Banking On Paraguay’s Fiscal Stability And Digital Future
Under the supervision of Paraguay’s independent Central Bank, the banking sector comprises more than 50% of GDP. Today, banks and communications companies are mobilizing technology to increase access to banking for Paraguayans, as well as to improve services and products for international investors.
“Profitable and well capitalized,” as defined by the IMF, the sector is closely supervised by the Paraguayan Central Bank, which has achieved prudent macroeconomic stability through controlled inflation and increased regulation. Central Bank Governor Carlos Fernandez Valdovinos is confident he will be handing over a “better institution” at the end of his term in 2018, due to ongoing improvements in monetary policy, bank supervision and financial inclusion.
In 74 years, Paraguay has maintained the same currency without any readjustments, reinforcing its leading monetary policy and stability. According to Manuel Ferreira, former finance minister and head of investment consultancy MF Inversiones, “In Paraguay there is a free flow of capital, and the economy is integrated into international financial markets. A major currency in the Paraguayan economy is the U.S. dollar, and around 40% of transactions are made in dollars.”
International investors will find Paraguay’s banks eager to work with them. “Paraguay is a small country but welcoming to foreigners, and much easier to do business in than its neighbors,” says Beltran Macchi, president of the Association of Banks. “We are also in need of a lot of investment, which creates unique opportunities.”
Eduardo Campos, president of Paraguay’s BASA bank, welcomes foreign clients: “We urge foreign investors to trust Paraguay, a country of great opportunities. The nation has been carrying out the right tasks to achieve sustainable development.”
Viviana Varas, president of Paraguay’s largest commercial bank, Itau, likewise believes Paraguay possesses all the conditions necessary to make it an international hub for the region. “Paraguay is the best-kept secret,” she says. “It has had excellent GDP
“For the traditional bank, it is difficult to flourish in emerging markets like Paraguay, as we have many people living in rural areas far from branches. Instead, people are using mobile phone technology. We have the network — now we are learning how to use it.”
— CarLoS FernanDez VaLDoVInoS, Governor, Central Bank
growth in recent years, many young people will be moving into the workforce in coming years, and it has a private sector that is dynamic and that moves independent of the public sector.”
Technological innovation is also driving changes in the traditional Paraguayan banking sector with new players emerging, including Paraguay’s largest foreign investor, communications giant Millicom, which has also become the country’s largest money mover through its mobile banking service, Tigo Money. “We are responsible for $1.5 billion worth of transactions per year,” says Jose Perdomo, CEO of Millicom’s Tigo Paraguay. “In a country of 7 million people, we have more than 2 million mobile wallet active accounts and 1.3 million regular users. Paraguay has only 800,000 bank accounts.”