The curious case of Paraguay: economic freedom and stability amid the challenge of structural corruption

In a region often marked by political instability and macroeconomic challenges, Paraguay—a bilingual country of fewer than seven million people—stands out as an industrious student in a classroom full of bad influences. With controlled inflation, a stable currency (the guaraní), prudent fiscal policies, and high economic freedom, the red-and-white nation has quietly become an increasingly attractive destination for entrepreneurs, companies, and investors. This appeal is especially driven by growth in the real estate sector and the country’s streamlined business startup processes.

However, despite being supported by a solid economic foundation, Paraguay faces a structural challenge that hinders its rise as a regional power: endemic corruption, the troubling expansion of organized crime, and an inefficient state apparatus—disproportionately large relative to its territory—that struggles to convert sustained growth into a comprehensive institutional framework for its citizens.

Economic freedom, low fiscal cost and silent growth

Paraguay boasts several qualities that make it an exotic and attractive destination. Notably, its rich cultural heritage sets it apart in the region, as it is the only country with two official languages: Spanish and Guaraní, an ancestral indigenous language.

Additionally, Paraguay is known as a very happy country with warm and hospitable people—a quality that encourages tourists and foreigners who visit to return frequently, and sometimes even to settle permanently.

However, there is a third, lesser-known characteristic that makes Paraguay an indispensable destination: according to the Heritage Foundation’s Index of Economic Freedom 2024, Paraguay ranks as one of the freest economies in South America, surpassing regional giants like Brazil and Argentina. Interestingly, these neighboring countries—along with Uruguay—were Paraguay’s adversaries during the infamous War of the Triple Alliance (1864–1870), a brutal conflict that resulted in Paraguay losing a significant portion of its territory and population. Many historians regard this war as a genocide.

More than 140 years later, Paraguay looks at its neighbors with pride, thanks to its macroeconomic stability. The country’s low tax burden—a corporate income tax of just 10% and one of the region’s lowest VAT rates—combined with a stable exchange rate and open trade policies, creates a business-friendly environment.

After the severe impact of the pandemic, inflation in Paraguay reached 4.63% in 2023 and remained below 3.85% in 2024, reinforcing the strong reputation of the country’s monetary policy. Unlike many regional currencies, the guaraní has demonstrated remarkable stability since its introduction in 1943.

Meanwhile, sectors such as agribusiness, services, energy, the real estate market, gold and cryptocurrencies continue to expand; boosting Paraguay’s Gross Domestic Product (GDP), which grew by 4.2% in 2024. This growth has also helped stabilize the labor market, with the unemployment rate falling to 5.6%—the lowest first-quarter figure since 2017.

This is further supported by an investment climate characterized by competitive costs and the anticipated, necessary move toward administrative digitalization.

Formalization via EAS: a success story

One of the most notable recent advances—and a key way Paraguay aims to distinguish itself from its regional neighbors—has been its fight against business informality through the introduction of Simplified Joint Stock Companies (EAS).

From its launch in February 2021 through November 2024, a total of 13,744 companies were incorporated under the Simplified Joint Stock Companies (EAS) model, accounting for 28% of all new businesses in Paraguay. In 2024 alone, 5,472 EAS registrations were recorded—a 21% increase over the previous year.

"I created my EAS a couple of years ago in less than two weeks. The whole process was via online and without anyone's help. This formalization helped me to start invoicing legally, open bank accounts and expand my business," said Mathias Lugo, owner of Alzati, a bookstore-cafeteria located in the corporate hub of Asunción, in an interview with VOZ.

The success of this State-promoted tool in Paraguay lies in its agility: zero cost to open, fully digital processing, and a promised turnaround time of 72 working hours—though in practice it usually takes seven to ten days. Previously, as other entrepreneurs told VOZ, the main challenge with EAS was its limited integration with the financial system. However, opening a bank account has now become much simpler and faster, thanks to this new legal structure.

According to the Ministry of Industry and Commerce, capital invested through EAS over the past four years has exceeded $588 million, with 89% originating domestically and 11% from foreign sources.

Thus, the model is achieving two key objectives: lowering barriers to formalization for thousands of entrepreneurs and positioning Paraguay as a trusted destination for regional investment.

Doubts about Paraguay: organized crime and weak institutions

Although Paraguay has all the ingredients to be a beacon of freedom and prosperity in a region often marked by turmoil, stability is not guaranteed at the heart of South America.

Despite remaining one of the safest countries in Latin America—according to rankings like the Global Peace Index 2024—Paraguay has slipped several places in recent years, largely due to the rise of organized crime.

According to Insight Crime, Paraguay’s prisons have become epicenters of violence and criminal control, especially after a riot led by the Clan Rotela group at Tacumbú penitentiary in 2023. While the government has launched operations to contain gang leaders and strengthen prison oversight, structural problems such as overcrowding, judicial weakness, and police corruption remain unresolved.

Beyond the prison issues, Paraguay climbed significantly in the Global Organized Crime Index 2023, ranking 4th out of 193 UN member states surveyed, placing it alongside Colombia, Mexico, and Myanmar at the top of the list.

The threat is clear: without profound reforms, organized crime could undermine Paraguay’s greatest asset—its relative internal peace.

Moreover, systemic corruption significantly fuels the proliferation of organized crime.

Sadly, Paraguay holds a troubling position on Transparency International’s Corruption Perceptions Index, ranking second-worst in South America after Venezuela. This ranking reflects ongoing issues with bribery scandals, institutional capture, and political clientelism. 

In fact, local political analysts agree that despite Paraguay’s strong macroeconomy and the freedoms enjoyed by its citizens, the country faces a dilemma: it appears attractive and reliable to foreigners but is far less dependable for many of its own people, who often feel overlooked by the system.