MercoPress. South Atlantic News Agency

US dollar at bay in Paraguay but expected to grow

Household consumer credit also went up, the BCP reported

The US dollar retreated against the Paraguayan guaraní at the end of November but local analysts believe it will keep its upward trend in the days to come. An intervention from the Paraguayan Central Bank (BCP) was needed in October to keep it from crossing the ₲ 8,000 barrier and keep it on a leash to close Friday at ₲ 7,760 from ₲ 7,860 the previous month, thus representing a 1.2% decline.

 Although BCP interventions have dropped drastically in November, so far this year some US$ 1.476 billion were injected into the financial system to keep the exchange rate within target. Last month, most of the region's currencies depreciated against the US dollar. In line with the global strengthening of the dollar, the currencies of Uruguay, Colombia, Chile, Brazil and Peru depreciated by 2.9%, 2.7%, 2.1%, 1.4% and 0.8%, respectively. Paraguay's currency appreciated 1.2% in the same period. The Brazilian consulting firm Itaú Macro expects the exchange rate to close at ₲ 7,900, up from G. 7,800 in the previous report.

Desarrollo en Democracia (Dende) also projects that the exchange rate would close 2024 at ₲ 7,850 per dollar, slightly above the current position. Projections for next year mention a quotation between ₲ 8,000 and ₲ 8,250.

In this scenario, household and corporate debt continues to increase, the BCP said in last week's financial stability report. Although household debt is at a high level, it still poses a low credit risk. Between 2016 and 2024, total household consumer credit grew at an average rate of 12.8% year-on-year, driven especially by consumer credit. In relative terms, total credit to households has increased from 6.3% of Gross Domestic Product (GDP) in 2016 to 10.5% in 2024, one of its highest historical levels.

In turn, credit to companies has continued to show a favorable performance reflected in a growth rate of 13.5% year-on-year in September (excluding the exchange rate effect). This figure is above the figures for March 2024 (12.3%) and September of the previous year (7.8%). The good dynamism of credit granted to companies operating in the services, agriculture, wholesale trade, and industry sectors has had a positive influence on the increased momentum of lending to companies. These results are consistent with the good dynamics in GDP this year, the BCP argued.