Agriculture, Technology

Is Paraguay’s Agriculture at Risk?

themarketmogul.com

Despite the political and economic instability facing South America, the small nation of Paraguay is experiencing growth. This upturn is due to a record soy harvest alongside a number of infrastructure projects supporting predictions of the country’s economy to grow by over 4.2 percent this year.

The Crops

The most important part of the Paraguayan economy is its agricultural sector, which is the world’s fourth-largest soy exporter. The 2016/17 soy crop yield is estimated to be more than 10 million tonnes and expected to be worth $3bn. These figures are very important to an economy that lacks in mineral resources while the nation has recently been affected by weather conditions that have destroyed 430,000 hectares of high-protein wheat sown this year.

The Minister of Finance, Santiago Peña, affirmed

“What’s interesting about this [soy] harvest is the impact that it has on the whole supply chain and in other sectors. When we add up commerce, transportation, and the financial sector, it’s going to be a very strong year.”

Paraguay has enjoyed an agricultural boom in the production of grain- from 2 million metric tons in 1991 to an expected 17 million tons a year. It has been a process supported by investment in its agricultural sector.

Hector Cristaldo, President of the Paraguayan Farmers Association, stated

“We have managed to greatly increase agricultural production without occupying much more land. Production grew to over sevenfold in the last twenty-six years, while the farmed area only doubled.”

The country is experiencing growth; in May economic activity grew nearly 5 percent year-on-year. This success was helped by the support of greater investment in its infrastructure since the centre-right President, Horacio Cartes, won the election in April 2013. In the same year, Paraguay joined the international bond markets – but will not return to these markets this year since raising $500m in debt.

Public Dismay

Growing dismay amongst the country’s agricultural communities has been reported by a proposed 15 percent export tax on corn, soy and wheat exports that have acted as a catalyst for mass protests. The Paraguayan government has argued that the agricultural sector contributes too little to the country when compared to other sectors. Approximately 2.6 million people live in rural zones and account for 30 percent of the population, while 2.6 percent of landowners – the small elite – hold 85.5 percent of Paraguay’s lands, a section of people the state has been known favour.

The government’s tax proposal would affect the incomes of farming populations, fearing they would become part of the nation’s growing poverty epidemic. The proposal could also increase the risk of pushing Paraguay’s agricultural boom into jeopardy. Alongside this, the government vetoed a prior decision to subsidize small and medium income farmers in August, enraging farmers even further.

Rising Tensions

With over 40 percent of its 6.8 million population living in poverty, Paraguay is still considered one of Latin America’s poorest countries. While growth is expected, the country is plagued with corruption and political unrest that threatens Paraguay’s fragile democracy. Earlier this year between March and April, further protests were experienced when demonstrators set fire to Paraguay’s Congress building in response to President Horacio Cartes’ attempts to change a constitutional amendment that would enable him to run for a re-election. The disruption ended with the Chamber of Deputies of Paraguay rejecting the constitutional amendment proposal. The strong public response against the government is a reflection of the nation’s murky past when it was under rulership by dictator Alfredo Stroessner between 1954-1989.

But despite the recent public outcry against the current President, results of next years April 2018 elections indicate that Paraguay will follow Latin America’s recent populist political trend and continue with the conservative Colorado Party. Paraguay’s Minister of Finance, Santiago Peña, will run for office as leader of the Colorado Party that has ruled Paraguay for a combined total of 61 years, only losing recently in 2008 to the centre-left Christian Democratic Party led by the Fernando Lugo. The Colorado Party is believed to win the next election as Peña has indicated he will have similar policies to that of Horacio Cartes.

 

”But despite the recent public outcry against the current President, results of next years April 2018 elections indicate that Paraguay will follow Latin America’s recent populist political trend and continue with the conservative Colorado Party.”

The Effect

While the President’s attempts at altering the amendment to run for office have been negated, other proposals – such as the tax on the agriculture sector- bring unnecessary uncertainty amongst Paraguay’s already dismayed farming population, and also presents a risk towards disturbing the country’s booming agricultural sector. With the Presidential elections looming next year, the President’s current party confidently believes an election victory is again within reach. But while it continues to implement controversial policies, it risks disturbing Paraguay’s population – potentially precipitating a surprise election result and disrupting much-needed economic growth.

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