Paraguay's Lugo says economy in good shape

ASUNCION, Oct 8 (Reuters) - Paraguayan President Fernando Lugo said on Wednesday the international financial crisis would have a milder impact on his country than on neighboring Brazil and Argentina.

Lugo, a former Roman Catholic bishop who took office two months ago, said authorities in the poor, soy-exporting nation were monitoring the impact of the crisis on the foreign exchange market.

"The crisis will have repercussions, but not with the same intensity as countries like Argentina and Brazil, which have much deeper economic ties with the United States," the center-left president told reporters during a visit to the central bank.

Landlocked Paraguay, one of South America's poorest countries, is the world's No. 4 soybean supplier, which would make it vulnerable to falling soy prices. Soybean prices have plunged about 40 percent from record highs in early July.

Luis Campos, one of the central banks directors, said strong growth and healthy finances meant the country was well-positioned to weather the storm in the near-term, but he warned over the effect of lower prices for farm exports.

"This year we're going to see limited secondary effects," he said, saying the impact would be more serious in 2009 when the soy harvest is finished.

"The crisis could manifest itself more seriously in terms of commodities prices," he said.

Farm industry groups estimate that the fall in soy prices alone could reduce export earnings by $400 million.

The government of Lugo, who took office two months ago, expects the economy to expand 5 percent next year, but economic analysts say weaker farm exports and a lack of credit could slow growth.

Agriculture also accounts for about a quarter of gross domestic product. (Reporting by Mariel Cristaldo; Writing by Helen Popper)