In March, Paraguay recorded a total inflation rate of 3.6% year-on-year (YoY), significantly lower than the 6.4% YoY rate in March 2023 but slightly higher than February 2024’s inflation, which stood at 2.9%. The top five contributors to the higher consumer price index were driven by price increases in fresh fruits (12.5% YoY), eggs (9.0% YoY), fuel (5.7% YoY), and vegetables and beef meats (5.6% YoY and 2.7% YoY, respectively). Despite this, the inflation rate in March remains on track with the Central Bank’s target of 4.0% for 2024.
The intense heat and drought resulting from climate change have significantly reduced agricultural yields in the region, particularly for fruits, vegetables, and eggs. Additionally, attractive prices in neighbouring countries have led farmers to export more produce such as rice. On the demand side, factors such as the Semana Santa holiday week have driven domestic demand higher for these food sections.
However, compared to the Christmas holiday week, retail prices for fruits and vegetables last month were not as high. The government, through the Ministry of Livestock and Agriculture, signed an agreement with the Paraguayan Chambers of Supermarkets (Capasu) last month to reduce retail prices by 25 to 40% during Semana Santa in the last week of March for 150 food items, including coffee, soda, beer, rice, jams, and pasta, among others. This response aims to counter the effect of skyrocketing food prices experienced during last Christmas, where egg prices jumped to 45,000 Guarani for 2 dozen eggs compared to the normal price of 25,000 Guarani.
An increase in beef prices is still expected to continue due to lower domestic supply in cow livestock following the country’s fight against mouth and foot disease. Last month, beef prices saw an increase of 2.9% YoY. According to the Ministry of Agriculture, the mass vaccination program to tackle the disease began in February and is expected to be completed by April 5th, 2024, and has thus far been successful.
The increase in fuel prices is in line with the global market prices of crude oil and gas. Last month in Paraguay, the fuel price increased by 5.7% year-on-year (YoY). Consequently, transportation costs and bus ticket prices in the unsubsidised sector have increased accordingly. Additionally, some durable goods such as furniture, home improvement items, and electronics also experienced slight increases last month due to higher demand resulting from newly completed construction of apartment buildings.
Certain items in the spending basket, such as flight tickets and tourism services like hotels and tourism packages, experienced slight price reductions due to seasonality. Last month, air transportation and tourism prices recorded decreases of 3.8% and 1.1%, respectively.
Paraguay’s total inflation of 3.6% YoY remains healthy and aligned with neighbouring countries within the region. In comparison, in March 2024, Brazil and Chile recorded inflation rates of 4.5% YoY, while Uruguay and Colombia recorded rates of 4.7% and 7.7% YoY, respectively. Bolivia and Peru recorded lower-than-average regional inflation last month at 2.6% and 3.0%, respectively. Meanwhile, Argentina remains in a hyperinflationary situation with a total inflation rate of 277.1% YoY.
