Economic Policy

Abstract

Paraguay is a small and open agrarian economy. The country covers an area of 406,752 square kilometres, and had a population of 4.3 million and a GNP per capita of US$ 1,580 in 1994. It represents only 3 per cent of the surface area, 2 per cent of the population and 1 per cent of the GNP of MERCOSUR, the Southern Cone common market that is composed of Argentina, Brazil, Uruguay and Paraguay. Foreign trade comprises about 30 per cent of GNP, but the figure is even higher when unregistered contraband trade is included. Agriculture employs approximately 42 per cent of the Economically Active Population (EAP), contributes 27 per cent of GNP, and generates more than 90 per cent of foreign exchange. The economy grew rapidly during the 1970s, when the average annual growth rate of GNP was 8.5 per cent. This was followed by a dramatic fall in the 1980s, when the growth rate averaged only 2.0 per cent per annum (Borda, 1992). The growth rate did not recover during the transition years (1989–93), during which period the per capita time GNP growth rate was very low and the unemployment rate rose consistently (Table 10.1).