Numbers can be misleading. Listen to government economists in Paraguay and they’ll paint a picture of an economy whose growth reached 13% this year, making it the fastest growing country in the Americas. But what won’t be forthcoming is an explanation of why 30% of the population of the fastest-growing country in the Americas still lives in poverty.
The trouble is that the country’s growth is limited to a small percentage of the wealthy. The majority of the economy’s growth is driven by highly mechanized agriculture and the export of cash crops like soy and corn. However, modernized agricultural methods mean fewer jobs created for the lower classes, and 77% of arable land in Paraguay is controlled by 1% of landowners. This results in the vast majority of the income fueling the country’s growth belonging to a small elite class.
And this wealth disparity is only increasing. Social spending is minimal, and Paraguay ranks near the bottom for poverty reduction among South American countries. Part of this is due to inefficient, or completely absent, taxation. Paraguay only introduced an income tax this year, and tax collection only corresponds to about 18% of GDP, a percentage that is lower than African nations like Congo and Chad.
So economic inequality increases, even as Paraguay’s economy appears to be booming. It’s an unsustainable system though. Inevitably, social inequality will act as a brake on economic growth by slowing the development of markets and limiting investment opportunities for the poor. It will take the government realizing it though. Or at least acknowledging the issue. Government statistics report unemployment to be at less than 6%, while unofficial sources claim that up to 50% of the workforce is unemployed or underemployed in low-wage jobs.
Sustainable growth requires growth at all levels. Not a short-sighted view that creates a boom, but inevitably leads to a bust.
– David Wilson