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Paraguay's dollar drop driven by internal factors, economist says
🇵🇾 Paraguay /Economy & Trade

Paraguay's dollar drop driven by internal factors, economist says

From ABC Color · () Spanish

Translated from Spanish, summarized and contextualized by DistantNews.

At a glance

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  • The Paraguayan Guarani has appreciated significantly against the US dollar, with the dollar depreciating about 25% annually.
  • Economist Rodrigo Ibarrola attributes this currency shift to a combination of internal financial, monetary, and exchange rate factors, not a single global cause.
  • The Central Bank of Paraguay's (BCP) previous interest rate cuts and interventions, including selling nearly $1 billion in foreign currency, are discussed as contributing elements.

The Paraguayan Guarani has experienced a notable appreciation against the US dollar, with the dollar depreciating by approximately 25% annually over the past year. Economist Rodrigo Ibarrola of Cadep explained that this currency movement stems from a confluence of internal factors, rather than a singular global influence on the US dollar's positioning.

The dollar depreciates about 25% annually, when in the world the average appreciation of currencies against the greenback is around 10%.

— Rodrigo IbarrolaEconomist Rodrigo Ibarrola explained the significant depreciation of the US dollar against the Paraguayan Guarani.

Ibarrola detailed that the current exchange rate scenario in Paraguay is the result of a multi-faceted process involving financial, monetary, and exchange rate dynamics. This contrasts with a global trend where most currencies have appreciated against the dollar by around 10%. The dollar is currently trading at 6,100 Paraguayan guaranis.

The current exchange rate scenario in Paraguay arises from a process of several factors (financial, monetary, and exchange rate) and not because of a single factor.

— Rodrigo IbarrolaIbarrola elaborated on the internal factors driving the dollar's depreciation in Paraguay.

He pointed to Paraguay's monetary policy decisions in 2023, specifically successive interest rate reductions, as a starting point. These cuts narrowed the interest rate differential with the United States, leading to a gradual depreciation of the guaraní and a corresponding rise in the dollar, which peaked at 8,000 guaranis per dollar in April 2025.

The starting point, according to Ibarrola, is when Paraguay applied successive reductions in interest rates (monetary policy) in 2023, which markedly narrowed the interest rate differential with the United States.

— Rodrigo IbarrolaIbarrola discussed the impact of Paraguay's monetary policy decisions on the currency exchange rate.

In response to the strengthening dollar and its impact, the Central Bank of Paraguay (BCP) intervened in the foreign exchange market. Throughout 2024, the BCP sold approximately $967 million to moderate the guaraní's decline and absorb local currency liquidity. However, Ibarrola noted that the initial effect of these interventions was limited, and the dollar's upward trend persisted for several months.

However, the economist highlighted that the initial effect was limited and that the upward trend of the dollar continued for several months.

— Rodrigo IbarrolaIbarrola commented on the effectiveness of the Central Bank of Paraguay's interventions.
DistantNews Editorial

Originally published by ABC Color in Spanish. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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