An Underdog Trump Ally in Latin America Becomes an Investor Magnet

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Then last century, it was run as a dictatorship for 35 years — one of the longest in the region, whose fall in 1989 was followed by a tumultuous transition to democracy. But Paraguay’s embrace of sound fiscal and monetary policies after its 2003 financial crisis is now paying off, with single-digit inflation and annual growth averaging around 4% over the past two decades.

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“Paraguay will keep growing more than the other countries in South America,” Peña told Bloomberg Television in Washington last month. “Very soon it will have the highest per-capita income, above Uruguay and above Chile.”

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Investors are also taking notice, pouring money into factories and real estate. Many of them are foreign, with migration authorities receiving nearly 50,000 residency applications last year. About half were Brazilians, though there were also large numbers of Argentines, Germans, Bolivians and Spaniards.

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Felipe Bertolini, 24, from São Paulo, is one of them. He and his father, a port investor, spent three days in Asunción in late February applying to live in Paraguay. The tax regime at home, where the state takes about 40% of the revenue from his factoring and securitization company, led Bertolini to consider moving next door.

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“Brazil is pushing people toward Paraguay because its taxes make entrepreneurship unviable,” he said. “Companies shut down in Brazil and come here.”

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The Portuguese-speaking country is the largest player in Paraguay. Brazil’s share of foreign direct investment climbed to about 15% at the end of 2024 from less than 12% four years prior, according to central bank data.

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Factories that enjoy tax breaks under Paraguay’s manufacture-for-export, or maquila, rules are a magnet for investors. Maquila exports by companies like Blue Design, headed by Argentine textile entrepreneur Jorge Bunchicoff, have more than quadrupled in the last decade to about $1.2 billion last year.

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Bunchicoff ships about 1 million premium denim products, including jeans and jackets, annually from his state-of-the-art factory on the outskirts of Asunción to global markets including the US, UK and Japan. The company supplies high-end brands such as Lacoste and Good American, while its own brand, Dala, can sell for more than $300.

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“I could never have done this in Argentina” or Brazil because of high costs and toxic labor relations in both countries, said Bunchicoff, who has done business in Paraguay for 30 years. The secret to his success, he argued, is a compelling blend of low taxes, cheap energy and labor, and predictability.

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New arrivals to Paraguay are also fueling consumption. About 120,000 people a week visit Shopping del Sol, up 30% over the past three years thanks in part to immigration, said Rojas, the mall director. “You can really see the arrival of foreigners,” she said. “Hotels are full. Restaurants are full. The car fleet has grown tremendously. Our airport can’t keep up.”

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Still, Paraguay’s economic miracle faces headwinds that could curb growth and social mobility if left unattended. Only Venezuela outranks it as the most corrupt nation in South America, according to Transparency International’s latest index.

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The Colorado Party retains a tight grip on power — it lost presidential elections only once since the end of Alfredo Stroessner’s rule — owing to entrenched client politics and a disorganized opposition. In 2024, the party used its congressional majorities to impeach a prominent opposition senator and pass a bill increasing government oversight of civil society, which critics denounced as democratic backsliding. And this year the US removed one of Peña’s predecessors from a financial blacklist.