How a unique intervention is saving guaraní from sinking against the US dollar! Find out more here.

Paraguay’s guaraní holding up against the US dollar thanks to BCP’s intervention

Last week, a timely intervention by the Central Bank of Paraguay (BCP) sparked optimism in Asunción’s financial circles as the local currency saw an appreciation against the US dollar, moving away from the crucial ₲ 8,000 threshold. The BCP committed to injecting a minimum of US$ 15 million into the market daily, aiming to stabilize the local currency. The dollar had surged by 9% against the guaraní in 2024, primarily due to international demand for the dollar and local exchange requirements.

While the BCP’s initiative was met with relief to ease the pressure on the guaraní, concerns linger among analysts about potential repercussions from any further devaluation. This could potentially impact inflation and overall economic stability. Some experts caution that the global and regional economic landscape may necessitate additional interventions for a sustained stabilization of the currency moving forward.

Aside from currency concerns, Paraguay grapples with a separate challenge – a continuous downspout affecting local rivers, resulting in a significant jump in freight costs of up to 40%. Raúl Valdez, President of the River and Maritime Shipowners Center (Centro de Armadores Fluviales y Marítimos – Cafym), highlighted that transport capacity experienced a recurring 30% reduction on average. Notably, freight costs have surged by an average of 40%, depending on the type of cargo being transported.

Acknowledging the critical role river transport plays in the import and export sector, Valdez stressed the significant impact these challenges pose on the overall economy. With river transport accounting for about 80% of imports and exports in the country, the freight cost surge presents a considerable concern for economic stakeholders.

Furthermore, Paraguay witnesses a downward trend in transactions involving electronic wallets. From January to September, trade volume totaled ₲ 8.4 trillion, reflecting a 15.28% year-on-year decline from the previous ₲ 9.9 trillion. One possible factor contributing to this decline is the commissions levied on each transaction, as highlighted by the BCP.

In conclusion, while the BCP’s intervention has provided temporary respite for the guaraní against the US dollar, Paraguay faces a complex economic landscape shaped by currency challenges, rising freight costs, and declining electronic wallet transactions. It is imperative for stakeholders to monitor these developments closely and consider strategic interventions to ensure economic stability and growth in the face of these multifaceted challenges.