What’s Happening with the Economies of Chile and Paraguay?

As a Chilean who lived several years in Sweden and currently resides in Paraguay, I’ve had the unique opportunity to closely observe three very different economic realities.
First, Chile — my home country — with a mature and structured economy.
Then, Sweden — highly developed, with a strong social model and long-term policies.
​And now, Paraguay — a country growing with dynamism and stability, but from a completely different base.
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This article is not about comparing to compete, but rather to understand. I’m interested in analyzing why Paraguay is growing at a faster pace than Chile, what factors explain this phenomenon, and what we can expect in the coming years. I share this perspective based on lived experience, technical analysis, and a deep connection to both countries.

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Current macroeconomic outlook
Paraguay closed 2024 with estimated GDP growth between 3.8% and 4.0%, even surpassing official forecasts. The growth was driven mainly by agro-exports and the energy sector. It was the fastest-growing economy in South America that year.
Chile, in contrast, recorded a 2.6% growth rate in 2024 — also above projections — due to improved exports and a moderate recovery in domestic consumption.
This represents a growth gap of approximately 1.5 percentage points in favor of Paraguay.

Factors Driving Paraguay’s Growth

• Favorable Business Climate:
  Paraguay leads Latin America’s Economic Climate Index (ICE) with a score of 153.9, thanks to its macroeconomic stability, tax incentives, and low operational costs.
• Agro-industrial and Energy Power:
  Paraguay is a major exporter of clean energy (Itaipú and Yacyretá dams), along with key agricultural products like soy, corn, and beef.
• Infrastructure Investment:
  Public investment in logistics and export corridors is generating a multiplier effect on the economy.
• Tax Advantage:
  Paraguay enjoys a significantly lower corporate tax burden:
  • A flat corporate income tax rate of 10%,
  • Plus an 8% dividend tax for residents.
    In contrast, Chile applies a general 27% rate (or 25% for SMEs under Article 14 D of the Income Law), and a personal dividend tax that brings the total effective tax burden close to 35%.
• Young Demographics:
  Paraguay has a median age of 29, with a large percentage of the population under 35 — fueling both labor supply and future consumption.

Chile: Moderate Growth with Structural Challenges.
Chile remains a mature economy with institutional and financial stability. However, its structural growth capacity is limited. The Central Bank projects GDP growth between 2.0% and 2.5% in 2025.
Despite being one of the most developed economies in Latin America in terms of per capita income, Chile faces several internal challenges:

• Low productivity in key sectors
• Persistent inequality
• Weak public and private investment
• High dependence on copper exports and global demand

Economic Outlook for 2025

• Paraguay: The Central Bank and international institutions forecast growth between 3.8% and 4.2%, with a focus on attracting more FDI and diversifying exports.
• Chile: Projections by the IMF, OECD, and Central Bank agree on a range of 2.0% to 2.5%, dependent on international markets, mining investment, and internal structural reforms.
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Paraguay has consolidated an agile growth model, built on its natural advantages, openness to trade, and fiscal efficiency — allowing it to surpass Chile in annual growth.
Chile, while still a solid and respected regional benchmark, is showing signs of structural deceleration. To return to a path of sustained growth, it must promote investment, diversify its productive matrix, and accelerate productivity-focused reforms.
Both countries have strengths.
Paraguay stands out as a clear opportunity for those seeking to enter a dynamic emerging market.
Chile, on the other hand, offers a more predictable environment, albeit with lower short-term growth expectations.
This analysis is not intended to make judgments or spark competitive comparisons.
Rather, it stems from a personal and technical perspective shaped by having lived in very different contexts — Chile, Sweden, and now Paraguay.
I share these observations to contribute to the economic conversation with a hybrid outlook: one that blends lived experience, professional interest, and a genuine desire to better understand the dynamics transforming the region.

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Paraguay y Chile de Mario Contreras

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Mario Contreras
Club Networking