Paraguay – Poverty and Equity Assessment

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Paraguay has made significant progress in reducing poverty, halving its poverty rate from 51.4% in 2003 to 24.7% in 2022, and extreme poverty from 12.6% to 5.6% during the same period [22][43] - The pace of poverty reduction has slowed since 2014, with most gains occurring between 2003 and 2013, and recent adverse shocks have impacted progress [23][47] - In 2023, Paraguay saw a reduction in moderate poverty by 2.8 percentage points and extreme poverty by 1.2 percentage points, indicating signs of recovery [23][51] Overview of the Challenge - Despite significant poverty reduction, spatial disparities persist, with rural areas experiencing higher poverty rates [22][42] - The Gini coefficient for income inequality was 45 points in 2022, indicating a higher level of inequality compared to structural peers [23] - Vulnerable groups include the young, women, low-educated individuals, informal workers, and Indigenous communities, who face higher poverty rates [23][24] Factors Limiting Poverty Reduction - Human Capital: Paraguay faces significant human capital deficits, with low educational outcomes and health disparities affecting poverty reduction efforts [26][27] - Job Quality: High labor informality (63% in 2022) and poor job quality hinder access to quality employment [28] - Fiscal System: The fiscal system's limited impact on poverty reduction is due to low tax collection and inefficiencies in public spending [29] - Climate Vulnerability: Low-income households are particularly vulnerable to climate shocks, which can exacerbate poverty [30] Strategies for Inclusive Growth - Human Capital Accumulation: Prioritize early childhood education and improve access to quality education, especially for marginalized communities [32] - Job Creation: Implement policies to enhance job creation in formal sectors and improve access to quality jobs [33] - Fiscal Policy: Enhance the progressivity of the tax system and improve targeting of social transfers to lower-income households [34] - Climate Resilience: Develop strategies to increase resilience to climate shocks, including investment in infrastructure and disaster risk management [36] Proposed Policies and Interventions - Short-term policies include expanding early childhood education and stimulating job creation in micro, small, and medium enterprises (MSMEs) [39] - Medium- to long-term policies focus on attracting foreign direct investment (FDI) and enhancing vocational training aligned with market needs [40]