Fitch Ratings has upgraded Paraguay’s sovereign rating outlook from stable to positive, while maintaining the BB+ rating, one notch below Investment Grade. The decision underscores Paraguay’s robust economic performance, fiscal consolidation efforts, and ongoing structural reforms. Fitch Ratings, headquartered in New York and London, is a leading international credit rating agency that provides credit opinions, research, and data to assess the creditworthiness of entities such as governments, corporations, and financial institutions.
Paraguay’s Ministry of Economy and Finance (MEF) reported that the positive outlook reflects Paraguay’s solid economic growth, declining public debt, and a proactive reform agenda. The country’s prudent macroeconomic policies and increasing private investment further bolster its economic prospects.
Strong economic performance drives upgrade
Fitch’s report attributes the outlook revision to Paraguay’s sustained economic growth, low fiscal deficits, and moderate debt levels compared to similarly rated economies. The agency highlighted structural improvements in the tax base, a progressive reduction in foreign currency debt, and the continuation of sound macroeconomic policies. These factors have strengthened Paraguay’s economic resilience and fiscal stability.
Additionally, Fitch commended the government’s efforts to contain public spending, boost revenue, and enhance the efficient use of resources. The agency projects a fiscal deficit of 1.9% of GDP in 2025, with compliance to the 1.5% GDP fiscal limit expected by 2026, in line with Paraguay’s fiscal rule.
“In terms of country branding, it has been a very important step that the third-ranked risk rating agency is now placing us in this position,”, responded Paraguay’s Minister of Economy and Finance, Carlos Fernández Valdovinos. “”For the public sector in particular, the next time we go to the international markets to issue debt, the conditions will be much more favourable, and there will be greater demand. And when Paraguayan companies decide to enter the global markets, they will have sufficient demand to raise the financing they need.”
Declining debt and capital market growth
Fitch anticipates that public debt, expected to peak in 2024, will gradually decline in the coming years, supported by responsible fiscal policies. The issuance of guaraní-denominated bonds in international markets and growing participation of non-resident investors in the local market were also noted as signs of a strengthening Paraguayan capital market.
These developments reflect increasing investor confidence in Paraguay’s economic stability and its ability to attract diverse funding sources, further solidifying its financial position.
Reform agenda fuels investment and growth
Government initiatives are aimed at modernising the Paraguyan state, improving the business climate, and promoting investment include tax incentives for foreign investors, the expansion of the maquiladora system to services, and measures to encourage the production and assembly of electronic equipment. These reforms are expected to drive productivity and economic diversification.
Fitch forecasts Paraguay’s economy to grow by 4.8% in 2025, propelled by strong performances in the services, manufacturing, and construction sectors. Major investment projects, such as the Paracel pulp mill and the ATOME fertilizer plant, are set to enhance medium-term growth prospects.
Robust reserves and stable Iiflation
The rating agency also praised Paraguay’s macroeconomic stability, underpinned by international reserves covering 5.8 months of imports and stable inflation aligned with the Central Bank of Paraguay’s target. The prudent management of monetary policy under the inflation targeting regime continues to bolster institutional credibility.
Paraguay’s strong economic fundamentals and reform momentum have positioned it as a standout performer in the region, with Fitch noting the country’s growing diversification and resilience.
Regional recognition and leadership
Paraguay’s positive trajectory has been recognised by other rating agencies as well. In July 2024, Moody’s granted Paraguay Investment Grade status, while in January 2025, S&P upgraded its risk rating outlook to positive, also one step below Investment Grade. These endorsements highlight Paraguay’s emergence as one of South America’s most stable and dynamic economies.
“This will have implications for the country, improving its international perception, because all the rating agencies are basically granting us this seal of approval for public policies”, Fernández Valdovinos stated. “Tthat logically puts the country in a privileged position compared to the region, which is quite deteriorated economically.
Paraguayan president Santiago Peña celebrated the Fitch upgrade on his official X account, stating, “Fitch Ratings has upgraded our country’s outlook to Positive, highlighting our growth, stability, and commitment to reforms. Yet another rating agency recognises that we are on the right path.”
