‘Paraguayan industry has shown its capability, but needs better conditions to take off.’ That’s how Enrique Duarte, president of the Paraguayan Industrial Union (UIP, by its Spanish initials), describes the situation of his country’s manufacturing sector. With macroeconomic stability, abundant resources and logistical advantages, Paraguay presents itself as a platform with potential to participate in global value chains, according to Duarte. The challenge is in transforming that platform into a diversified, modern, and competitive industry. Unlike regional neighbors such as Argentina and Brazil, which went through significant cycles of industrial development in the twentieth century, historical and economic circumstances meant that Paraguay’s industry did not begin to develop until the start of the new millennium. For that reason, the process is often described as “incipient.” Industrial development has been growing at an average of 3% over the last decade, according to Duarte. However, that growth has been hampered by ongoing structural challenges such as a lack of appropriate industrial credit, high levels of informality, and logistical shortcomings. This industrial process may have come late, but the sector has great expectations. This follows efforts over the last two decades to stabilize the macroeconomy and promote the country internationally, as well as policy coordination between the public and private sectors. “There was no miracle in the Paraguayan economy. It’s a process that was respected. It was something that took a lot of sacrifice,” Duarte told the Herald. From stability to development: the next step The 21st century got off to a tumultuous start in Paraguay, with a selective default on public debt and a wave of banking collapses that led to high levels of poverty and the economic exclusion of much of the population. Yet over the last two decades, Paraguay has been consolidating a significant period of macroeconomic stability. Without further turmoil, the country has laid the foundations for an attractive investment climate, via policies such as an inflation goal scheme, an independent central bank, and (since 2013) a fiscal rule that has limited the public budget deficit to 1.5% of annual GDP. In 2003, manufacturing represented scarcely 10% of Paraguay’s GDP. According to the Central Bank of Paraguay’s (BCP) figures, that had doubled to 20% by 2025 — or 27%, counting construction and power generation. Between them, these form the secondary sector. Currently, the manufacturing sector employs just under 290,000 people, representing 10% of formal jobs in Paraguay, according to data from the National Institute of Statistics — still small fry when compared with the 66% of jobs in the service and commercial sector. “With our macroeconomic stability and degree of investment, we should be seeing higher development — not just industrial, but economic, too,” Duarte said. Factors such as a lack of access to credit and economic informality mean that, for the moment, Paraguay’s industry cannot take flight the way its leaders hope. Nevertheless, the outlook is promising, thanks to ongoing public-private collaboration, which has already translated into concrete investments for the development of emerging industrial sectors such as ferrosilicon, forestry, biofuels, and the food industry. These sectors join other industrial segments already well-established in the country, such as pharmaceuticals, metals, and leather. Food production, traditionally characterized by low value addition in Paraguay, is booming. Investment is beginning to transform consumption habits among the growing middle classes, who increasingly seek out more refined cuts of meat and affordable healthy options. The future also looks bright for processed foods. Pork exports, for instance, have risen from zero to more than 10,000 tonnes per year over the past five years, according to data from the BCP. Meanwhile, destinations for Paraguayan beef exports are proliferating. Data from the BCP’s foreign trade bulletin show that by the end of 2024, exports of manufactured industrial goods (including cables, aluminum, pharmaceuticals, textiles, and others) amounted to US$1.716 billion, a 14% increase over 2023. However, most exports still consist of commodities such as soy and corn (US$4.033 billion during the same period), along with some manufactured agricultural goods such as soybean meal and oil. Emerging industries One of the most promising sectors is forestry. The Paracel pulp mill, in the north of the country (an expected investment of US$4 billion), is expected not only to add value to reforested wood, but also to generate its own energy from biomass — with the capacity to inject excess energy into the national power grid. Nor is the forestry industry limited to pulp. “There’s an entire industry linked to wood, such as the manufacture of furniture or construction structures,” Duarte explained. “The more value that’s added, the more employment and development are generated.” “We’ve been growing, but with all the resources we have, we can say that foreign investment is still modest — it’s still not significant,” he continued. “While we have investments in the pipeline like Paracel, we’re still waiting for investment in the actual industrial development of the forestry sector. Financing issues are being worked on.” Another emblematic example is Omega Green, a biofuels plant aiming to produce sustainable aviation fuel (SAF) from oilseeds. “Paraguay and the region are destined to be major bioenergy producers. But these investments are sensitive to the cost of capital, and the post-pandemic period has caused delays,” Duarte noted. Alongside the forestry and energy sectors, Paraguay is looking to move up the value chain into more technologically complex industries. Ferroalloys, for instance, use local raw materials to produce inputs such as ferrosilicon, which are key for semiconductors and solar panels. “We won’t produce chips, but we can integrate into global tech supply chains,” says Duarte. The textile sector also stands out, operating under the maquila system, taking advantage of tariff benefits to export to markets like the U.S. The leather industry, meanwhile, already manufactures finished parts for automobiles. Paraguay’s industrial sector has evolved over the years. UIP data shows that in just a decade, the share of imported products on supermarket shelves has dropped from 75% to just 25%. The quality and diversification of local products span a wide range of consumer goods, with food and household care products standing out. The credit portfolio for the industrial sector is expanding. According to Central Bank data, it closed 2024 at approximately US$1.9 billion, with year-on-year growth of 25%. However, a UIP study indicates that credit remains a bottleneck in the sector, especially for smaller companies. “Paraguay’s financial structure is still not adapted to the timelines the industry requires. You invest in machinery and might wait three years just to receive it, but loans offer a grace period of two years at most,” Duarte explained. The UIP estimates that unmet financing needs in Paraguay — whether due to interest rates or lack of collateral — exceed US$1 billion. For this reason, the industrial association proposes a US$100 million revolving guarantee fund to unlock investments and improve access for micro and small enterprises. This fund would be managed by the Development Finance Agency (AFD), a second-tier state bank with experience in such financial instruments. Investment law under review The country is in the process of modernizing Law 60/90, which regulates investment incentives. The reform aims to bring greater coherence to procedures, encourage the purchase of domestically produced goods, and introduce mechanisms such as hyper-amortization — already used in European countries — to promote long-term capital investment. Enrique Duarte, presidente de UIP