The Financial Times (FT) did a short piece on Paraguay this week talking about the country’s economic growth. “Gross domestic product surged by a jaw-dropping 14.8 per cent in the first quarter, compared with the same period last year, positioning Paraguay as the world’s fifth-fastest growing economy.” Great news, right? Well, yes, but we should examine this in a bit more detail.
In the past ten years, economic growth has helped transform Asuncion from a sleepy city forgotten by time to a dynamic urban center with all the luxuries that any other city can offer: you can go for sushi at the Sheraton, sip ridiculously expensive coffee in the many cafés that have recently opened, and stroll around the many shopping malls in the expensive parts of town just like you would in Sao Paulo or Buenos Aires. The city landscape is definitely changing with buildings popping up every day and new investments being announced every other week. But let me remind you that this is Asuncion, the capital and main political and economic hub, and when you start looking beyond the borders of Calle Ultima, the scenario starts to change.
In rural areas, a short drive from Asuncion, people still live in dire conditions, with 32% of the population below the poverty line (World Bank figures) and about 20% of those in extreme poverty (UNDP). Undernourishment (which I talked about in a previous post) is between 25-34%, and overall social spending on health and education is very low compared to regional standards. Not to mention one of the highest levels of inequality on the continent, structural land tenure issues, rampant corruption and extremely weak institutions incapable of addressing any of the major issues Paraguay faces today
Given the circumstances, growth in and of itself is not enough. In Paraguay, growth will need to come hand in hand with strong social policies that disproportionally target the poorest of the poor. For those of you unfamiliar with development jargon, this is called “positive discrimination” and has had a very positive impact in reducing levels of poverty and improving overall living standards worldwide. The whole idea that growth will just trickle down and miraculously reach the poor and lift them out of poverty is not only outdated, but evidence has also shown that a) it doesn’t happen like that b) it doesn’t work. Moreover, we have already seen this idea put in practice in Paraguay with no results: amazing rates of growth that haven’t really translated into an improvement of living standards of the overall population. Under the trickle down approach, the poor remain poor and the economic and political elite are the ones who benefit from periods of growth.
Paraguay needs to move beyond the discussion of growth to a discussion on how to make growth more sustainable and inclusive and especially what type of growth we want. We need to stop asking ourselves how many more shopping malls will open and start asking how to feed everyone; how to use the economic boom to lift people out of poverty, to improve education and health and build institutions. While the answer is somehow clear and straight forward – through smart and inclusive policies – the implementation process, especially in Paraguay, is far from simple.
The current situation is the perfect cocktail for social unrest: high levels of inequality and poverty in a context of high economic growth where only a small percentage of the population benefits. Seriously, we have seen this elsewhere before, and we are doing nothing to prevent it. Unfortunately, the economic and political elite who should be responsible for having this discussion, have no intention or willingness to do so, mainly because that would mean altering the status quo and shifting the balance of power to a certain extend.
So, to my fellow Paraguayans, next time you are sitting in a café thinking how wonderful all the new shopping malls are and asking yourself when will Starbucks open in Asuncion, try and think about what you have done lately to make sure everyone gets to sit at the same table and have the same opportunities you do!
*picture from Hostel Asuncion