Former Minister of Finance, Manuel Ferreira, explained why economic growth indicators often feel disconnected from the reality of ordinary citizens. He analyzed the complex economic situation in Paraguay, where a notable rise in food prices and low wage growth are intersecting with Argentina's changing economic policies.
The Dilemma of Cross-Border Demand and Price Increases
Paraguay's recent economic growth is evident across various sectors, including commerce, services, industry, livestock, and construction. The growth in the commercial sector has a particularly interesting background. In the past, Paraguayan consumers would cross the border into Clorinda, Argentina, to buy cheaper goods. Now, there's a clear trend of them making purchases within Paraguay. According to Ferreira's example, a jar of mayonnaise that once cost 5,000 Guaraní in Argentina has skyrocketed to 15,000 Guaraní. This makes it more rational to buy the same item for 10,000 Guaraní in Asunción, the capital of Paraguay.
However, this shift presents a double burden for consumers. While they could once buy two jars of mayonnaise for 5,000 Guaraní, they can now only buy one for 10,000 Guaraní. In other words, their purchasing power has been halved because prices have doubled while wages have remained stagnant. On the other hand, supermarkets are experiencing a "double benefit": they are not only retaining Paraguayan customers but are also attracting new ones from Argentina, leading to a significant increase in sales.
Ferreira emphasized that Paraguay's current economic activity is heavily influenced by external factors, such as Argentina's "Milei policies." For instance, large numbers of Argentinians are visiting for events like the Pan American Junior Games, boosting consumption at malls and restaurants. This type of growth, based on external demand, is unlikely to translate into increased income for individual citizens.
Sharing the Fruits of Growth: The Importance of Education
Ferreira stressed that for the benefits of economic growth to reach all citizens, "education" is paramount. Globally, the service sector, which is creating the most jobs today, is divided into low-skill and high-skill positions. Paraguay is no exception, and the key challenge is to cultivate a skilled workforce through high-quality education.
Currently, many Paraguayan companies struggle to find qualified candidates for senior management and specialized roles, often filling these positions with professionals from neighboring countries like Argentina, Brazil, Chile, and Uruguay. This is because the local talent pool lacks the necessary skills. "If we truly want to share the fruits of economic growth with everyone, we must genuinely invest in education," Ferreira stated. As long as companies are forced to look beyond their borders for talent, true economic growth that fills the pockets of Paraguay's citizens will remain a distant goal.
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