ASUNCION (Reuters) - Paraguay’s economy will grow more than 4.2 percent in 2017 thanks to a record soy harvest, Finance Minister Santiago Pena said on Thursday, a forecast much higher than the central bank’s current estimate of 3.7 percent growth.
The central bank’s estimate “will be revised upwards” as the harvest accelerates and begins to benefit the country’s financial and transportation sectors, Pena told Reuters in an interview at the annual meeting of the Inter-American Development Bank’s board of governors.
“One number that’s being talked about is 4.2 percent,” Pena said. “Based on what I’m seeing in the business that’s being generated, and the sentiments of the private sector, growth will be higher than 4.2 percent.”
Paraguay’s 2016/17 soy crop is estimated at more than 10 million tonnes, Agriculture Minister Juan Carlos Baruja said earlier this month, setting expectations for a record harvest that would bring in more than $3 billion.
“What’s interesting about this harvest is the impact that it has on the whole supply chain and on other sectors. When we add up commerce, transportation and the financial sector, it’s going to be a very strong year,” Pena said.
Paraguay grew 4 percent in 2016 largely due to improvements in the industrial, construction and electricity generation sectors.
The country has boosted its investments in infrastructure since center-right President Horacio Cartes took office in 2013, financed in large part by debt after the country debuted in the international bond markets that same year.
The country will not return to the global bond markets this year after raising $500 million in debt earlier this month, Pena said, though he said he expects to raise some $50 million in the local market.
Pena said he was skeptical a proposed trade deal between Mercosur - the South American trade bloc consisting of Argentina, Brazil, Paraguay and Uruguay - and the European Union would come together soon, despite newfound momentum this year during negotiations that have lasted more than a decade.
“This year we will see absolutely nothing, in truth,” Pena said. “I would love to be more optimistic, but the reality is I don’t think we see a process for closing the free trade deal with the European Union. I think it will still take a lot of time.”
He said Latin American countries would have more success boosting intra-regional trade, particularly given the potential for changes in U.S. trade policies.
Reporting by Daniel Desantis and Luc Cohen; Editing by Chizu Nomiyama and Cynthia Osterman