Editing Economy of Paraguay (section)

==Overview==
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Paraguay is a middle-income country that changed rapidly in the 1970s and 1980s as a result of hydroelectric development, agricultural colonization, construction, and cash crop exports. Nevertheless, the country's [[gross domestic product]] (GDP) in 1986 was approximately US$3.4 billion, or roughly US$1,000 per capita, ranking Paraguay only ahead of [[Bolivia]] among countries of [[South America]]. Paraguay was the most [[agricultural economy]] of South America, and that [[Economic sector|sector]] influenced the performance of virtually every other sector of the economy. The over dependence on agricultural economy and low tax collections deteriorated the already wide gap wealth distribution. The extreme poverty increased from 16% to 20% during 2001 to 2012, even as the economy grew. By 2013, it has a human development index of 0.669 which is even lower than Bolivia.

The Paraguayan economic miracle of the 1970s came to a halt in 1982 because of the completion of construction at Itaipú, lower commodity prices for cotton and soybeans, and a global [[recession]]. The economy recovered in 1984 and 1985, [[Economic stagnation|stagnated]] in 1986, and continued to expand in 1987 and 1988. Despite its rapid growth, the Paraguayan economy became increasingly dependent on soybeans and cotton for exports and overall economic dynamism. These two crops, however, remained subject to external price fluctuations and local weather conditions, both of which varied considerably.

Economic growth in the post-World War II period occurred in the context of political stability characterized by authoritarian rule and patronage politics. Government economic policies deviated little from 1954 to the late 1980s, consistently favoring a strong private-enterprise economy with a large role for foreign investment. Unlike most other Latin American economies, in Paraguay import [[tariff]]s were generally low, fiscal deficits manageable, and exchange rates not overvalued. These trends faltered in the 1980s as the government took a more active part in industry, [[Government budget balance|deficit]]s rose, and the national currency was generally overvalued and devalued numerous times. Throughout the post-World War II era, Paraguay had no [[personal income tax]], and government revenues as a percentage of GDP were among the lowest in the world.

Despite the sustained economic growth that marked the postwar period, the distribution of economic benefits was highly inequitable. Although GDP expanded rapidly in the 1970s, most economists estimated that income distribution worsened during the decade. Government spending on [[social services]] was particularly lacking. Paraguay's poverty was mostly a rural phenomenon, which increasingly involved competition for land in the eastern region near the [[Brazil]]ian border, especially in the departments (administrative divisions) of [[Alto Paraná]], [[Canendiyú]], and [[Caaguazú Department|Caaguazú]]. Nonetheless, [[land tenure]] was not generally the acute social problem it was in many developing countries.

Although Paraguay faced significant obstacles to future economic development, it displayed extraordinary potential. Paraguay contained little oil and no [[precious metal]]s or [[sea coast]]s, but the country was self-sufficient in many areas and was endowed with fertile land, dense forests, and swift rivers. The process of opening up the eastern border region to economic activity and continued [[agricultural expansion]] was expected to effect rapid changes in once-isolated Paraguay. Likewise, the development of a series of hydroelectric plants along the [[Río Paraná]] linked Paraguay to its neighbors and provided it access to cherished [[energy resource]]s and badly needed export revenues. Finally, [[road construction]] united different departments of Paraguay and provided the country its first access to the Atlantic Ocean via Brazil. These processes of infrastructure development, hydroelectric expansion, agricultural colonization, and a cash crop explosion allowed Paraguay by the late 1980s to begin to tap its potential