Paraguay has climbed to 55th place in the 2026 Index of Economic Freedom, scoring 66.4 points out of 100, a 1.2-point increase from 2025. The ranking, published annually by the Heritage Foundation, a Washington-based think tank, covers 184 countries. Paraguay now sits 9th in the Americas and above both the regional average (59.7) and the global average (59.9), consolidating its position among the better-performing economies in Latin America.
A consistent climb over three years
The result is part of a sustained upward trend. In 2024, Paraguay ranked 80th globally. By 2025, it had risen to 59th. This year it reached 55th, a gain of 25 positions in two years, one of the sharpest climbs in the region over that period. The Heritage Foundation describes Paraguay’s economy as one of the fastest-growing in South America.
The Foundation’s editor of the index, Anthony Kim, singled out Paraguay in his 2026 commentary, saying that President Santiago Peña’s administration has been “unambiguously promoting economic freedom, combating corruption, and building alliances with democratic nations.” Kim listed Paraguay alongside Oman, the Philippines, and Morocco as countries that recorded sizable score improvements over the past two years despite challenging global economic conditions.
What drives the score up
The current administration has pursued a series of legislative reforms aimed at improving the entrepreneurial environment and strengthening the private sector, with the stated goal of generating broader-based job growth. Paraguay has also overhauled its investment framework, enacting legislation to increase efficiency, modernise tax incentives, and expand the scope of foreign investment.
Economist Fernando Escobar, a board member of the Asunción-based think tank IDPPS, attributes the improvement to three pillars: fiscal discipline, with Paraguay keeping its deficit and public debt low by regional standards; monetary stability, with the Central Bank maintaining controlled inflation; and policy continuity, which has strengthened the country’s international reputation.
Those efforts have yielded a concrete result: Paraguay has achieved an investment-grade credit rating, a milestone that few countries in Latin America have reached and one that signals confidence to international markets.
The numbers support the picture. Paraguay scores 95.9 for tax burden, reflecting its flat 10% income and VAT rates, among the lowest in Latin America, 86.9 for government spending, and 83.0 for fiscal health. On open markets, investment freedom reached 80 points and trade freedom 78.4.
Where Paraguay still falls short
The weakest scores tell a different story. Government integrity received just 27.3 points, the lowest of any category, while judicial effectiveness and property rights scored 38.4 and 44.2, respectively, all well below the global average. These figures reflect longstanding concerns about corruption and the reliability of the courts, which continue to deter investors despite the country’s strong fiscal performance.
Labour freedom also scored low at 44.1, pointing to rigidities in the job market. Inflexible employment regulations limit the dynamism of the formal workforce and remain one of the structural weaknesses the index consistently flags for Paraguay.
What the Paraguay economic freedom 2026 results mean in context
Paraguay now ranks fourth in South America, behind Chile (17th globally), Uruguay (32nd), and Peru (54th). Brazil sits at 117th. Argentina, despite posting the largest single-year score gain in the entire index under President Milei’s reforms, remains at 124th and is still classified as “mostly unfree.”
Fifteen of 19 Latin American countries improved their scores this year, suggesting a broader regional trend. But Paraguay’s trajectory stands out. For a small, landlocked country of around 7 million people, the 55th-place finish represents a meaningful step forward. Whether it can push further will depend on whether judicial and governance reform can catch up with the fiscal discipline that has driven the rise so far.
