Carlos Carvalho Spalding, Governor of Paraguay’s Central Bank, highlights prudent monetary policy and structural reforms in securing long-term growth.
Global Finance: What are your expectations for the economy over the next 12 months?
Carlos Carvalho SpaldingParaguay’s economic outlook remains positive, supported by strong macroeconomic fundamentals, a diversified growth base, and stable inflation. Despite recent external uncertainty, market volatility, and climate shocks, Paraguay’s economy has demonstrated remarkable resilience, maintaining its ability to adapt and sustain growth. We expect GDP to grow by about 4.4% in 2025, with strong contributions from services, manufacturing and construction, along with resilient private consumption and investment. Headline inflation is expected to end near 4%, close to our medium-term target of 3.5%, supported by firm expectations and a neutral monetary policy stance. The external situation remains sound, with high levels of international reserves and a flexible exchange rate that absorbs shocks.
GF: In December 2024, the Banque Centrale Populaire changed the rules for the issuance, custody and trading of public debt securities, making it easier for foreign investors to hold government bonds issued in guarani. What is the effect?
Carvalho: These regulatory amendments are designed to simplify procedures, strengthen market infrastructure, and align with international best practices, making it easier for foreign investors to participate in our domestic bond market. Since implementation, we have observed an increase in non-resident holdings of government securities in garani and a gradual lengthening of the yield curve. This not only diversifies the investor base, but also contributes to lower financing costs and improved market flexibility. Moreover, strengthening the guaranita market would enhance the credibility of monetary policy, mitigate exchange rate risks, and reflect investors’ growing preference for local currency instruments within a solid macroeconomic context.
GF: What are three much-needed reforms that would boost long-term economic growth?
Carvalho: First, human capital development – improving the quality of education and workforce skills to enhance productivity and encourage innovation. Second, modernize infrastructure, especially in logistics and energy, to reduce costs and enhance Paraguay’s integration into regional and global value chains. Third, institutional strengthening – including judicial efficiency and regulatory quality – to enhance investor confidence, support financial deepening and protect macroeconomic stability. These reforms, along with our prudent macroeconomic framework, will create the conditions for sustainable and inclusive growth.
It is worth noting that many of these reforms are currently being implemented – in areas such as productivity, public sector efficiency, and institutional modernization. Paraguay is among the few countries in the region able to advance this agenda from a position of macroeconomic strength. This foundation, underpinned by reliable macroeconomic and monetary policies, has allowed Paraguay to be the only country in the region to achieve investment grade during a period of global uncertainty.
GF: What keeps you up at night?
Carvalho: As Central Bank Governor, I believe that much has already been accomplished in strengthening our institutions, modernizing the monetary framework, and building a long record of wise policy management. Paraguay today rests on a foundation of stability that has been hard-won over decades. These achievements reflect ongoing institutional efforts: the national currency – the Guarani – which has survived for more than eighty years without monetary reform; A central bank with credible independence and a consistent record of price stability, which has enhanced confidence in the monetary framework. Together, these milestones demonstrate the depth of Paraguay’s institutional structure and its ability to withstand the passage of time. Thanks to this foundation, which has maintained macroeconomic stability, I can sleep well and wake up with serenity and the determination to continue working to maintain it.
However, in moments of reflection, I am reminded that our challenge is not only to protect these achievements, but also to accelerate the transformation required for the next stage of development. My primary concern as Governor of the Central Bank is to protect this stability that supports our growth. We must remain vigilant in the face of external shocks and ensure that our policy responses are effective and timely. Ultimately, the sustainability of our progress depends on promoting structural reforms that close productivity gaps and reduce inequality. I believe that the delicate balance between maintaining stability and advancing social reforms is the critical task of our time.
