Paraguay halts public works due to fiscal constraints

Paraguay’s finance ministry has asked the public works ministry (MOPC) to cancel current auctions and refrain from tender launches this year, creating uncertainty over the country’s infrastructure agenda.

“If these measures aren’t applied, fiscal accounts will be very compromised and it won’t be possible to reach sustainable fiscal results in the medium term, which implies a high risk for fiscal and macroeconomic stability,” finance minister Benigno López wrote in a letter, according to daily Última Hora.

Itaú’s latest report on Paraguay’s economy forecasts a fiscal deficit equivalent to 6% of GDP, up from 2.8% in 2019. According to the bank, the deficit will result from the effects of the COVID-19 pandemic and the government’s plan to increase debt by US$350mn as part of recovery efforts.

In response to the letter, public works minister Arnoldo Wiens said it applies only to projects that count with resources from the finance ministry, “not the [projects financed with] multilateral loans that we have ongoing or that are in their approval processes with entities such as IDB, CAF, Fonplata, JICA, World Bank and others.”

He said the public works ministry has an “enormous list of projects that we were ready to tender,” but now “we will have to wait for the finance ministry to say that there are resources to make these calls.” 

Wiens said affected works include the US$16mn widening of Asunción’s Silvio Pettirossi avenue, the US$13mn underpass for Asunción’s bus terminal, Concepción’s US$35mn Costanera road, and paving works over 306km in Central department.

The first three projects had been included in the government’s US$2.5bn recovery plan, which involves US$1.8bn in infrastructure investments, including PPP’s and multilateral loans. 

But Wiens underscored that public works remain central to the government’s recovery strategy.

“Of course there are budgetary and financial constraints, no one doubts that, but one of the most important elements for our country to go forward is infrastructure investment,” he said.