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Country profile - Paraguay

Paraguay

Bordered by Bolivia, Argentina and Brazil, Paraguay lies firmly in the heart of South America. With a land area of just under half a million square kilometres, the country is considerably smaller than its neighbours and has the least dense population in the region. With few mineral resources, Paraguay's economy revolves around agriculture. But the commercialisation of agriculture, population growth and forest clearances have led to a dramatic increase in the number of landless families, increasing migration into urban areas and shanty towns. Around 60 per cent of Paraguayans, mostly Mestizo of mixed Spanish and indigenous Guarani descent, live in poverty.

The country name Paraguay originates from the Guarani word for a great river (pararaguay), the Parana River. Indeed, the river is so large that it provides Paraguay, a landlocked country, with access to the Atlantic Ocean, as well as enabling the country to generate a significant amount of hydroelectric power. Power is generated at two dams, one shared with Brazil and the other Argentina, which supply all of Paraguay's electricity requirements and have enabled the country to become the largest exporter of hydroelectric power in the world.

Living from the land

The east of the country is lowland where much of the population reside, while to the west and north the land rises to dry plains. Paraguay has some mineral deposits but they are fairly poor and less than 15 per cent of the population is involved in mining or industrial activities. In contrast, over half the population is involved in agriculture and forestry, much of this being on a subsistence basis.

After the expulsion of the Jesuits and Spanish in the late 1700s, the state owned around 60 per cent of the land. However, large tracts were sold to Argentina to pay for debts incurred during the bloody War of the Triple Alliance (1865-70), fought against Argentina, Brazil and Uruguay, which claimed more than 1.2 million lives, including two-thirds of the adult male population. Land policy remained contentious until 1930, when there was a broader accord on titling. The 1950s saw large tracts of land bought by American and Brazilian multinationals for the purpose of raising cotton, cattle, timber and soybeans, and a census in 1981 revealed that 79 per cent of the nation's farmland could be attributed to just one per cent of the 273,000 farms. This disparity, together with a rising number of landless people, culminated in 2004 with protests, land invasions and demands for the redistribution of agricultural land.

The story of soybean

Grown since the time of the Jesuit missions, cotton was once a principal crop for Paraguay. In recent years, however, it has been displaced by the explosive growth in soybean production, which had all but replaced cotton by the 1980s. In 1970, less than 55,000 hectares were devoted to soybean, but within twenty years this had increased by more than ten times, such that soybean was cultivated on more land than any other crop and generated export revenues of over US$150 million. Soybean production now represents 10 per cent of the country's GDP and 50 per cent of its exports. However, less than a quarter of soybean farmers are Paraguayan; many are from Brazil, displacing large numbers of smallholder subsistence farmers.

One direct consequence of increased soybean cultivation and cattle ranching has been deforestation on a massive scale. Until 2004, Paraguay had the second highest rate of deforestation in the world, although a zero deforestation law, which came into effect in December 2004, has helped to cut the rate of deforestation by 85 per cent. The law, due to expire in 2006, has been extended for a further two years, as little impact has been recorded on cattle production, and soybean production has actually increased.

Paraguay has found niche markets for both organic and Fair Trade sugar (La Siembra Co-operative)
Paraguay has found niche markets for both organic and Fair Trade sugar
La Siembra Co-operative

The increase in soybean has also been accompanied by the rise in illegal planting of genetically modified (GM) soybean seeds. Use of GM seeds allows farmers to apply less herbicide, reducing production costs by US$20-40 a tonne. Seeds are smuggled in from Argentina, where they are legal, and it is anticipated that should Brazil legalise production of GM soybean, Paraguay would quickly follow suit.

While soybean production might dominate Paraguay's agricultural landscape, it is by no means the only crop grown. Tobacco cultivation continues (although production has decreased), which is exported, along with coffee and hardwoods, such as quebracho and cedar. Food crops include maize, cassava, beans and peanuts, the staple crops traditionally grown by the indigenous Guarani.

Sugar's sweet success

Sugarcane is grown as a cash crop and Paraguay has managed to fill a niche market with both organic and Fair Trade sugar. Cooperatives such as La Siembra (www.lasiembra.com), founded in 1999, help farmers to produce organically-grown and fairly-traded sugar, and also cocoa. In some cases, as much as 92 cents from every dollar earned is returned to the farming families, a far greater return than through traditional markets.

The Manduvirá cooperative comprises 220 small-scale farmers growing 550 hectares of sugarcane to organic standards. Established in 1975, the cooperative's objectives are to provide marketing, training and credit services to its members. The co-operative has recently built an office block and clinic with the Fair Trade premium. Two smaller cooperatives, the Arroyense and the Producers Association of Montillo Sugar also produce organic, fairly-traded sugar.

La Siembra chocolate is made from organically-grown and fairly-traded sugar and cocoa (La Siembra Co-operative)
La Siembra chocolate is made from organically-grown and fairly-traded sugar and cocoa
La Siembra Co-operative

Paraguay is the world's largest exporter of petitgrain, an essential oil used in aromatherapy, perfumes, cosmetics and flavourings. The bitter orange tree (Citrus aurantium var. amara), is also cultivated for the production of oil, harvested from the shoots and leaves by steam extraction.

Meatpacking, cement production, sugar processing, textiles and brewing make up the industrial contribution to Paraguay's economy. Alongside these activities however, there is also a large underground economy based on trafficked cocaine from Bolivia, together with the associated smuggling and money laundering activities.

After thirty years of dictatorship under Alfredo Stroessner - who was ousted from power in 1989, and finally died in exile in 2006 - Paraguay has failed to achieve political stability and Stroessner's party, the National Republican Association-Colorado Party, retains power. But, although the country continues to suffer from intrinsic corruption and high levels of poverty, the economy has recently shown signs of growth, thanks in part to improvements in the exchange rate, but also to the economic policies of the current administration.

Statistical information
  • Country: Paraguay
  • Capital: Asuncion
  • Area: 406,750 sq. km
  • Population: 6,506,464 (July 2006 est.)
  • Population growth rate: 2.45% (2006 est.)
  • Life expectancy: 75.1 years
  • Ethnic groups: mestizo (mixed Spanish and Amerindian) 95%, other 5%
  • Languages: Spanish (official), Guarani (official)
  • Inflation: 9% (2006 est.)
  • GDP: purchasing power parity $30.64 billion (2006 est.)
  • GDP: per capita: $4,700 (2006 est.)
  • GDP composition by sector: agriculture: 22.4% industry: 18.4% services: 59.2% (2006 est.)
  • Land use: arable 7.5%, permanent crops 0.5%, other 92%
  • Major industries: Sugar, cement, textiles, beverages, wood products, steel, metallurgic, electric power
  • Agricultural products: cotton, sugarcane, soybeans, corn, wheat, tobacco, cassava, fruits, vegetables, beef, pork, eggs, milk, timber
  • Natural resources: hydropower, timber, iron ore, manganese, limestone
  • Export commodities: Soybeans, feed, cotton, meat, edible oils, electricity, wood, leather
  • Export partners: Uruguay 28.4%, Brazil 19.3%, Argentina 6.4%, Russia 6%, China 4.1% (2005)

Written by: Simon Pickstock

Date published: March 2007

 

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