Paraguay has been enjoying a relative political stability since 2013 while its foreign exchange reserves rose in the past years to arrive at a relatively high level (covering 8.4 months of imports at the end of 2016). Nevertheless, the ‘China of South America’, as this low-cost manufacturing hub is positioning itself, also saw a sharp increase of its short-term debt to close to half of its export receipts. This evolution negatively impacts the country’s liquidity position, especially as the current account balance is expected to turn into a small deficit due to infrastructure import while prices of important export products (e.g. soybeans and oil) are relatively low. For these reasons, Credendo has downgraded its short-term political risk classification to category 3/7.
15 Apr 2020
Latin America: Region is likely to face a harsh recession, liquidity constraints and deteriorating public finances
Region quickly enacted harsh containment measures
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