Finance minister calls for more investment in Paraguay’s infrastructure

2nd November 2017 Manuel Manrique

Why did you accept the position of Minister of Finance in June?

An opportunity like this, to contribute to the economic and social growth of my country, can’t be rejected. I feel privileged to be part of the great transformations that are taking place in Paraguay, where, as never before, young professionals have been in key decision-making positions. I love my country and from my profession as an economist I have the chance to contribute to a more inclusive Paraguay with opportunities for all. I have taken this challenge as a huge commitment and responsibility, as a woman and as a young person. I am part of the 73 percent of the population under 40 years old that is proving it does in fact want to contribute. I feel that I represent thousands of young people who, like me, dream of leaving a legacy and a better country for the next generations. I’ve met some great professionals who every day perform a first rate job, being the sustenance of fiscal policy in this country. I am accompanied by a great team, which constantly finds solutions to the various challenges we face, both in the economic and social field. The support and confidence of colleagues from all public institutions, national authorities and especially my family is an important encouragement to develop my daily work and build a country with better opportunities for all.

What are Paraguay’s main challenges when it comes to sustainable economic development?

Policies today are framed in the Paraguay 2030 National Development Plan (PND 2030), which defines the strategic axes and objectives, the priorities and the lines of action that articulate the policies and governmental actions for inclusive and sustained development. The main challenges facing the country are linked to the reform of health and education systems, as well as the modernisation of state institutions to achieve greater efficiency in the use of public resources and to respond to the current needs of Paraguay. We are facing these challenges with our efforts focused on the welfare of the people and the protection of the environment. At the same time, to achieve sustainable economic development, we must consolidate strategies to increase productivity, with booming industries, technological development and innovation, which promote the creation of quality jobs, with heavy investment to close gaps in infrastructure.

Which sectors need more support from the development finance institutions?

Those would be the sectors of productive investment and those in vulnerable situations, which include people in poverty and extreme poverty. It is worth mentioning that the National Financial Inclusion Strategy (ENIF) is part of the national development plan, and is in full compliance with the objective of reducing poverty and boosting economic growth. The strategy is based on the effort and coordinated work of the public and private sector, non-profit organisations, as well as civil society. From our perspective, financial inclusion is a matter of social equity, considering that it seeks to incorporate those that do not have access to finance in the context of adequate education and consumer protection. Likewise, the role of public banks is key to financing productive sectors. Their impact on the economy in general must be considered, such as the channelling of resources to such sectors as real estate, industrial, services and agriculture. In relation to micro, small and medium enterprises, which account for 80.4 percent of the total employed population, they require operating capital. The implementation of the Credit Guarantee Fund for these firms, which will be managed through second-tier banks, will strengthen access to credit, guaranteeing the operations that boost the competitiveness of companies with the greatest impact on employment generation within the economy. At the same time, the process of transforming the productive matrix requires support with financial tools according to the needs and characteristics of new sectors that are showing greater dynamism.

What policies does the government plan to implement to reduce poverty and close the gap between rich and poor?

We have made tremendous progress in reducing poverty and inequality. Between 2002 and 2016, poverty was reduced by 50 percent, and during this period the middle class doubled by just over one million people. To face these challenges, public policies are focused on the generation of decent employment that guarantees the labour income of the people. In addition to investment in health, we need quality education and major advances in infrastructure investment. Through the efficient use of FONACIDE resources we are making a strong investment in education and improving the infrastructure of public schools and colleges throughout the country. This will allow our children and adolescents to have better resources to develop their abilities. Health spending seeks to guarantee comprehensive quality care for early childhood, especially for children in vulnerable situations. We are also making a big bet on investment in infrastructure that for many years was absent in our country. As I always mention, the biggest debt we have is with people, especially the ones who day-after-day suffer from a lack of adequate infrastructure that allows them to develop their capacities. We are committed to reversing that situation and that is why we have reached unprecedented levels of investment in Paraguay. On the other hand, the direct transfer programmes that we promote also reinforce the policies, so that people in a situation of poverty and vulnerability have social protection.

How can the public sector attract private capital for sustainable development projects so that the project can reach scale and continue to attract private investors?

Given that Paraguay had a lower level of physical infrastructure in relation to the other countries of the region, it became necessary and urgent to be able to take measures to reverse this situation, with only one path to take, which was a strong commitment to public investments in infrastructure to create an enabling environment for private investments to accompany the investment process. The results of this process are already visible, considering that the public investment of the central government estimated for 2018 would be around US$1 billion, a figure that practically triples the average level of public investment for the period 2008-2012. This strong commitment to investment in infrastructure brings with it an improvement in competitiveness and productivity in all areas of production at the national level. In addition, and not least, this process became one of the main engines of economic growth in the country, to the point that Paraguay at the end of 2017 will be the Latin American economy that grew the most in the last five years with an average level of real growth of 6.0 percent for the period 2013-2017 compared to an average growth for the entire region of 0.8 percent for the same period.

These levels of investment and growth have been possible thanks to the fact that investment channels that previously did not exist have been promoted in recent years, the most important being:

First, there is international bond issuance. This has not only allowed direct access to foreign capital for the government, but has also had a positive effect on the flow of private capital to the country. The latter has been possible by positioning the country in the eyes of international investors with the greatest possible transparency during the process of promoting the issuances.

Second, there’s public-private partnerships. This type of project financing has become the main channel for aligning public and private sector incentives, in such a way that both can work together. The ultimate goal of this modality is that the private sector can be the main protagonist in contributing capital to investment projects and also assume shared risks with the government, always within a long-term horizon.

Third, we have what are called ‘turnkey projects’.  Under this modality, the aim is to streamline the involvement of the private sector from the design of the project, through private financing and construction, to the completion of the same. These models have brought the private sector into different sectors of the economy such as water, electricity, transport, airports, housing, health, education, which made it possible to increase the general welfare of the people.

The government has also recently granted a license to operate an integrated hotel casino resort, to be built in the Central Department. It is a tourism and development project located on San Francisco Island that will be carried out by Vimerica Development LLC, an American company, and Paul Steelman, majority partner and CEO of Steelman Partners based in Las Vegas, Nevada. It is an investment of US$150 million, the largest private one of all time in this sector. The project will be developed over around 42 months and will employ approximately 5,000 people.

According to the World Bank, Paraguay’s GDP will grow 3.8 percent this year and the same is projected for 2018. Considering that the percentages are among the highest in the region, how will this growth benefit the population of Paraguay, especially the poorest?

Our growth estimates for this year are around 4.2 percent, and for 2018, growth of 3.9 percent is expected. Economic growth is key and benefits the population, through the dynamism of the productive sectors, which are generating quality jobs with an important transformation of the productive matrix, which contribute to growth in a growing proportion. To advance that way, economic growth must be sustained. This will improve business conditions so that the private sector continues investing to develop industries and new markets. In relation to well-targeted public spending, the ministry of finance is making every effort to ensure that resources are well targeted and benefit the neediest. The ‘cut of fats’ to the budget and the redirection of those resources is a sample of the will of the executive power to improve social conditions. The UN’s Sustainable Development Goals (SDGs) are important for the growth and well-being of the planet and its inhabitants.

How does the Ministry of Finance of Paraguay support the SDGs and what are the SDGs that it promotes?

We have worked to align the General Budget of the Nation to fulfill the objectives of PND 2030, which is in turn focused on the SDGs. About 44 percent of PGN 2018 is allocated to three of the main development objectives, such as quality education, good health and the end of poverty. The 2030 Agenda of the SDGs has as one of its main objectives that of “promoting economic growth, sustained, inclusive and sustainable, full and productive employment, and decent work for all.” The ministry promotes productive capacity, productivity, employment and industrial development through the implementation of public policies aimed at improving the living conditions of the most vulnerable population.

In addition, the PGN 2018 is oriented to social spending and investment, respecting what is established by the Fiscal Responsibility Law that guarantees the sustainability of public finances and a balanced budget. The application and reliability promoted by the law contribute strongly to maintaining the economic stability of the country and the confidence of foreign investors.

In addition, we are striving to allocate more resources to education, not only for students but also for teachers, through the Carlos Antonio Lopez Scholarships (BECAL) that allow the training of many Paraguayans in the best universities in the world.

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