From 1990 until 1998 the government of Paraguay placed a peg on its currency, the Guarani (PYG). This helped to reduce inflation in the country by 40 percent over the course of the decade. Since the peg was lifted, the Guarani has consistently depreciated relative to all of the major currencies. Political corruption has been a major problem in Paraguay throughout its history and it has caused inflation to rise again, leading to the continuous weakening of the Guarani.
| Moody's Rating |
| B1 |
| S&P Rating |
| B- |
|
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Political Structure
The Republic of Paraguay is divided into 18 departments. The government, based on the constitution drafted in 1992, is divided into three branches: the executive, the legislative and the judicial. The executive branch consists of the President and a cabinet called the Council of Ministers, which he nominates. The executive branch is a bicameral congress consisting of the 45-member Chamber of Senators and the 80-member Chamber of Deputies. Each house holds elections every five years. The judiciary is the Supreme Court of Justice whose members are appointed on the proposal of the Council of Magistrates.
Prominent Figures
The President of Paraguay, Raul Cubas Grau, was elected in 2003, defeating the incumbent Luis Gonzalez Macchi. He will serve as President for four years when he will then be eligible to run for re-election. The central bank in Paraguay is Banco Central del Paraguay. The President of the Republic appoints the president of the bank. The current President of the Central Bank is German Rojas.
Key Economic Factors
Paraguay has no known oil or natural gas reserves, resulting in a heavy dependence on neighboring countries. The nation is a huge importer of hydroelectric power and a part of a Latin American Trade Coalition called Mercosur, which ties the Paraguayan economy with that of Brazil, Argentina, and Uruguay.
Paraguay relies heavily on imports for oil and is thus very sensitive to increasing crude oil prices. Although the nation pays subsidized oil prices, Paraguay is under pressure to deregulate oil monopolies, which may result in price increases.
Paraguay's economy is predominantly agricultural. The government relies heavily on exports of soybeans, cotton, grains, cattle, timber, and sugars, and thus the economy is extremely sensitive to seasonal and weather fluctuations.
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