The G15 group of dissident Partido Colorado senators will temper President Horatio Cartes' ambitious reform agenda by watering down the proposed expansion of Paraguay's public-private partnerships with foreign businesses. A more challenging political landscape will threaten investment into the country though the remainder of Cartes' term.
The government of Paraguay will ramp up capital expenditures in the months ahead to improve the long-term attractiveness of the country for foreign investment. This will widen the country's fiscal deficit as revenue growth remains subdued due to base effects, slowing economic growth and little room to implement new taxes.
Paraguay's current account deficit will widen further in 2015 as currency weakness in major trade partners reduces the country's export competitiveness. Meanwhile, increased security risks as well as the limited progress toward promised investor-friendly reforms will temper foreign investment into Paraguay through the year.
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