Brazil & Southern Cone - May 2012 (ISSN 1741-4431)

The government is struggling to find ways to stimulate the economy, with concerns that the country is headed for a sharp contraction this year. On 10 April the central bank (BCP) revised down its forecast for the year from 3.7% to somewhere between 0% and -2.5%. The BCP said that the severe summer drought and the recent outbreak of foot-and-mouth disease had combined to severely affect the agricultural sector, which accounts for up to one-fourth of Paraguay’s GDP. The BCP now expects the agricultural sector to contract by 18.3% in 2012. Soya production fell an estimated 49.5% in the 2011/2012 harvest, resulting in estimated losses of US$1.8bn. Meanwhile the beef sector lost access to some of its more profitable foreign markets and is expected to post losses of a similar magnitude (US$1.0bn). The government has announced that it plans to substantially increase its spending this year by implementing an ambitious US$650m infrastructure development programme. However it appears that the implementation of the scheme is slower than expected and the private sector is getting nervous.

Members of Paraguay’s construction chamber (Capaco) met the labour minister, Humberto Blasco, on 11 May to express concerns about the delays in the execution of planned public works projects. According to Capaco, if the delays continue there is risk of “massive job losses” in the construction sector, which could affect up to 40,000 workers. Blasco recognised that weaker activity in the construction sector had already been affecting the unemployment rate; and said that he would take these concerns to his fellow ministers. He pointed out that the government has already ordered all ministries to expedite the disbursement of funds destined for public works projects. However Blasco pointed out that the implementation of these projects depends on “the agile management of each ministry’s resources so that projects can be executed as quickly as possible”.