–June. Reflecting uncertainty and bank inefficiency8 bank spreads and real interest rates continued at very high levels. This occurred at a time when the financial turbulence was eroding investors confidence, adversely affecting aggregate demand, and depressing real economic activity.

Even though ad—hoc measures and financial assistance may be able to hold off a full blown banking crisis, continuation of such an haphazard strategy to deal with problems in the financial sector may result in an increasing burden of high real interest rates and intermediation spreads, mounting quasi—fiscal costs, and a continuous risk that potential spillover effects might debilitate additional banks in the system. Moreover, in a context of weakening public finances, the decrease in foreign reserves and the mounting costs of sterilization (Box 1) may make it more difficult for the BCP to continue giving support to the financial sector, while maintaining inflation under control.

Central Bank’s Quasi—Fiscal Deficit

Since the 1995 crisis, the central bank has disbursed over US$600 million (around 6 percent of GDP) in assistance funds to the financial sector. Around two-thirds of this amount may not be recoverable since it has been given either to banks and finance companies that have been liquidated, or that have substantial negative net worth. Further, the need to sterilize the resulting inflows of liquidity in the system has led to increased costs with the remuneration of central bank securities giving rise to losses for the institution and putting upward pressure on domestic interest rates.

Central Bank Profit/Loss Account

(In billion guaraníes)

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Includes interest revenues and expenditures associated with the conduct of monetary policy.

Fund staff/BCP projections.

The capital loss of the central bank is the sum of the operating losses, provisions, and depreciation of assets. In 1997 the BCP will establish new provisions of around G74 billion (10 percent of the estimated

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746 billion irrecoverable portfolio of credit to the financial system). Further, fixed assets will depreciate by
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6 billion. Taking all the information together, the BCP may experience a loss of around
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110 billion ($51 million) in 1997; one third of its equity base.

II. The Privatization Process (1994-1997)9

The privatization process in Paraguay has been limited and relatively unsuccessful due to the existing legal framework, which makes it very difficult to carry out international bidding processes and excludes the public utilities from privatization, and a lack of political will to divest public enterprises. Since the framework law allowing the privatization of some of the public enterprises was approved in 1991 (Law No. 126/91)10, only five companies have been sold and the net fiscal impact has actually been negative (see Table 2). The principal legal obstacle has been Law No. 636/95 which implements Article No. 111 in the 1992 Constitution in such a manner as to make it very difficult for a firm to be offered and purchased by any party other than the current or previous workers of the firm as well as directly associated firms (e.g., suppliers of the public enterprises).11

Table 2.

Fiscal Impact of Privatization Process (1994-1997)

(In millions of U.S. dollars)

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These firms were all declared privatizable by Law No. 126/91, the sale of any others would have to be approved by additional legislation.

Price was established based on an estimate of each firm’s price by the Paribas consulting firm. It represents 100% of the shares.

Calculated on a NPV basis since the buyers have usually been given three years to pay.

Includes the company’s debt which was assumed by the Ministry of Finance.

Net fiscal impact to Government equals the NPV of the sale price minus the Government investment prior to sale and the payments still outstanding for the purchase of the company.

On June 30, 1997, the Government decided to liquidate these companies.

Paraguay will not receive substantial benefits from privatization until it divests the assets of and/or concessions the services provided by the public utilities; primarily the public electricity company (ANDE), the public phone company (ANTELCO), and the public water company (CORPOSANA). In order for the latter to be privatized effectively, Law No. 636/95 may have to be modified. Additionally, a separate law would have to be approved for the privatization of each one of these enterprises; the prospects for such legislation are minimal in the run up to the presidential elections and will depend on the intentions of the next administration, which assumes office in August 1998.

The status of the privatization process of the enterprises that have been declared privatizable follows.

LAPSA. In 1994, Cielos de America, an Ecuadoran firm which owns and operates an airline (SAETA), won the right to purchase 80 percent of the shares of LAPSA, the Paraguayan flag–carrier airline, and a 10–year concession to the flag–carrier status in 1994 for a price of US$22.1 million. Prior to its sale, the airline had ceased operations due to serious liquidity problems. Since this enterprise was not included in the privatization law, Congress approved its sale through a specific law (Law No. 320/94). The Government assumed LAPSA’s debt of approximately US$40 million. In 1996, Cielos de America sold its shares and concession to Transportes Aereos del Mercosur, a regional Brazilian airline.

CAPASA. In October 1995, Tekojoja, a firm representing approximately 523 current and former employees of CAPASA, purchased 68 percent of the shares of CAPASA, the state–owned alcohol company, for a price of US$10.6 million (20,300 shares at US$520/share, payable over a three–year period). The Government kept 30 percent of the shares and the remaining 2 percent were sold to workers not associated with Tekojoja. Tekojoja made an initial payment of US$1.06 million and was supposed to pay the remainder in 36 monthly instalments of US$263,900 each; the interest rate on this financing was 0 percent. CAPASA has performed poorly since it was acquired by Tekojoja (it lost about US$300,000 in 1996), has internal management problems (some of the workers want to split off from Tekojoja) and is in poor financial shape. To date, Tekojoja has paid a total of about US$3.2 million and is now over one year in arrears on its payments to the Government. In response, the Government has indicated the intention to sign a contract with Tekojoja that will extend the repayment period to ten years (and set the interest rate equal to LIBOR).

FLOMERPASA. FLOMERPASA, the state–owned merchant shipping fleet with total assets valued at about US$19 million by Paribas, was split into the following companies prior to privatization:

  • Flota Mercante Paraguaya (FMP). In May 1996 the preferential option was exercised to purchase 99 percent of the shares of this firm—9,460 out of a total of 9,472—at US$505 per share to yield a price of US$4.8 million. The buyer made a down payment of 10 percent and the remainder is to be paid off in 36 equal monthly payments.

  • Compañía de Transporte Fluvial (CTF). In May 1996 the preferential option was exercised to purchase 95 percent of the shares of this firm—9,085 out of a total of 9,555—at US$505 per share to yield a price of US$4.6 million. The buyer made a down payment of 10 percent and the remainder is to be paid off in 36 equal monthly payments.

  • Compañía Marítima (CM). This company was comprised of 11,996 shares worth US$505 per share to yield a price of US$6.0 million. The Privatization Council received some 96 separate requests to purchase it through the preferential purchase option. However, none of these potential buyers presented themselves at the time to sign the contract. Then, two separate international bids were annulled. Finally, in March Medill and Associates purchased 100 percent of the shares directly from the Privatization Council. The buyer has made a down payment of 10 percent and will pay off the remainder in eight equal annual payments.

  • Compañía de Transporte de Pasajeros y Cargas (CTPC) and Astilleros y Transporte de Cargas Generales (ATCG). The Privatization Council decided on June 30, 1997 to liquidate these two firms rather than sell them.

ACEPAR. Efforts to privatize ACEPAR, the state-owned steel company with assets valued at about US$35 million by Paribas (but it needs an investment of about US$25 to modernize its equipment), have been unsuccessful so far, primarily due to problems associated with the above-mentioned preferential purchase options. Initially, the Government gave ACEPAR’s workers the option to purchase the company for the established base price of US$35 million. In response, the workers offered to lease the enterprise for 24 years with an option to buy that could be executed at any time. The Privatization Council rejected this offer—since the net present value would have only been about US$14 million—and proceeded to initiate an international bidding process. At that point, ACEPAR’s labor union was able to stop the bid process by obtaining a ruling from the courts that such a process was unconstitutional. Then, ACEPAR’s workers established COSIPAR, a consortium with the metallurgical guild, to present another offer for ACEPAR, this time with a 12–year financing plan. In July 1997, Congress, after overriding a Presidential veto, approved Law No. 1037, which authorizes the Privatization Council to sell 100 percent of ACEPAR’s shares to all parties that qualify for the preferential purchase option, i.e., the consortium of workers and suppliers. The law establishes a purchase price of US$35 million and allows the buyers a financing plan which includes a three-year grace period, a ten–year repayment period, and an interest rate equal to 360–day LIBOR.

FCCAL. Rather than proceed with the divestiture of FCCAL, one of the oldest railroads in the Americas (it is still powered by a wood–burning steam engine), the Privatization Council is entertaining a notion to build a new track from Asunción to Encarnacion at an approximate cost of US$240 million. The feasibility and financing of such an investment is doubtful. In the meantime, the Government has transferred an average of about US$1–2 million per year to maintain this enterprise, that is operating on a limited basis.

III. The Southern Cone Common Market and its Implications for Paraguay12

A. Introduction

The Southern Cone Common Market (Mercosur)—including Argentina, Brazil, Paraguay and Uruguay—was created by the Asunción Treaty on March 26, 1991. The agreement aimed to eliminating trade barriers, coordinating economic policies, and establishing common trade regulations among the participating countries and common trade policies vis-á-vis nonmember countries. Mercosur covers a land mass of 12 million square kilometers with a population of about 201 million inhabitants and a GDP in excess of US$1 trillion (Table 3).

Table 3.

Paraguay: Mercosur-Economic Indicators

(As of December 1996)

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Sources: Central Bank of Paraguay: Coyuntura Macroeconómica Regional 1996; and Fund staff estimates.

Although the provisions of Mercosur have not yet come fully into effect, the volume of trade among the member countries has been increasing every year. By 1996 the commercial interchange within Mercosur had risen to about US$17 billion from about US$4 billion in 1990. Trade within the region is expected to increase at a more rapid pace with the incorporation of Chile and Bolivia as associate members.13

Mercosur’s main objective is to increase the efficiency and competitiveness of the member countries by opening markets and accelerating economic development. Its long term goal is the establishment of a common market, including the free circulation of goods, services and factors among the member states.

Trade within the region will be subject to a zero tariff by the year 2000, after four equal 25 percent reductions starting on January 1, 1996 for Argentina and Brazil—which will then reach zero tariff by January 1, 1999—and a year later for Paraguay and Uruguay. Trade outside the region will be subject to a common external tariff (CET) with 11 tariff positions that range from 0 percent to 20 percent with the highest protection going to consumption goods. The CET entered into force on January 1, 1995. Both regimes are subject to exceptions. Paraguay was allowed 427 exceptions to the agreement on intra-Mercosur trade, which enabled it to maintain protective tariffs of up to 30 percent on some domestically produced manufactures and agricultural products—mainly textiles, dairy products, tomatoes, rice and oils. Paraguay also has been allowed to exempt up to 399 items (consisting mostly of production inputs and items destined for reexport) from the CET until the year 2006.14

B. Paraguay’ s Implementation of Mercosur Commitments

Since 1989, Paraguay has been implementing a liberal trade policy based on removal of customs duties and other barriers to trade. Until 1992 tariff rates remained high, mainly to protect domestic enterprises and reduce the trade deficit. In the context of the Asunción Treaty, as mentioned above Paraguay agreed to reduce its basic tariff rate of 47 percent to zero on intra-Mercosur trade in four equal annual steps beginning January 1, 1997. Nevertheless, in July 1992, by its own initiative Paraguay cut down import duties, setting its basic rates between zero and 10 percent, with lower tariffs on raw materials, intermediate and capital goods and higher rates on consumer goods. Duties of 15 and 20 percent were imposed on vehicles and of 6 percent on goods categorized as raw materials for the tourism industry. During 1993–94, the country eliminated most of its discriminatory import or export policies and administrative barriers and quotas. As scheduled, in January 1995 Paraguay adopted the CET. All remaining quantitative restrictions on imports and exports were also removed on that date.15 Also, on January 1, 1997 Paraguay complied with the first reduction by 25 percent of tariffs on products traded with Mercosur countries.

The government created Proparaguay with the mandate to oversee import operations, foster export activities and promote Paraguay to foreign investors. This agency is also involved in trade studies.

C. Mercosur’s Implications For Paraguay

Even not counting the informal “tourist trade”, the bulk of Paraguay’s trade is concentrated with its Mercosur partners and has been increasing every year after the signature of the Treaty. In 1996 about 46 percent of its registered imports came from Mercosur and over 60 percent of its total registered exports went to these countries (compared to 31 percent of its imports and 32 percent of its exports in 1991) (Tables 4 and 5). The association of Chile and Bolivia to Mercosur opens the prospect of a further expansion of Paraguay’s exports markets.

Table 4.

Paraguay: Composition of Registered Exports

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Source: Direction of Trade Statistics, IMF; and Fund Staff estimates.
Table 5.

Paraguay: Composition of Registered Imports

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Sources: Central Bank of Paraguay; and Fund Staff estimates.

The potential effects of Mercosur on productive capacity and potential output will depend on the ability of Paraguay to strengthen the sectors and activities in which the country has a comparative advantage. A more open regional environment will require a significant adjustment in some activities. The remainder of these note elaborates on the likely impact in some economic sectors.

Agricultural Sector

Paraguay’s economy is largely dependent on agriculture. Crop agriculture, livestock, and forestry accounts for over a quarter of the country’s real GDP, while registered exports account for some 50 percent of total export earnings. Cotton and soybeans are the main export crops, amounting to about two thirds of the value of exports and nearly half of the gross value of agricultural production.

It is expected that Mercosur will pave the way for the diversification of Paraguay’s agricultural export base. The excessive reliance on two agricultural products leaves growth and exports earnings vulnerable to unfavorable climatic conditions and to fluctuations in their international prices. Cotton fiber however, is likely to continue to do well in Mercosur, since none of the other countries is a major producer. However, the cotton sector has severe weaknesses. Cotton is produced in small and medium-size farms with little mechanization. Mercosur offers an opportunity for Paraguay to expand production of other crops such as oils, wood products, tea and mate, for which it appears to be well suited.

To benefit, however, from the more open regional environment, Paraguay will need to address the major deficiencies that its agriculture exhibits at present, such as the lack of diversification, development based on exploitation of natural resources and not on increases of productivity, and soil degradation. Agricultural services will need to be enhanced to explore alternative agricultural opportunities, and farmers will need to be assisted in making the necessary transformation of their farming systems.

The government is providing technical assistance to help small and medium size producers to be competitive in the production of cotton. High–quality cotton seed has been imported to help raise productivity. The World Bank Natural Resource Management Project aims to develop sustainable, diversified agricultural production systems and conservation measures in two Departments of the Eastern Region. In addition, the IDB, Japan and Germany are providing assistance for the improvement of agricultural productivity and conditions in rural areas. A pilot project for Sustainable Rural Investment aims at developing small and medium scale agroindustry and natural–resource–based industry in three Departments.

Manufacturing

Manufacturing represents about 15 percent of GDP, and is largely based on agricultural goods. Production is mostly oriented to the domestic market and is heavily concentrated in the production of light consumer goods. Among the important products are packed meat, other processed foodstuffs, textiles, wood products, and chemicals.

In recent years the widening of market opportunities given by Mercosur has induced manufacturing to adapt to competition from Brazilian and Argentinean imports, and has triggered an increase of foreign investment in the manufacturing sector. In 1991 a major vegetable–oil processing plant, was installed with the capacity to process 50 percent of national oilseed production. In 1996, two companies of electronic and computer products began operations. Paraguay’s largest foreign investment project in 1997, Celulosa Río Paraná S.A., envisages the construction of a US$300 million pulp and paper mill near Encarnación. The goal is to produce 210,000 metric tons a year of pulp for the production of tissue, printing and writing papers.

Paraguay’s legal framework is generally favorable for foreign investment. There are no restricted areas, and no discrimination. Under Law 117/91 national and foreign investors have the same rights and obligations in relation to fiscal and normative aspects. It allows investors to obtain insurance locally or overseas and permits the establishment of joint ventures. Despite this legal incentive, however, the high level of the minimum wage relative to that in main trading partners; and weaknesses in the judicial system act as a deterrent to foreign investment in Paraguay.

Informal Trade

Paraguay’s external trade is greatly influenced by the contraband trade or “tourism trade”, which may be as important or exceed registered or legal trade. It is estimated that about 70 percent of Paraguay’s exports (registered and unregistered) go to Mercosur countries, and that nearly ¾ of these exports are unregistered tourism trade, based on goods imported into Paraguay to be reexported to its neighbors. The informal trade makes a significant contribution to the economic activity.

Ciudad del Este (formerly Puerto Presidente Strossner) is an emporium where 12,000 businesses operate. Annually it receives about four million tourists from Brazil 16 and Argentina. Soybeans, coffee, scotch whisky, cigars, perfumes, electronic and household appliances are the main items sold in this market. Paraguayan companies profit from the country’s low taxation and open economy and resell imported goods at prices considerably below those in partner countries where tariffs are much higher. Contraband activity is likely to be reduced gradually as trade barriers fall and the CET starts to apply. This process is likely to have initial adverse consequences for the large segment of economic activity that at present depends on border trade but, over time, it will prompt the retooling of the economy and its adaptation to the enhanced prospects opened by the wider market of Mercosur. The public finances would mirror these developments as duties on the goods imported for the tourist trade give way to the general boost to revenues resulting from the strengthening of economic activity.

Table 6.

Paraguay: Selected Production and Price Indicators

(Annual percentage change)

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Sources: Central Bank of Paraguay; and Fund staff estimates.
Table 7.

Paraguay: National Accounts by Final Expenditure at Current Prices

(In billions of guaraníes)

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Sources: Central Bank of Paraguay; Ministry of Finance; and Fund staff estimates.

Corresponds to changes in inventories in the livestock sector.

Table 8.

Paraguay: National Accounts by Final Expenditure at Constant 1982 Prices

(In billions of guaraníes)

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Sources: Central Bank of Paraguay; Ministry of Finance; and Fund staff estimates.

Corresponds to changes in inventories in the livestock sector.

Table 9.

Paraguay: Trends in Expenditure and Output

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Sources: Central Bank of Paraguay; Ministry of Finance; and Fund staff estimates.
Table 10.

Paraguay: Financing of Investment

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Sources: Ministry of Finance; Central Bank of Paraguay; and Fund staff estimates.

Corresponds to changes in inventories in the livestock and public sectors.

Refers to the consolidated public sector’s current account (with accrued Itaipu receipts).

Refers to the current account deficit of the balance of payments before public transfers.

Table 11.

Paraguay: Real Gross Domestic Product by Sector of Origin

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Sources: Central Bank of Paraguay; and Fund staff estimates.

Comprises mining, housing, and other services.

Table 12.

Paraguay: Gross Volume of Agricultural Production 1/

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Sources: Central Bank of Paraguay; and Fund Staff estimates.

Agricultural years; for example, 1991 refers to the 1990/91 agricultural year.

Table 13.

Paraguay: Gross Value of Agricultural Production 1/

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Sources: Central Bank of Paraguay; and Fund staff estimates.

Agricultural years; for example, 1991 refers to the 1990/91 agricultural year.