Countries of the World/COUNTRYS.BIN/dp/0281/02815.txt

Text File | 1991-06-25 | 32KB | 519 lines

$Unique_ID{COW02815}
$Pretitle{356}
$Title{Paraguay
Chapter 3D.   Industry}
$Subtitle{}
$Author{Daniel Seyler}
$Affiliation{HQ, Department of the Army}
$Subject{1980s
percent
paraguay
country's
industry
construction
late
system
government
manufacturing}
$Date{1987}
$Log{Figure 7.*0281501.scf
}
Country:     Paraguay
Book:        Paraguay, A Country Study
Author:      Daniel Seyler
Affiliation: HQ, Department of the Army
Date:        1987

Chapter 3D.   Industry

     Industry, especially the manufacturing sector, historically was linked to
agricultural processing until the 1970s, when the construction of
hydroelectric plants and new industrial incentives began to broaden the
industrial base. Industry was composed principally of manufacturing and
construction. Paraguay had no real mining sector, but the manufacture of
construction materials included limited mining activity. Manufacturing and
construction in the economy in the late 1980s remained dependent on
developments in other sectors, such as agriculture and energy, for their
growth. Although industry was becoming more visible in Paraguay in the 1980s,
industry's share of GDP actually declined in the 1970s and 1980s because of
more rapid growth in agriculture.

Manufacturing

     Manufacturing accounted for 16.3 percent of GDP in 1986 and employed
roughly 13 percent of the labor force, making Paraguay one of the least
industrialized nations in Latin America. Manufactured exports, by most
definitions, accounted for less than 5 percent of total exports; when
semiprocessed agricultural products were included, however, that figure
reached 77 percent. The growth of the country's manufacturing industries was
hampered by numerous structural obstacles. These included a small internal
market, limited physical infrastructure, costly access to seaports, a
historical lack of energy production, and the openness of Paraguay's economy
to the more industrialized economies of Brazil and Argentina. Another
significant factor was the ubiquity and profitability of smuggling operations,
which encouraged importing and reexporting rather than production.

     Paraguay's earliest manufacturing industries processed hides and leather
from its abundant cattle and tannin from quebracho trees (see Agriculture,
this ch.). Small-scale manufacturing, especially textiles, flourished under
the Francia dictatorship, when the nation's borders were closed. The War of
the Triple Alliance, however, devastated what little industry and
infrastructure the country had, causing Paraguay to enter the twentieth
century as an almost completely agricultural society. Land sales to foreigners
stimulated increased agricultural processing in the early twentieth century,
including meat packing and the processing of flour, oilseeds, sugar, beer, and
pectin extract. After the early 1900s, small-scale manufacturing in all
subsectors grew at a slow, but steady pace, with some of the fastest growth
occurring because of the shortages during World War II.

     The government's role in promoting industry increased in the postwar era,
and in 1955 the Stroessner government undertook the country's first industrial
census. Over the next twenty years, the government enacted a number of
industrial incentive measures, the most important of which was Law 550. Law
550 promoted export-oriented industries or those that would save foreign
exchange. It also provided liberal fiscal incentives for companies to develop
specific areas of the country, especially the departments of Alto Paraguay,
Nueva Asuncion, Chaco, and Boqueron. Incentives for business were related
mostly to import-duty exemptions, but they included a variety of tax breaks
and placed no restrictions on foreign ownership. Approximately one-fourth of
all new manufacturing investment from 1975 to 1985 was registered under Law
550. Most foreign investments originated from Brazil, West Germany, the United
States, Portugal, and Argentina in that order of importance. The dynamic
processes of agricultural colonization and hydroelectric development, combined
with such attractive industrial incentives, caused manufacturing to grow at an
unprecedented rate in the late 1970s and early 1980s.

     Unlike many other Latin American governments, which followed an
import-substitution industrial policy, the Paraguayan government had played a
minimalist role in the economy through most of the postwar era, curtailing
import tariffs and maintaining a realistic exchange rate. In the 1980s,
however, Paraguay's exchange rate became overvalued and several state-owned
heavy industry plants became operational.

     In the late 1980s, the major subsectors of manufacturing were food,
beverages, and tobacco; textiles, clothing, leather, and shoes; wood and
related products; and chemicals, petroleum, and plastics. Despite some
increases in heavy industry in the economy during the 1970s and 1980s,
Paraguayan industry was generally small-scale. Manufacturing production
remained focused on consumer goods, and capital goods comprised under 5
percent of industrial output. In fact, in the 1980s Paraguay did not contain
even one of Latin America's 1,000 largest companies, at least some of which
were found in most other countries in the region. Virtually every subsector of
Paraguay's manufacturing was characterized by numerous small- to medium-sized
firms and a few large firms, which often were foreign owned. Most companies
operated well below their capacity.

     The food, beverages, and tobacco subsector has been the core
manufacturing activity throughout Paraguay's history. In the late 1980s, this
subsector continued to dominate, accounting for about 45 percent of industrial
activity, depending on agricultural output in a given year. Agro-processing
involved a large number of small, inefficient, and often family-run firms as
well as a small number of large, efficient, and usually foreign-owned firms.
The larger firms produced only the most lucrative items, such as oilseeds,
meats, and various beverages, often for export. Some of the most common
small-scale producers manufactured milled items, baked goods, sugar and
molasses, dairy products, candy, manioc flour, vinegar, coffee, and tobacco.
Along with raw agricultural produce, processed and semiprocessed food
generated nearly all of the country's exports in the late 1980s. But, as with
other manufacturing subsectors, the profitability of the food subsector often
was impaired by contraband items from Brazil and Argentina, such as flour,
meat, or dairy products. Paraguayan goods crossed borders unofficially as
well, thus lowering official exports.

     The second most important manufacturing activity also relied on
agricultural inputs for its base. Utilizing Paraguay's rich endowment of
hardwood trees, the wood subsector represented about 15 percent of all
industrial activity and contributed over 8 percent of exports in the 1980s.
The most voluminous wood export was lumber, which was produced by hundreds of
small sawmills throughout the central and eastern border regions. In addition
to saw wood, mills also produced a variety of milled wood, plywood, chipboard,
and parquet flooring. Although the country cut and processed only a fraction
of its hundreds of species, Paraguayan wood was known for its quality. The
country also contained several small paper companies and one large paper and
cardboard factory located at Villeta.

     Textiles, clothing, leather, and shoes comprised the third largest
manufacturing subsector. These industries were traditional, grounded in the
nation's abundance of inputs like cotton fibers, cattle hides, and tannin
extract. The subsector accounted for about 10 percent of all manufacturing.
The textile industry performed spinning, weaving, and dyeing operations and
produced finished fabrics that amounted to over 100 million tons in 1986. Most
fabrics were derived from cotton fibers, but a growing number of synthetic and
wool fibers also were produced. Textile production provided inputs to
approximately sixty