Paraguay continues to court Taiwanese investors

Finance minister warns against China reliance
calendar icon 2 August 2023
clock icon 3 minute read

Paraguay is seeking more Taiwanese investment to diversify its farm-driven economy focused on exporting raw materials to China, incoming Finance Minister Carlos Fernandez Valdovinos said in an interview, according to Reuters.

Paraguay remains the only South American nation with formal diplomatic relations with Taiwan, which China claims as its own territory. As Paraguay prepares for the Aug. 15 inauguration of the next government, it has reinforced its 70-year friendship with the democratic island, even as China ramps up diplomatic and military pressure.

"We are very good at producing soybeans and meat, but we must diversify," Fernandez told Reuters on July 28 at his temporary office in Asuncion. "We ask Taiwan to help us with that, through investments from its private sector."

A Taiwan delegation including business leaders will travel to Paraguay in August for the inauguration of conservative President-elect Santiago Pena, he added.

China "is not convenient" for Paraguay

Paraguayan farmers who support switching ties to China to boost the landlocked country's agricultural exports "are not seeing the risks" that Beijing presents, Fernandez said.

China, as a buyer of raw materials from Paraguay with no added value, "is probably convenient for some sectors," Fernandez said. "But as a strategy for the economic and social development of Paraguay, it is not convenient for us to continue betting solely and exclusively on the main export sectors."

Paraguay's cattle ranchers had been pressuring officials to gain access to the lucrative Chinese market for their beef before the April 30 election, which Pena won by a sizeable margin.

Big meatpackers say they can get better prices elsewhere, as demand for more specialized cuts and processed foods grows.

"China has lowered prices for beef cuts and we see the immediate effect of that across the border in Brazil and Uruguay," said Jair Antonio de Lima, founder and president of Paraguayan meatpacking firm Concepción, in an interview.

Volume sales of Uruguayan beef in the first half of this year to China have fallen as much as 39.9% fromthe year-ago period.

"Taiwan is still an important market for us, prices there are better than in China," Lima said.

Paraguay hopes this year to conclude a lengthy certification process to export beef to the United States, which could also pave the way to other attractive markets such as Japan and South Korea, Fernandez said.

Another sovereign bond

Paraguay is planning to issue close to $1 billion in sovereign bonds in international markets, possibly as soon as January, Fernandez said.

Proceeds will be used primarily to finance the 2024 budget and settle debts inherited from the outgoing administration which issued $500 million in 10-year sovereign bonds as recently as June.

The bond offering is subject to congressional approval. Congress will debate whether to return the debt ceiling to 1.5% of Gross Domestic Product. The annual target had been raised since 2020 to ease the impact of the COVID-19 pandemic, Russia's invasion of Ukraine and other factors.

Paraguay's fiscal deficit ballooned to 3% of GDP last year. "By 2026 or if possible sooner, we hope to reach 1.5%," said Fernandez.

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