MercoPress. South Atlantic News Agency

Paraguayan economy contracts for second quarter running

The drought had a dramatic impact on crops and cattle

Mercosur junior member Paraguay’s economy again plunged in the second quarter of this year, 4.3%, compared to a year ago, almost the same percentage contraction as in the first quarter, 4.2%, according to the latest release from the country’s Central Bank.

The report indicates that the negative performance of the economy is closely linked to agriculture, one of the country’s main industries, which suffered in extreme because of adverse climatic conditions, particularly a several months long drought.

“The contraction of economic activity, together with more restrictive international financial conditions, weakened the economy from its very foundations, punishing most sectors during the first half of the year”, states the Central bank report.

Livestock also had a rough time. “The forced sale of cattle during the first few months of the year was motivated mainly because of the drought, and therefore during the second quarter the level of slaughtering had to adjust to the new climatic conditions, which determined a considerable activity diminution in the livestock sector”, adds the document.

Construction also reflected the contraction as did the industrial sector “with weaker performances in all the main areas”.

However in spite of the poor performance of the Paraguayan economy, the Inter American Development Bank praised the measures implemented by the country to address the world financial meltdown.

“I think the worst is over”, said Roberto Vellutini, IADB Vice-president for developing countries. “I think Paraguay has managed to come out quite well”.

Vellutini underscored the solidness of the Paraguayan financial system, the macro economic management and fiscal and monetary stabilities.

“I believe the economic reactivation plan from the government was well programmed and executed”, he emphasized.