Paraguay has reached a significant economic milestone after Standard & Poor’s (S&P), an American credit rating agency, granted the country an Investment Grade sovereign rating. With this decision, Paraguay has achieved investment grade status from two of the three major credit rating agencies. Therefore, Paraguay is among the Latin American economies with the highest levels of macroeconomic credibility.
S&P highlighted the strengthening of Paraguay’s economic resilience, the effectiveness of its public policies, and growing investor confidence in the country’s institutional framework. As a result, Paraguay was upgraded from a BB+ rating to BBB-. The country’s first investment grade rating was awarded by Moody’s in July 2024 and has been confirmed this year.
An investment grade rating indicates that bonds issued by a country carry a low risk of default, meaning the sovereign has a strong capacity to meet its financial obligations. This classification enhances investor confidence and improves the country’s standing in international financial markets.
S&P’s rationale on Paraguay’s Investment Grade
This new rating reflects a comprehensive analysis of Paraguay’s profiles. Standard & Poor’s noted that strong private investment and domestic consumption are expected to drive economic growth of around 4% over the next two years, following an average growth rate of 3.9% between 2022 and 2025. The agency also expects GDP per capita to increase to approximately USD 9,000 by 2027, up from less than USD 7,000 in 2024.
S&P projects that investment will grow by 17% in 2025 and reach 27% of GDP during 2026-2028, compared to an average of 24% of GDP between 2022 and 2024. This expansion is supported by a robust pipeline of projects across key sectors, including maquiladoras, construction, forestry, energy, and services.
In addition, S&P emphasized the government’s credibility in meeting its fiscal policy targets. Inflation remained at 3.5%, close to the Central Bank of Paraguay’s (BCP) target, while the fiscal deficit was reduced to 1.5% of GDP for 2026, in line with the post-pandemic fiscal convergence plan.
Recognition to Paraguayan government
The rating agency also highlighted the efforts of the current Paraguayan government, describing President Santiago Peña’s leadership as pursuing “an aggressive reform agenda to modernize governance, improve social programs, and attract private investment.” Among the most notable reforms, S&P cited the strengthening of the supervisory and regulatory system for public-sector pensions, improvements to the revenue collection agency, and the expanded role of the Ministry of Economy to enhance institutional effectiveness.
“We are living through a unique moment in our country’s history. We are witnessing the resurgence of a giant. Achieving investment grade status means greater confidence, more investment, more jobs, and more opportunities for our people. Paraguay is proving that when a country gets its house in order, projects itself, and believes in itself, the world recognizes and respects it,” the president stated after Paraguay received the Investment Grade rating from S&P.
S&P’s outlook and considerations
As a small and open economy, Paraguay remains exposed to external shocks. While strong agricultural performance over the past decade has reduced reliance on energy exports, the country still depends heavily on commodities. Nearly one quarter of exports is linked to the soy sector, making Paraguay sensitive to changes in commodity prices and weather conditions, which have historically affected export revenues.
On the fiscal side, S&P expects the government to maintain controlled public spending, keeping general government expenditure stable as a share of GDP. However, medium-term pressures remain, particularly from the public-sector pension system (Caja Fiscal). In addition, economic growth will require greater investment in infrastructure. Paraguay’s updated public-private partnership law could help attract private investment, although implementation challenges persist.
Regarding public debt, S&P forecasts that net public debt will grow moderately between 2026 and 2028, primarily due to the high proportion of debt denominated in U.S. dollars. To reduce this risk, the government plans to diversify the currency composition of new borrowing. Given the still limited scale of domestic markets, S&P expects Paraguay to supplement smaller local issuances with cross-border guaraní-denominated bonds.
Further analysis can be found in the S&P Global report.
