On the Ground in Paraguay (Part 1)

Over the course of the last several months, we've followed the journeys of Mark Svoboda as he's traveled from Singapore to Tanzania, Malaysia to Colombia. Today Mark stops off in Paraguay, where he and his wife traveled to start their residency process...

Paraguay - the Heart of America

In April of 2012, my wife and I traveled to Paraguay to start our residency process in the so-called "heart of America." Our hope is to eventually receive a citizenship in the country without actively residing there. Since I suspect many International Man readers are, like me, interested in 1) obtaining Paraguayan residency in hopes of eventually receiving a citizenship, and 2) buying some of that cheap productive land, I thought it was high time I report on the country.

COUNTRY FACTS

Here is some general information about Paraguay, the purpose of which is not to make you an expert in Paraguayan history, but rather, to give you some idea about the country...

Paraguay is one of the only two landlocked countries of South America (the other one being Bolivia). Due to its central location on the continent, it is sometime referred as "the heart of America."

History

Indigenous people of Guarani lived in Paraguay long before the Spaniards came in the 16th century and have left a rich heritage even in present day-Paraguay. Most of the country's population still speaks the language of Guarani, which bears the same name.

After Paraguay received its independence from Spain in 1811, it was ruled by a series of dictators. The last dictator, Alfredo Stroessner, ruled the country from 1954 to 1989 (the longest rule in Paraguay's history) and was known for his use of torture and kidnappings to suppress the opposition. The Archives of Terror, discovered in Asuncion in 1992, show that Stroessner is was responsible for thousands of Paraguayan lives during his presidency.

Besides its dictators, the country has also been beset by additional miseries in the form of wars. First, there was the absolutely disastrous war fought against Brazil, Argentina and Uruguay in 1864-1870, from which Paraguay emerged economically ruined after it lost much of its territory and male population. Paraguay was also involved in what is considered to be the bloodiest war fought on South American soil in the 20th century - the Chaco war. Fought against Bolivia in the 1930s, this conflict emerged over the northern Chaco region, an area that was mistakenly believed to be rich with oil. This time they won.

Demographics

Paraguay's population is close to 6.5 million people, with 2.3 millions living in the Asuncion metro area, the largest city and capital of the country. Paraguay neighbors with Brazil, Bolivia and Argentina, and straddles the tropic of Capricorn - it is therefore home to both subtropical and tropical climates. Catholicism is, by far, the most practiced religion in the country.

ECONOMY

Despite the periods of strong growth in its history, Paraguay remains one of the poorest countries of Latin America. Its PPP GDP/capita of USD 5,143 (IMF numbers) is one of the smallest in South America, ahead of only Bolivia. The country experienced its first period of rapid growth through the seventies, when the Itaipu dam was being constructed (world's largest hydro facility in terms of annual capacity). Most of the 90s, however, were disastrous for the country but starting in 2002 Paraguay recovered with the GDP more than quadrupling to USD 22.3 billion (IMF) in the last 10 years (mainly due to historically high prices for agriculture commodities - Paraguay's main export).

The main natural resource of Paraguay is without a doubt its fertile soil; most of the country's land is arable and productive. Leading agriculture products are cotton, sugarcane, corn, soybeans, as well as a very important commodity that is not widely available outside of South America (but extremely popular in the Southern cone countries), yerba mate. Yerba mate is a plant used to obtain a caffeinated beverage: Tereré when consumed cold, and Mate when consumed hot. Also, while in Paraguay, I heard numerous times that the Chaco region in the north contains large amounts of natural gas. However, a simple check on the Internet does not support that data, meaning that most likely the reserves (if they exist at all) are still in the "unproven" category.

According to IMF data, Paraguay's Debt to GDP is a modest 14%, very low in our world of ever-rising national debts. While on the ground, I got the positive impression that Paraguay was self-sufficient in most of its needs - abundant fertile soils will likely always be in high demand, and most of the electricity produced by its mega hydroelectric stations is sold to neighboring countries. And while, of course, the success or failure of an economy mostly depends on the economic policies of the rulers, I got the impression Paraguay was going in the right general economical direction. There was a visible and quite significant middle class in Asuncion and, while bureaucracy and corruption is abundant, I heard that slowly but surely the situation was getting better.

All told, despite the Paraguay economy's impressive growth in recent years, the country is still incredibly poor. But because of this, it may be relatively easy for the country to keep growing at very high rates, especially if high commodity prices stick around.

EXPAT PERSPECTIVES

Personal and Corporate Finance

Finance is probably not the country's strong point, though Paraguay does have a number of local as well as international banks. Opening a bank account is not very easy, as residency is usually required (though, like many other rules in Paraguay and as you'll soon see, this rule can be bent in your favor).

Generally, you have the option to keep your money in USD or the local currency, Guaraní. The last choice may make more sense if you agree with me that diversifying out of USD might not be a bad idea. Moreover, banks offer interest rates up to 13% for Guaranis, and up 6% in USD for long term CDs. I opened an account at Interfisa for the simple reason that that was where my residency lawyer had good contacts (so that I could open an account without having obtained my "cedula" or permanent residency card). But as always, do your due diligence in finding out which bank you feel more comfortable with.

Until very recently, Paraguay was one of those rare countries that did not tax income. Unfortunately, in 2010 a law was passed that allowed the taxation of personal income from Paraguayan sources. The law was suspended later the same year and now is expected to enter into force in 2013. The maximum tax rate is going to be 10%, and the country expects to start collecting a whopping USD 37 million a year in personal taxes. Corporate tax is a flat 10 %.

Lifestyle

If you ask the average American on the street where Paraguay is located, I'm sure most of them will be totally lost. The country doesn't seem to have any stigma (bad or good) attached to it and, in effect, it seems like nobody really cares about it at all. But that could be a serious advantage in the eyes of those seeking residency and eventual citizenship there.

Historical Asuncion, where my wife and I stayed, was very pretty. But it also felt abandoned, as most of the modern development as well as night activities are now happening outside of the city center. Streets in Asuncion (and outside of it) were surprisingly clean, with the historical district being the dirtiest (despite what common sense may advise us). I was told that even Paraguayans gave up on the city center and generally avoid it except for the occasional visit to Bolsi, perhaps one of the oldest and most well-known Paraguayan restaurants.

In my opinion, Paraguay could be an excellent place for people looking for some kind of retreat, because once you get out of Asuncion, life becomes slow and easy. All the small towns are home to a slow and peaceful lifestyle, and at the same time, you don't have to go too far from Asuncion to get back to all big city's amenities (frankly speaking, Asuncion itself isn't that big of a city either). Land is generally cheap, even around Asuncion, and the area around Lake Ipakarai is very pretty. San Bernardino, for instance, a small town located on the lake's shores, was so pretty and clean that I could have thought it was located somewhere in old Europe and not in one of the poorest countries in the Americas (it was, in fact, founded by German immigrants in the 19th century).

I didn't see many tourists running around, probably because neighboring Argentina, Brazil, Chile and even Uruguay each have arguably much more to offer it terms of cultural activities and what nature has to offer. Nevertheless, we found Asuncion (and surroundings) pretty interesting with several great museums. For example, an old train station that was built by the English in 19th century was turned into a museum now lets people go back a century or more to see how wealthy Paraguayans used to travel through the country. (Side note: as I travel through the developing world, I am constantly fascinated at how much the English have done in the world.)

We found that Paraguay, in many ways, shares the culture of food with Argentina (of course with distinct local variations) - I had one of the best steaks in my life for the price I would have paid for a hot dog in Australia! We rarely paid more than 30 USD (for both of us) to eat dinners - even in the best restaurants of the country.

Other things were not as cheap as I would have wanted them to be in a "cheap country". For instance, taxis were relatively expensive - we paid around 30 USD for about a half an hour ride (if it was in Manila it would have cost no more than 5-6 dollars). That being said, Paraguay still remains one of the cheapest places in Latin America and will definitely fit the bill of those expats who are looking to expatriate in order to lower their monthly bills.

When we traveled there in April, the weather was great at about 25 Celsius. However, since Asuncion is geographically located at about the same distance from the equator as Houston or New Orleans, I can surmise that temperatures during the summer could get very uncomfortable, with the winters being mild and without snow. In fact, summers in Paraguay get seriously hot and uncomfortable, and I was even told that Stroessner (the country's last dictator) was especially cruel when the summer's dry and hot northern winds arrived...

Crime is not a major concern in Paraguay, and the place seemed quite safe to us. However, exercising a bit of common sense will always help you as Paraguay is a poor country and venturing into some of the bad neighborhoods may spell trouble. The homicide rate is on par with that of Costa Rica, so beloved by North Americans. Interestingly, despite the country's obvious and visible poverty, I didn't see a single beggar on the street through our entire stay. (I guess they all moved to Buenos Aires, which was strikingly full of them back when I visited the city in 2010.)

Spanish is the prevailing language for all people living in cities, while Guarani is spoken mostly in the countryside. There is also a percentage of the population who don't know any Spanish... and also a percentage who don't speak any Guarani. English proficiency was at best marginal, even in Asuncion, so learning Spanish should be a priority if you plan to spend any significant time in the country (but, of course, that's true for most of Latin America).

As for public transportation, the system in Asuncion consists predominantly of old buses that leave clouds of stinky exhaust behind. Sometimes, walking was so bad that we had to change streets to ones with less traffic on them.

This marks the end of the first part of Mark's report on Paraguay. Join us again next week when Mark concludes his report on Paraguay and discusses the medical system, the country's downsides, as well as residency options.


[PLEASE NOTE: The publishing of this article does not imply an endorsement of the services being offered. As always, please conduct your own due diligence before engaging in any business.]

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