Introduction to Paraguay

Paraguay, a small, landlocked state in southern South America, has a population of 6.8 million million,1 of which 37% is rural.2 Situated at the crossroads of different climatic regions, Paraguay faces a hot semi-arid climate in the northwest region, a tropical savanna climate in the north and central regions, and a humid subtropical climate in the southeast region.3 The country is no stranger to extreme weather events, having experienced intense droughts, rainfall, and flooding. This can prove consequential to Paraguay’s highly concentrated urban population, as 62% live in cities, and the urban growth rate is steadily increasing at 1.7%.4 Over the past two decades, Paraguay has had one of Latin America's largest average annual economic growth rates at 3.6% and a poverty reduction from nearly 50% in 2003 to 17.6% in 2023—a result of the country’s strong political and economic stability.5 The services and manufacturing sector account for 49% and 32.4% of GDP, respectively, while the agricultural sector accounts for 11.3%.6 Although agriculture makes up a small portion of GDP, it employs 27% of the country’s workforce and makes up 90% of registered exports,7 while agrarian land makes up 53.8% of all territory.8 Paraguay has a young, homogenous population, with 46% of the population under 259 and 91% identifying as mestizo—mixed-race Spanish and Native mix.10 While this young population is highly beneficial for the labor force, only 53% of newly born Paraguayan children achieve their full productive potential, and over 65% of students do not attain minimum proficiencies in math, science, and reading.11

Mapping Major Climate Events and Climate-Induced Displacement

The impacts of the climate crisis on Paraguay are divided, as the dry, western region faces more extreme heat waves and droughts while the eastern, more populous region faces more frequent floods and rainfalls.7 Since 2008, 397,000 climate-induced displacements and 32 major disaster events have been reported, most of which have been floods.12 In 2019, the Paraguay River floods were a dark moment for the country, displacing 2,000 people, affecting 69,534 families, damaging 347 schools, and killing 16 people.13 Due to a likely combination of the climate crisis and El Niño events, there has been a rise in total annual rainfall and the expected number of days receiving rainfall—increasing at approximately 3 mm/year.14 Further, the current number of heat waves tripled over the last 40 years, with some of the highest relative temperatures in Paraguay’s history recently recorded.15 Since 2018, Paraguay has been facing an ongoing drought that has hit the country hard in all sectors and production chains, leading the Paraguay River to drop 89 centimeters—the lowest point in 120 years.16 As a landlocked country, this river is crucial, acting as a lifeline for trade and moving 96% of international exports and imports.17 Furthermore, the drought has threatened water supplies, led to water scarcity in the western region, drove up rampant wildfires, and made several commercial and social services practically impossible. People with low incomes are disproportionately affected by the climate crisis in Paraguay, as they typically work in flood-prone industries and reside in areas—rural and urban—that are more susceptible to the risk of extreme storms, rainfall, and droughts with little readiness to adapt.18

Mapping the Costs of the Climate Crisis

The GDP of Paraguay is $42.96 billion,19 while the GDP per capita is $6,260.20 While the country has experienced exponential economic growth over the past two decades, its economy heavily depends on its rich natural capital, such as agriculture, animal husbandry, and hydroelectric production. This reliance makes long-term economic success contingent on climate shocks, as 16% of Paraguay’s total per capita wealth and over a third of GDP depend on natural resources.21 Reports estimate that if current climate trends continue, Paraguay’s GDP can reduce by up to 3.1% by 2050, and poverty rates can increase by up to 1.19%.22 Much of this loss would come from extreme droughts that destroy crop yields and reduce labor productivity from heat stress. Paraguay is also a global leader in soy production, ranking as the sixth largest producer of soybeans and among the top 4 global exporters.23 Soy occupies over 80% of all agricultural lands,24 accounts for 18% of total GDP, and employs hundreds of thousands of Paraguayan citizens.25 Climate shocks can easily disrupt this monoculture supply chain operation, as seen with droughts between 2021-2022; soybean yields dropped from 3.2 tons per hectare to 1.2 tons, and total production fell from 10.6 million tons in 2019 to 4.2 million in 2022.26 This led GDP in 2022 to be even lower than that of 2018 and disrupted global supply chain operations because of their exports to South America, Europe, and Asia.27 With the current Paraguay drought, the extreme fall in water level has heavily slowed down cargo traffic and significantly increased the price of several goods due to less supply and lost opportunities in trade, causing an economic loss of $250 million.28 Further, since the Paraguay River is responsible for moving 80% of all international commerce, the central bank cut back on its 2022 GDP growth forecast from 3.7% to just 0.2%.29  

Mapping Resilience and Mitigation Pathways

Despite being responsible for less than 0.20% of global GHG emissions, Paraguay is highly vulnerable to the effects of the climate crisis.30 To combat its domestic emissions, Paraguay has targeted a 20% reduction in BAU emission levels by 2030, 10% being unconditional and the other 10% being conditional on external financing.31 Paraguay’s NDC has relatively low targets compared to its Latin American counterparts and is not as comprehensive on specific mitigation tactics, leading 88% of Paraguayans to favor stricter government measures to combat the climate crisis.32 The largest contributors to Paraguay’s emissions are agriculture, at 40%, and land use, land use change, and forestry (LULUCF), which makes up 41.2%.33 Deforestation continues to be a significant problem for the country, as over 25% of its net forest cover—12.8 million acres—has been lost over the last 20 years due to the expansion of cattle farms, giving it one of the world's highest rates of tropical deforestation.34 Although they have passed the Zero Deforestation Law to help address the issue, it only applies to the eastern region and 88% of Paraguay’s territory remains unprotected.35 Furthermore, weak enforcement of this law enables illegal cutting to persist, while ambiguous wording in the law and a lack of monitoring system hinder efforts against deforestation.36 However, Paraguay has recently approved legislation to help with forest conservation efforts to create a national carbon credit registry that will improve forest governance and induce private investment in restoration.33 Paraguay also leads the world in clean electrical power production, as efficient hydropower infrastructure enables the country to generate 99.9% of its electricity from zero carbon emissions.37 The country produces more energy than is needed for domestic consumption, allowing it to sell excess electricity to neighboring Argentina and Brazil, accounting for 7.1% of net GDP.38 However, Paraguay must heed climate shocks, as the drought decreased its electricity export revenue by 12%.39

Necessary Changes

Aside from submitting its NDC and maintaining a clean electrical power production grid, Paraguay has yet to implement several key measures that would allow the country to adapt to the climate crisis effectively. Due to its low historical contribution of GHG emissions and status as a landlocked state, Paraguay’s priority is to focus more on adaptation rather than mitigation.40 This includes addressing specific actions and gaps in seven prioritized sectors: communities and resilient cities, health and epidemiology, ecosystems and biodiversity, energy, agricultural production, forestry and food security, water resources, and transportation.41 More robust research capabilities and institutional capacities must be implemented nationwide to reduce data and information gaps, while early warning systems must be quickly developed.42 Paraguay’s food security is categorized as medium to high vulnerability because of unequal ownership of land and resources—a challenge that must be urgently tackled as the climate crisis will only exacerbate this exposure. Since agriculture makes up such a large portion of the economic activity in Paraguay, it is understood that it will take time for diversified and sustainable agricultural practices to become widespread. However, the second largest contributor—deforestation—requires immediate control and effective action as it continues to deplete vital natural carbon sinks. Further, Paraguay recognizes that they must focus on strengthening human capital in the long run, as by investing in youth education and nutrition, they can lay the groundwork for a future labor force better equipped to implement sustainable changes.43 The largest challenge to transition to a low-carbon, climate-resilient future is the financial cost, as public and private sector investments are heavily required. An annual increase in investments of 2.1% of GDP is needed every year until 2050, and to properly implement Paraguay’s NDC measures, over $6.5 billion is required.33