Paraguay’s steady growth is primarily driven by the export-oriented agriculture sector, followed by hydroelectric power generation. This, together with good macroeconomic management, has allowed the South American nation to generate a fiscal surplus of 0.6 percent of GDP on average for the 2005-2018 periods and maintain public debt below 27 percent of GDP.
The country is seeking India’s cooperation for building its infrastructure and solutions for diversifying its economy. The only country in the world which has a transparency law regarding public information is looking to India for collaborations and ventures in various sectors including education, health, agriculture, renewable energy, and machinery. To attract investors, the landlocked country is planning to give more tax incentives to companies wanting to invest there.
The government of Paraguay is pursuing policies such as Law 60/90, Maquila Regime, incentives for Forestry together with low tax benefits in to attract investments to promote development. Foreign companies in Paraguay have a simple tax regulation, with a reduced amount of taxes and rates.
The Indian business houses can look at Paraguay as a gateway to Pacific Alliance member countries including (Peru, Chile, Colombia, and Mexico) and MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) which together make up for 80 percent of market share in the region.
“It is the least bureaucratic business environment among the MERCOSUR countries. Import tariffs on inputs and capital goods are the lowest in the commercial block. The country also has differentiated rules of origin that allows the aggregation of up to 60 percent of origin not from MERCOSUR,” says Gustavo Rojas, Researcher at the Centre of Analysis and Dissemination of the Paraguayan Economy (CADEP).
What is the Maquila Regime?
It is a system in which goods are produced and services are provided for the international market and the main objectives include industrial development, employment generation and increased exports. The production of products or provision of services is made by company legally established in Paraguayan territory, which is the Maquila Company, for and on behalf of a company domiciled abroad, which is the Head Office according to the Maquila Contract.
Directed by the Ministry of Industry and Trade, the National Council of the Export Maquila Industry (CNIME) is the official promoter of the Maquila policies in Paraguay. There are four more State institutions: Ministry of Finance, Ministry of Foreign Affairs, Central Bank of Paraguay and Technical Planning State Office.
In March, at the bilateral meeting between Vice President M Venkaiah Naidu and his Paraguayan counterpart Vice President, Hugo Velázquez, India offered that both Indian Space Research Organisation (ISRO) and the space agency of Paraguay could cooperate in: resource mapping; earth observation data sharing; manufacturing and launching satellites on commercial basis; establishing a ground station to receive, process and disseminate data from Indian Remote Sensing satellites for use in various remote sensing applications. Space agencies of both countries must collaborate on training related to manufacturing small satellite, and customised training on specific areas of space technology applications including natural resources assessment and disaster management support. Paraguay created its Space Agency in 2014 and, last January defined its space policy. In this initial stage, international cooperation initiatives are essential to promote capacity building and technology transfers.
China has been offering competitive satellite construction and launch services to various South American countries and countries like Venezuela and Bolivia have launched their first satellites with Chinese cooperation. However, Paraguay does not maintain official relations with China; this is an opportunity for India to become a strategic partner to boost its space program at low cost.
Both countries have decided to seek new areas for cooperation including Hydel and solar power, health including traditional medicine, and pharmaceuticals, Information and Communication Technology which would open more opportunities for the youth in that country.
For its food security, contractual farming in Paraguay is one of the options that India can explore. India has offered agricultural machinery that can help the farmers as well as new technologies that can help improve the food chain there. As a South American country, its Agriculture based economy mainly focuses on agribusiness and cattle ranching and is the 4th largest exporter of soya beans in the world.
Besides seeking cooperation in developing small electric plants for clean energy, it is seeking cooperation from Indian companies to participate in several infrastructure projects including airports, railways, roads and transportation as that will help in not only establishing good connectivity but also improving trade and movement of goods to various countries in the region.
While Paraguay’s global export is recorded at $9.04 billion by the end of 2018, exports to India were recorded at $166.90 Million in 2017 - 2018. The bilateral Trade graph shows the import and export between India and Paraguay from 2013 to 2018. India has recorded $168.43 Million export value product to Paraguay in 2017 - 2018.
There has been a tenfold increase in bilateral trade between the two countries over the last decade when it touched $335.33 million in 2017-18 from $40 million in 2008-09.
The top 10 products exported by India were Iron and Steel (HS Code:72), Plastics and articles thereof (HS Code: 39), Vehicles other than railway or tramway rolling stock and parts and accessories thereof (HS Code :87), Miscellaneous chemical products (HS Code : 38), Pharmaceutical products (HS Code : 30), Organic chemicals (HS Code : 29).
The graph below shows the top 10 Export and Import product in values (US Dollar Unit: Thousand) and the percentage of India-Paraguay by Product HS Code of the period January - December 2018.
Gustavo Rojas, Researcher at CADEP, says, “Paraguayan pharmaceutical companies already make extensive use of Indian supplies. The direct presence of Indian pharmacists could expand the population’s access to generic medicines, also accessing MERCOSUR’s broad public procurement market.”
The country is undergoing rapid demographic transition and urbanization; the young population is between 17-29 years of age which is 29 percent of the total population, this demographic structure combined with the low unemployment rate promises a demographic dividend that can be exploited for the next few decades.
Poverty reduction is progressing notably: absolute poverty fell from 12 percent to 5 percent between 2010 and 2018, a pace that puts the country on track to eradicate it by 2030. Around a quarter of Paraguayans live below the national poverty line. Much of the remaining poverty is now concentrated in rural areas and affects the most vulnerable population, nearly half the poor are children under 14 years, and indigenous communities have much higher poverty incidence.
The economy also faces a large output and price volatility that further exposes the poor and vulnerable to economic risks. Not only has the burden of diseases shifted towards Chronic and Non-Communicable Diseases, but maternal and child health issues and infectious and vector-borne diseases remain a concern.
With the demographic transition, Non-Communicable Diseases such as Cardiovascular, Neoplasm (All type of Cancer), Diabetes and Kidney Diseases, Mental Disorder (Hypertension), are becoming increasingly common in Paraguay. In 2000, Cardiovascular accounted for 10.19 percent of total disability-adjusted life years (DALYs) and increased to 14.84 percent in 2018, as same Neoplasm (Cancer), in 2000, accounted for 7.45 percent of total disability-adjusted life years (DALYs) and increased to 12.54 percent in 2018.
A fundamental way of achieving sustainable Universal Health Coverage is to invest more in health promotion and disease prevention. Tackling strategic risk factors is a challenging but worthwhile investment, as it is often more cost-effective than waiting to treat poor health associated with these behaviours. The country needs to expand health service and insurance coverage, increase financial protection and ensure the delivery of a well-defined benefit package. In particular, the current coverage of the Family Healthcare Units should be expanded to meet the health needs of the entire population.
Adequate financial protection could be ensured by providing universal coverage for costly conditions and treatments and by improving the availability and affordability of medicines.
Lastly, to advance towards Universal Health Coverage, the country needs to define a set of guaranteed services, Hospitals and pathology facilities that can be provided effectively to the population and deliver on that guarantee.