Hundreds of kilometers upstream of Asunción, the Paraguay River widens and slows, its surface broken by drifting camalotes and the steady churn of tugboats. For generations, this waterway has been Paraguay’s quiet lifeline, carrying crops and beef downriver and fuel back up. Today, it is beginning to move something else: the early signs of an economy remaking itself.
Along its palm-dotted banks, the transformation is increasingly visible. In Concepción, a pulp mill project by forestry company Paracel is poised to become the largest private investment in the country’s history. Upstream, construction crews are completing a bridge to Brazil, a key segment of the Bioceanic Corridor highway linking Paraguay’s Chaco to Chile’s Pacific ports. Further north, one of Brazil’s largest conglomerates is assembling hundreds of new barges to ship iron ore from its mines in Mato Grosso do Sul downriver to global markets.
Individually, these are large bets. Together, they point to consolidation of Paraguay’s natural advantages—land, energy, and location—under a more coherent growth model.
For decades, these advantages largely existed in parallel, rarely intersecting. Fertile land sustained a competitive agro-export sector. Hydropower generated low-cost, surplus electricity, most of it sold cheaply to Brazil. And a strategic location meant access to South America’s two largest economies. Now, these factors are converging, driven by infrastructure, foreign capital, and the geopolitical moment.
The macro numbers reflect this shift. GDP grew 6.6% in 2025, the fastest in Latin America, following four-plus percent growth in preceding years and a pair of investment grade ratings. A country long seen as peripheral is now edging onto investors’ radar.
Paraguay has an opportunity to channel this momentum into greater productivity and lasting development. The government’s “Paraguay 2X” roadmap, which aims to double GDP within a decade, captures the ambition. But meeting that plan’s implied annual growth of around 7% will depend on deepening structural changes. This starts with enabling infrastructure, institutional reforms, and external partnerships capable of sustaining successive waves of investment, each one diversifying productive capacity and reinforcing the next.
Widening value chains
The first wave is already underway. Paraguay’s maquila sector, built on a stable incentive regime, has grown by more than 20% annually on average since 2015. With over $1.3 billion in shipments in 2025, the sector now accounts for 70% of Paraguay’s industrial exports, with nearly two thirds—primarily auto parts, textiles, and aluminum—absorbed by Brazil, and another 16% by Argentina. What was once a largely informal border economy is increasingly industrialized and woven into regional supply chains.
Energy is another pillar. In March, UK fertilizer company ATOME secured financing for its $650 million plant in riverside Villeta, expected to become the world’s largest producer of green hydrogen fertilizer. It will convert 145 megawatts of Itaipu hydropower into an exportable, value-add product feeding regional agricultural demand, a promising model as Mercosur looks to reduce dependence on geopolitically exposed supply chains.
A third wave, targeting Paraguay’s natural endowments more directly, is also taking shape. The $4 billion Paracel project, backed by a Swedish-Paraguayan consortium, suggests potential scale, and industry executives believe the forestry market could support three to four additional projects of similar size. Paraguay’s abundant land produces faster eucalyptus planting cycles than either Chile or Uruguay—cellulose being the latter’s lead export—with investor interest likely to increase under the EU-Mercosur agreement recently signed in Asunción.
The sector extends beyond pulp. Biomass residues could create an innovative fuel market for Paraguay’s river barge fleet, considered the world’s third largest. Forestry also opens job-intensive downstream manufacturing opportunities and additional revenue streams through carbon credit schemes.
Closing the constraints
According to Fitch, the large-scale projects under development represent about 16% of GDP. But reaching the high bar of “2X” will require more than a strong pipeline.
Infrastructure is the most immediate constraint. Even in the capital, development is outpacing drainage systems and transport networks. Nationally, the gap is wider still. Closing an estimated $35 billion infrastructure deficit will require sustained investment well beyond what Paraguay’s narrow fiscal base can support.
This challenge is visible from roads to the river itself. The Paraguay-Paraná carries up to 90% of trade, with volumes on the waterway expected to double over the next decade. Yet drought and sediment frequently lead to costly bottlenecks, calling for coordinated dredging and port upgrades.
Energy presents a more paradoxical challenge. Paraguay’s surplus hydropower, long underpinning its investment pitch, is being rapidly absorbed by domestic demand. The country now consumes 36% of total Itaipu output, up from just 12% in 2015, ceding less of its 50-50 share to Brazil. At this pace, the surplus could disappear by the end of the decade. Meanwhile, overall grid losses nearing 25% remain above regional averages, complicating energy-intensive investments.
Solar and battery solutions offer one path forward, including in the Chaco region, where photovoltaic potential compares with that of Texas. Cross-border integration offers another, such as a proposal to pipe gas from Argentina’s Vaca Muerta to Brazil alongside Paraguay’s Bioceanic Corridor. These will require regulatory reforms to expand grid access, building on recent steps to enable private sector partners to develop diversified generation and transmission infrastructure.
External alignment to investment
Paraguay’s economic trajectory has always been shaped by its neighbors, from river management in Argentina to energy negotiations with Brazil. Those relations remain central. But the country’s strategic relevance is now reaching further, opening new avenues for external financing to close investment gaps.
Recent steps have reinforced Paraguay’s alignment with Washington. This includes expanded security cooperation under a Status of Forces Agreement, Paraguay’s first-ever U.S. Foreign Military Sales acquisition, and repeated meetings between Secretary of State Marco Rubio and President Santiago Peña. The next task is translating political and security ties into economic flows.
After Brazil, the United States is already Paraguay’s second-largest investor. There’s room to grow: The Paraguay-Paraná River and Bioceanic Corridor present strategic entry points for U.S.-led financing for infrastructure and logistics through the International Development Finance Corporation (DFC) or the Export-Import Bank. Emerging sectors also show commercial promise, from leveraging Paraguay’s energy profile for data centers to early-stage exploration for uranium, titanium, and rare earths. That could accelerate by pairing institutional reforms to the mining code with geological mapping under a cooperation framework recently signed with Washington.
Momentum to scale
Paraguay’s productive land, low-cost energy, and strategic location have long promised greater growth horizons. Today, their convergence alongside growing attention from investors and policymakers alike is making the difference.
To fully take advantage of this opportunity, Paraguay will need to successfully build up enabling infrastructure, domestic institutions, and external partnerships. While challenges remain, the current is moving in the right direction, as Paraguay shifts from the periphery toward the center of South America’s emerging production and logistics networks.
Gregory Ross is a senior associate with McLarty Associates’ Brazil and Southern Cone practice.
Photo via The Asunción Times.
