Paraguay Discovered

For decades, Paraguay was one of those countries the world overlooked. A landlocked state in the heart of South America, wedged between Brazil, Argentina and Bolivia, economically too insignificant to appear in international media, and as a destination barely known even to many South America travellers. Those who did take an interest in the country often did so for very specific reasons: agriculture, hydropower, low taxes, a comparatively straightforward residencia, or simply the wish to be as far away as possible.

That is changing right now. Not because of a single spectacular figure from which, with a little goodwill, a success story could be constructed, but because a surprising number of mutually independent indicators are now pointing in the same direction at the same time. More and more immigrants are arriving, tourism is growing, foreign capital is flowing into the country, the economy is expanding, international rating agencies have upgraded Paraguay, electricity consumption is rising considerably, and new transport axes are changing the economic significance of its geographical position. Even Asunción's construction boom, as conspicuous as it has now become, is less a cause than a visible symptom of a larger development.

One could spend time analysing each of these developments individually. But it becomes truly interesting once you step back and look at the big picture. Because then you no longer see merely individual rising curves, but a massive transformation that is somewhat reminiscent of the German economic miracle of the 1960s.

In 2025, Paraguay's immigration authority recorded a historic high: 47,687 applications for residence permits were received within a single year, more than 63 percent more than in 2024; at the same time, 40,600 residence permits were granted. In the first half of 2026 the trend continued with 33,243 new applications. Compared with the same period of the previous year, that meant yet another increase of 62 percent.

From a German perspective, another figure is almost more interesting. In the first quarter of 2026, German nationals already ranked third among the residence permits actually granted, behind Brazil and Argentina, but ahead of every other country outside Mercosur. The old image of a small German emigrant subculture somewhere between colony and Chaco has long ceased to describe this development.

In parallel, Paraguay is experiencing something few people would have associated with the country a few years ago: a tourism boom. In the first quarter of 2025, according to data published by UN Tourism, Paraguay recorded the highest growth rate in international tourist arrivals among the listed destinations, at 53 percent. In the first quarter of 2026 the country was once again at the top with a further 46 percent of growth.

Such percentages do, however, require a denominator. Paraguay has not become Spain overnight and still receives considerably fewer international visitors than established tourism countries. High growth rates arise more easily from a low base. What is remarkable, therefore, is not that Paraguay has suddenly become a global tourism giant. What is remarkable is that a country which barely featured in international tourism for decades is gaining considerable attention within a short space of time.

Migration and tourism measure different things. Together they nevertheless show one thing: more people are engaging with Paraguay.

It goes without saying that attention alone does not constitute an economic upswing. The development becomes more interesting where interest turns into capital.

Foreign direct investment has increased significantly in recent years. For 2024 alone, Paraguay's central bank reported net inflows of 931 million US dollars, 15 percent more than the year before; the stock of foreign direct investment reached around 10.4 billion dollars by the end of the year. For 2025, the CEPAL data used in the original article shows even higher net inflows. What matters here is not only the overall total, but the growing breadth of the investment fields.

Alongside the traditional sectors of agriculture, meat production and trade, telecommunications, digital infrastructure, data centres, food processing and renewable energies are coming more strongly into focus. Behind this lies a particularity that carries more weight in an increasingly energy-hungry world than it did twenty years ago: Paraguay has structural resources that cannot simply be copied.

The real economy also provides a solid foundation for this. For 2025, Paraguay's central bank assumed real economic growth of around six percent based on the information available at the time; for 2026, following the forecast raised in June, around 4.5 percent were expected. At the same time, public debt remained manageable by Latin American standards at approximately 40 percent of gross domestic product — depending on the definition used.

Paraguay is therefore not growing merely because the state is generating an economy on credit.

That this development is now also being noticed outside the country is evident in its creditworthiness. Moody's raised Paraguay to investment grade for the first time in 2024, Standard & Poor's followed in December 2025 with BBB−; Fitch was still one notch below at the time of publication, albeit with a positive outlook. For Paraguay that is far more than a pretty badge for government presentations. Investment grade influences financing costs, the investment mandates of institutional investors and ultimately the question of whether a country may appear in certain international portfolios at all.

A location long regarded as exotic is thus gradually becoming institutionally investable.

Part of this picture is a currency rarely discussed outside Paraguay. The Guaraní was introduced in 1943 and has thus survived numerous currency reforms among its Latin American neighbours. While other states in the region have experienced hyperinflation, currency redenominations or recurring cycles of devaluation, the Paraguayan currency has remained remarkably steady.

In the year before this article was published, the opposite movement was even visible at times: the Guaraní gained considerable value against the dollar and the euro. Depending on how the exchange rate is viewed, the change corresponded to roughly 20 percent or, calculated inversely as an appreciation of the Guaraní, to about a quarter.

For foreign investors that is by no means only pleasant. Anyone already invested in Guaraní was able to benefit from an additional exchange-rate effect; anyone who wanted to enter with dollars or euros had to pay correspondingly more for the same asset valued in local currency. A stronger currency is not a free gift. It is, however, another piece of a macroeconomic development that hardly fits the old image of an economically insignificant South American landlocked state.

Paraguay's perhaps most extraordinary structural locational advantage lies in its energy supply. With Itaipú and Yacyretá, the country holds a stake in two of the most significant hydropower plants in the region. For decades, electricity production far exceeded domestic demand, which is why large amounts of energy were passed on to Brazil and Argentina.

Now Paraguay is beginning to consume a larger share of this advantage itself. In 2025, Paraguayan electricity consumption rose by 12.5 percent according to the ANDE data evaluated for this article; in the first five months of 2026 it was another 19.4 percent above the corresponding period of the previous year. Energy-intensive industry, data centres and digital infrastructure thus encounter something other locations have to generate expensively or import: large quantities of renewable hydropower at internationally competitive cost.

Anyone who now constructs from this an energy paradise without limits, however, overlooks the difference between generation and availability. A lot of electricity in the country does not mean that any amount of power is available at any time from any socket. Transmission and distribution grids have to keep pace with a demand for whose speed they were in part not built. Paraguay's bottleneck in the long run may therefore lie less in generating sufficient electrical energy than in reliably delivering it to where new economic activity is emerging.

Similarly fundamental is a second resource that appears surprisingly rarely in classic location comparisons: water. Paraguay has regular rainfall, large river systems and lies directly above part of the Guaraní Aquifer — one of the three largest freshwater reservoirs in the world. A naturally given starting position whose strategic value can hardly be overestimated in times of globally increasing water scarcity.

Infrastructure is something humans can create. Natural resources, by contrast, are not. Countries whose water supply depends primarily on large-volume and vulnerable desalination plants, as for example in the Middle East, could tell you a thing or two about that.

Paraguay's geographical position is also a good example of how the economic significance of an unchangeable fact can change. The country has no access to the sea. For international trade that was and remains a disadvantage, because goods have to cover additional transport distances and cross borders.

With the Bioceanic Corridor, however, a transport axis is emerging that is intended to connect the Atlantic and the Pacific via Brazil, Paraguay, Argentina and Chile. Paraguay does not lie somewhere at the end of the route, but at its geographical centre. A key element is the new international connection between Carmelo Peralta and Porto Murtinho; at the same time, road sections through the infrastructurally still poorly developed Chaco are being expanded.

The corridor does not abolish Paraguay's landlocked position. A country does not suddenly acquire a coastline because a road is built. But it can change what that position means economically: the landlocked state which has to accept additional transport routes can at the same time become a transit, logistics and production location between two oceans.

Being in the middle is worthless in itself. Being the logistical link in the middle can turn into a gushing source of revenue.

Still speculative for now is what might lie beneath a part of the country that remains largely unexplored. In the Gran Chaco, geophysical surveys for lithium and other sought-after minerals are under way. Around two million hectares are currently being examined by a consortium of companies; investments in the double-digit millions have been announced for prospecting and exploration. Should the expectations be confirmed, an additional locational factor of quite considerable significance would emerge – especially in an area that is still structurally weak.

For all the enthusiasm about resources and growth figures, it would perhaps be somewhat premature to declare Paraguay an institutional model country. Corruption, weaknesses of state institutions, deficits in administration and law enforcement as well as regionally concentrated organised crime are equally part of the reality. Anyone living or investing in Paraguay encounters a state whose way of functioning differs in parts considerably from Central Europe.

It is precisely for that reason that another continuity is remarkable. Since the end of the Stroessner dictatorship and the transition to democracy at the end of the 1980s, Paraguay has experienced none of the ruptures in economic policy that other Latin American countries have repeatedly gone through. The basic direction of economic policy has remained comparatively market- and investment-friendly over a long period. Foreign investors are in essential areas treated in principle on a par with domestic ones, capital and profit transfers are possible, foreign corporate ownership is permitted, and real estate can in principle also be acquired by foreigners — subject to statutory restrictions, particularly in certain border zones.

It would be claiming too much to derive the increased capital inflow from this continuity alone. Investment decisions rarely have a single cause. It does, however, create a framework in which low barriers to entry, competitive costs, natural resources and new infrastructure can develop their economic effect in the first place.

Paraguay is interesting enough as a location. There is no need to dress it up with a shady “zero-tax” fairy tale.

The economic movement is currently most visible in Asunción. Anyone who knew the capital ten or fifteen years ago hardly recognises some districts today. Residential towers, offices, hotels and mixed-use projects are changing the eastern growth axes in particular; projects such as Sudameris Plaza, Paseo 55 or Petra Imperiale are reaching dimensions that would have been unthinkable for Asunción only a few years ago.

The impressive construction boom is neither the proof nor the cause of Paraguay's upswing. It is, however, the visible trace of capital, demand and expectations that have now become large enough to manifest themselves in concrete and glass.

This development comes at a price. Roads and public transport are not keeping pace with growth everywhere; electricity and water networks require investment, land and property prices are rising, administration and the judiciary do not everywhere reach the efficiency international entrepreneurs expect, and despite new corridors the landlocked position continues to cause real logistics costs. Rapid growth can even make existing weaknesses more visible, because infrastructure that would have been sufficient for a more leisurely development path suddenly reaches its limits.

That is not an argument against the upswing. It is part of its anatomy.

An established location sells what already exists. A developing location demands the decision whether what is currently emerging is worth the price and the risk.

Perhaps that is precisely the more interesting story of Paraguay in 2026. Not that everything suddenly works. Not that every investment is profitable or every political decision sensible. What is decisive is rather that a country largely overlooked internationally for decades is beginning to activate several of its existing locational factors economically at the same time.

The hydropower has existed since the dictatorship in the 1980s, the rivers for centuries. And twenty years ago Paraguay already lay between the large economies of Brazil and Argentina, had agricultural land, a comparatively steady currency and a basic economic-policy direction that left relatively much room for private and foreign capital. What is new is not the existence of all these factors. What is new is the speed with which they meet migration, international capital, infrastructure investment and growing worldwide attention.

No single curve proves a lasting economic ascent on its own. Paraguay will experience economic cycles. Projects will fail, prices can overheat, and in future too the government will take decisions that leave you wondering whether they rest on sheer stupidity or on someone in the apparatus having had his palm greased again.

But when many mutually independent developments point in the same direction at the same time, it would be equally foolish to ignore the resulting synergy.

Anyone who looks at Paraguay solely because of low taxes therefore sees only a fragment. Anyone who still considers the country a sleepy landlocked state somewhere between Brazil and Argentina has probably slept through the last 10 years themselves.

Paraguay is not finished; it is a rough diamond. That is not a shortcoming one would have to conceal in a location analysis, but an essential factor of the development opportunities arising from it. In a fully developed market you usually pay for what others have discovered before you.

In Paraguay you can currently still watch something take shape. And take part in it.