World Bank Document
Total Page:16
File Type:pdf, Size:1020Kb
RETURN| TO R E S T R I C T E D REPORTS DESK R e p o r t N o. WH-84a WITHIN L ONE WEEK FILE CI'Y Public Disclosure Authorized This report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized THE ECONOMY OF PARAGUAY Annex I Agriculture in- Paraguay Annex II Transport in Paraguay Public Disclosure Authorized March 17, 1959 Public Disclosure Authorized Department of Operations Western Hemisphere Currency Unit Fluctuating Free Rate (most recent reported transactions) U.S. $1 - 120 guaranies 1 guarani - U.S. $ .00833 1,000,000 guaranies- U.S. $ 8,333 TABLE OF CONTENTS Page No. BASIC DATA,.. .......... ,.*. ......... SUMMARY AND CONCLUSIONS........ ..... .. ..... 1........i-iii... Is Introduction.,....... .... ..... 1 Setting .. .... .,* 1 Resource Pattern,............... ,.,,, 1 Development Potential ..... * *... *9..*..9.9..9..9.....*..9 . Purpose of Report ..... ...................... 2 II. Structure of the Economy........ ....... .............. .2 Population .............. ,.......... -. 2 National Income.,.. .............. 2 Agriculture. Livestock and Forestry .... .. ... 3 Industry..... , 3 Transport .. .. , .,... ,,,. .. 99*e. .................. 4 Communications.. ....... ........ ..... 4 Power. ,,...0 5 Financial Organization.. 6 Public Sector .................................... ...... 8 Government and Business.............. 9 International Trade ....... ..... 10 Economic Coordination. ............. ......,... .. 11 III. Recent Economic Trends. .. .. ... 11 Produ.ztion Trends. ................. 11 Money and Prices ,.............. ............. ..... 12 Public Finances.*.,- ..... ... ....*.... , 13 External Economic Relations,.,..... .... 14 IV. Developmental Policies and Action.,.............. ....... 16 Prerequ2isites for G rouTt1,. ............ ......... 16 Monetary Stability......... 17 Fornulation of Public Investment Budgets ....... *...... 17 Public Savings ......... , ......... ...... 17 Concentration of Efforts.... 17 Agriculture .................... .. .. 18 Creditworthiness, *................. 4 . .......... 19 ANNEX I Agriculture in Paraguiay.................. ANNEX II Transport in Paraguray .................. STATISTICAL APPENDIX,. ...... **..... **. ....... 99..9..to TABLE OF CONTENTS (CONT.) After Page No. CHARTS: Supply and Use of Resources - 1957......9 ......... 2 Production Indexes...... ....... ............. 11 Agricultural and Forestry Production Indexes, Major Commodities............................................ I Industrial Production Indexes, Major Commodities... 11 Money Supply and National Income; Wholesale Prices. and Cost of Living.. ........................ .. *... 12 Total External Trade; Volume of Trade; Trade Balances with U.S. and Western Europe; Trade Balances with Rest of the World.................. 14 Indexes of Volume and Unit Value of Selected Exports.. .. .... **..... .14 Balance of Payments on Current Account; Gold and Foreign Exchange Holdings of the Central Bank.... 15 Total External Public Debt Outstanding; Interest and Amortization Payments; Total Service as Per- cent of Tota:L Current Foreign Exchange Earmings.. 16 MAPS: Distribution of Industry by Value of Output........ 3 Location of Large Industrial Plants................. 3 BASIC DATA Area: 157,000 square miles Population: 1.7 million Gross National Product, 1957, Total: 18.7 billion guaranies (U.S. $190 million) Per head: 11,000 guaranies (u.s. $100) Gross Investment. % of G.N.P. (1957) Financed by: Domestic Savings 6.8 External Resources 3.0 Total 9 : Government Current Expenditures 10.2 Money Supply 12.0 Balance of Payments: (1957) (in millions U.S.$ equivalent) Exports 36.1 Imports 37.8 Trade Balance - 1.7 Net Invisibles 7.2 Balance on Current Account - 8.9 Public External Debt: (U.S.$ equivalent) 17.7 million Of which in U.S.$ 16.1 million Foreign Exchange Reserves: (Jan. 1, 1959) (U.S. $ equivalent) Gold 86,000 Convertible currencies - 231,000 Payments agreements /, 6,983,000 SUMMARY AND CONCLUSIONS Income per head in Paraguay is only about g100 -- among the lowest in Latin America -_ although Paraguay's natural resources could support a much higher standard of living for her people. 2. The chief reasons for the persistence of this low level of economic development are to be found in political and economic history rather than in any immutable geographic or physical barriers to growth. 3. During the past decade Paraguay experienced one of the most acute inflations in Latin America which undermined the incentives to save and in- vest, invited stifling governmental intervention in economic activity and in- hibited growth. 4. The stabilization program embarked upon in 1957 has achieved a high degree of monetary and price stability and has provided the necessary frame- work within which to pursue sound economic development policies. 5. Continued maintenance of this condition and of faith in the value of the currency is essential for economic growth. In order not to upset monetary stability and revert to the hectic years of hyper-inflation and economic stag- nation, developmental investment will have to be based on real domestic sav- ings and the inflow of external financial resources. A repetition of recourse to the Central Bank for financing investment in the public and orivate sectors is unthinkable unless monetary chaos is to be invited once again. 6. Because of the scarcity of investment resources, it is most import- ant that they be used to yield the highest returns to the national economy. If scarce public investment resources are not to be wasted, their use must be based on a system of priorities embodied in a carefully formulated investment budget for the public sector. To achieve this objective, it would be desir- able to assemble a small permanent technical staff to the National Council of Economic Coordination. This staff, which could draw upon the services of the various technical assistance missions now in the country, should analyze and make recommendations on oublic investment proposals, and assist in preparing a realistic annual public investment budget. It should also enable the National Council to serve as the instrument of coordination for the implemen- tation of the annual program by the several ministries, agencies and other public bodies. 7. Although a careful review of the present character of the tax system and especially of its administration will probably reveal a number of possi- bilities of increasing government revenues, the entire structure of expendi- tures will require an overhaul of the goal of economic development is to be achieved. It is obvious that if the current level of exoenditures on ordinary "housekeeping" activities continues to absorb almost all revenues, there is little hope for carrying those capital expenditures in transoortation, agri- culture and other sectors of the economy which are needed if future economic growth is to be stimulated. 8. Sound and balanced public investment must be based on the realiza- tion that by and-large the development process is a "fanning out" operation and that yielding to the temptation of scattering public investments all over the broad territorial expanse of Paraguay will only serve to delay economic growth. The present limited resources must be used principally to help im- prove productivity and increase output of existing agriculture and industry. Whether this means pasture improvement and livestock husbandry, better farm management, and an increase in the productivity of the land, or a system of feeder road construction to stimulate the over-all level of rural activity -- these must be the immediate points of concentration if the next decade is to prove more fruitful in terns of economic growth than the past one. 9. In order to increase agricultural production, which is the backbone of the Paraguayan economy, it will be necessary to: (a) rationalize land ten- ure and land use patterns;(b) carry out administrative reforms; (c) review and revise agricultural price policies; and (d) completely reorganize the insti- tutions and their procedures for the provision of agricultural credit. 1C). Further investments in roads should be channeled for a period to- wards consolidation rather than additional major extensions to the highway system and synchronized with the activities directed toward the raising of agricultural output. 11. Although Paraguayan exports have not developed favorably over the past decade, it is believed that Paraguay has good potential to increase her exports. Well informed sources regard the market prospects for meat, particu- larly canned meat, as very favorable and report that meat exports could be quickly raised by $5 million annually over the next few years. If the Para- guayan authorities correct the price and other policies of COPACAR, with con- sequent encouragement to investments and imoroved animal husbandry, the out- look for sustained higher rmeat exports seems bright. Adoption of the measures advocated in the reoort on agriculture should also help increase export of crop prod-cts. Although market prospects for the remaining exDorts are some- what uncertain Paraguay should be able to increase rapidly her exports to at least around tg0 million as against the current level of $32 million. 12. Imports are not Likely to increase greatly providing monetary sta- bility is maintained; this means that development