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CREDIT ANALYSIS

SOVEREIGN & SUPRANATIONAL MARCH 26, 2015

RATINGS

Paraguay Foreign

Currency Local

Currency Gov. Bond Rating Ba1-STA Ba1-STA Country Ceiling Baa3 Baa3 Bank Deposit Ceiling Ba2 Baa3

Table of Contents:

OVERVIEW AND OUTLOOK 1 Special Topic: Key Drivers behind Paraguay’s upgrade to Ba1 with stable outlook 2

RATING RATIONALE 3 Economic Strength: Moderate (-) 3 Institutional Strength: Very Low (+) 5 Fiscal Strength: High (+) 8 Susceptibility to Event Risk: Low (+) 12 Rating Range 16 Comparatives 17

APPENDICES 18 Chart Pack 18 Rating History 20 Annual Statistics 21

MOODY’S RELATED RESEARCH 23 RELATED WEBSITES 23

Analyst Contacts:

NEW YORK +1.212.553.1653

Samar Maziad +1.212.553.4534 Vice President - Senior Analyst [email protected]

Carlos Morales-Villarreal +1.212.553.0554 Associate Analyst [email protected]

» contacts continued on the last page

This Credit Analysis provides an in-depth discussion of credit rating(s) for Paraguay, Government of and should be read in conjunction with Moody’s most recent Credit Opinion and rating information available on Moody's website.

Paraguay, Government of

Overview and Outlook

On 20 March 2015, we upgraded Paraguay’s government bond rating to Ba1 with a stable outlook. Key drivers of the upgrade are i) improved fiscal framework and boosting infrastructure investment as the government implements the package of reforms approved in 2013, 2) efforts to diversify the economy are producing positive results, and 3) improved governance and institutional strength. The Special Topic section on page 2 elaborates on these key drivers.

Paraguay’s rating balances the government’s strong fiscal position, improving fiscal framework, and on-going economic diversification, against the economy’s dependence on agriculture, its growth volatility, and overall weak institutions. Fiscal metrics remain favorable compared to medians for both Ba- and Baa-rated peers, and recent efforts to contain current spending will create room for capital and infrastructure spending that can boost potential growth. Because of climate-related shocks and agriculture’s significant contribution to output, Paraguay’s growth has been more volatile than that of its peers.

The Fiscal Responsibility Law, legislature approved in 2013, was a positive step towards enhancing the fiscal framework as well as improving the budget process and containing current spending. Efforts to boost tax revenue collection yielded double-digit growth in government revenues in 2015. The government also envisages strong capital spending, with the ultimate goal of improving infrastructure and utilizing more of the country's hydroelectric energy domestically.

The stable outlook reflects our expectation that the government will continue to implement the various laws approved in late 2013 and maintain fiscal prudence, while expanding infrastructure investment over the medium term. We do not anticipate Paraguay's rating to change in the near to medium term. Further upgrade would depend on a track-record of improving the institutional framework, including adherence to the FRL, and sustained improvement in governance indicators compared to peers.

Conversely, the rating and the outlook could come under pressure if there is a reversal of the government’s prudent fiscal management, a significant and prolonged commodity shock driven by declining prices or adverse climate conditions, or a recurrence of political instability.

This Credit Analysis elaborates on Paraguay’s credit profile in terms of Economic Strength, Institutional Strength, Fiscal Strength and Susceptibility to Event Risk, which are the four main analytic factors in Moody’s Sovereign Bond Rating Methodology.

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=180071

https://www.moodys.com/credit-ratings/Paraguay-Government-of-credit-rating-600044126

http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_157547

SOVEREIGN & SUPRANATIONAL

2 MARCH 26, 2015 CREDIT ANALYSIS: PARAGUAY, GOVERNMENT OF

Special Topic: Key Drivers behind Paraguay’s upgrade to Ba1 with stable outlook

On 20 March 2015, Moody’s upgraded Paraguay’s government debt rating to Ba1 from Ba2. Concurrently, we changed the outlook to stable. The key drivers of the upgrade are described below.

Progress in implementing reform The government has made progress towards implementing the reforms approved in late 2013, which included the fiscal responsibility law (FRL), income tax reforms, and the public-private partnership (PPP) framework to boost infrastructure investment. Despite uneven implementation of the FRL, the 2015 budget observed limits on containing current spending and wage increases, a significant improvement over the previous budget process. Tax collection and revenues have substantially improved with the implementation of the new laws. Although observing the limit on current spending was important, the actual budget deficit that congress approved was well above the limit set by the FRL. Also, the fiscal target was met in part by excluding capital expenditure financed through global bond issuance. While increasing capital spending is desirable, this approach to meeting the fiscal target indicates that adherence to the FRL is not yet complete. We expect continued and improving compliance with the FRL to contain current spending and wage growth, creating fiscal space for growth-enhancing capital spending. The government’s growth strategy is emphasizing infrastructure investment. It is also focused on improving the execution of capital spending, and has had some tangible success on these fronts. In 2014, the execution of the capital budget increased substantially from the historical average and we anticipate a number of key infrastructure projects being launched in 2015.

Economic diversification is underway Government-led and private sector initiatives are diversifying the country’s economy as they develop light manufacturing industries and raise the value-added of agricultural exports. The government’s strategy is to integrate Paraguay better into the regional supply chain by encouraging the development of maquilas, autopart producers, and other light manufacturers. We think the light manufacturing industries are likely to continue to expand given Paraguay’s competitive advantages vis-à-vis Brazil. These advantages include low labor and energy costs, and a more favorable tax environment. Diversification efforts are expected to mitigate the impact of agriculture sector volatility on GDP growth, which so far has had limited impact on government revenues and banking sector performance.

Improving governance and institutional strength. Government effectiveness has improved since the Cartes administration took office. The government was able to secure passage of several key reforms including; the FRL, the Law to Modernize the State’s Financial Administration, the PPP Law, and a revision of the sovereign bond law, among others.

The stable outlook reflects our expectation that the government will continue to implement the various laws approved in late 2013 and maintain fiscal prudence, while expanding infrastructure investment over the medium term. We do not anticipate Paraguay’s rating changing in the near to medium term. Further upgrade would depend on a track record of improving the institutional framework, including adherence to the FRL, and sustained improvement in governance indicators compared to peers.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

http://www.moodys.com/



Rating Rationale

Our determination of a sovereign’s government bond rating is based on the consideration of four rating factors: Economic Strength, Institutional Strength, Fiscal Strength and Susceptibility to Event Risk. When a direct and imminent threat becomes a constraint, that can only lower the preliminary rating range. For more information please see our Sovereign Bond Rating Methodology.

Economic Strength: Moderate (-)

Paraguay is a small economy based on agriculture and hydroelectric energy production

Factor 1

Scale VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL-

+ -

Economic strength evaluates the economic structure, primarily reflected in economic growth, the scale of the economy and wealth, as well as in structural factors that point to a country’s long-term economic robustness and shock-absorption capacity. Economic strength is adjusted in case excessive credit growth is present and the risks of a boom-bust cycle are building. This ‘Credit Boom’ adjustment factor can only lower the overall score of economic strength.

Overview and Macro Outlook Paraguay’s nominal GDP of $30 billion is below the Ba median of $48 billion and less than the median of countries rated Ba1. Paraguay has a GDP (PPP) per capita of $8,064, which is in line with the $8,021 median for Ba-rated countries, and above some peers such as Angola (Ba2), and Guatemala (Ba1). The small size of the economy and GDP growth volatility compared to peers would support assessing economic strength as low (+). However, there are ongoing positive developments in the realm of diversification, particularly as they relate to raising the value-added of agriculture products, developing maquila industry, and upgrading infrastructure.

At 14.2%, GDP growth recovered sharply in 2013, following the drought in the previous year, and remained strong in 2014 at over 4%. We project GDP growth at 4.5% in 2015, driven by construction, manufacturing, and government investment. Moderate inflation is expected to remain anchored around the central bank target of 4.5%. The current account will likely post a small deficit in 2014 and possibly beyond, reflecting the drop in soya prices and Paraguay’s higher growth and investment rates. The fiscal accounts for 2014 posted a deficit of 2.3%, largely due to above-average execution of capital spending in the last quarter. Tax revenue expanded at an impressive double-digit rate of 19%, with income tax expanding at 25% following improved compliance and enforcement and the implementation of the new income tax. Rapid growth and expansion of light manufacturing over the past three years have translated into a sharp drop in the poverty rate, from around 30% in 2011 to 23.8% in 2013.

Efforts to diversify the economy are bearing fruit Paraguay’s economy has traditionally relied on agriculture production, particularly soy and meat, and hydroelectric energy generation from Itaipú and Yacyretá dams owned jointly with Brazil and Argentina respectively (Exhibit 2). In recent years, government-led and private sector initiatives to raise the value-added of agricultural exports and develop light manufacturing are starting to bear fruit. The government strategy is centered on taking advantage of the country’s abundant domestically generated hydroelectric energy, and encouraging development of maquilas, autoparts producers, and other light manufacturers that are primarily part of Brazil’s supply chain. Since 2011, soy exports have been steadily shifting from raw grains towards processed soy oil, which currently constitutes 40% of soy exports, a share that is expected to reach 60%. This trend of expanding light manufacturing industries is likely to continue due to Paraguay’s



low labor and energy costs, and favorable tax environment compared to Brazil. There are also efforts underway to develop agribusiness industries, such as organic meats and poultry aimed at nontraditional export markets in Asia, North Africa, and the Middle East.

EXHIBIT 1

Contribution to Real GDP Growth (pct pts)

Sources: Central Bank of Paraguay, Moody’s Investors Service p=preliminary and f=forecast

EXHIBIT 2

2013 GDP by Economic Sector (%)

Sources: Central Bank of Paraguay, Moody’s Investors Service

Infrastructure investment will be key to raising Paraguay’s growth potential Paraguay’s key challenges in raising its potential growth are in the areas of social development, specifically education, and infrastructure investment. According to the UN Human Development Report 2013, only 37% of people ages 25 and older have at least a secondary education. However, Paraguay has a young population, with 39% of the total population between ages 10 and 29, and the secondary school enrolment rate is 67%, indicating that education levels have the potential to improve. Informality is high because labor market rigidities are significant.1 Basic infrastructure in roads, ports, and utilities is lacking, a fact associated with the country’s low investment rate, averaging 16% of GDP over the past five years.

To address these challenges, the government’s growth strategy has put emphasis on infrastructure investment and capital spending with some tangible success. In 2014, the execution of the capital budget doubled compared to the historical average, and a number of infrastructure projects are in the pipeline. In 2015, the authorities expect to launch two vital road expansions ($400 million) using the recently approved PPP framework. The work will duplicate the national highway linking Asuncion with major cities, including Ciudad del Este on the border with Brazil, and connecting other local capitals. Other infrastructure projects at the pre-feasibility stage include a new airport hub, road rehabilitation and improvement, and dredging and maintenance of Paraguay river. The authorities aim to ramp up capital spending to $1 billion by 2018. In addition, proceeds from the $500 million global bond issued in 2013 and the $1 billion bond issued in 2014, and any future bonds, will be used for infrastructure projects, namely roads, airports, electricity infrastructure, and a shipping waterway.

Strong growth and economic diversification are making a dent in poverty rates Paraguay’s poverty rate has dropped significantly, declining from close to 35% in 2010 to just below 24%, with a drop in rural poverty that is even larger. The rate of extreme poverty also fell significantly, and there was an improving trend in income per capita for the poorest quintile of the population. In addition, the growth of light manufacturing industries and development of maquila in Paraguay have been encouraging a formalization of the labor force and improved the quality of employment. According to measures of the quality of employment compiled by the United Nations Development Program (UNDP), high-quality employment, which is defined to include employment with healthcare benefits and social security, doubled

1 The World Economic Forum ranks Paraguay 117th out of 148 countries in the area of labor market efficiency in “The Global Competitiveness Report, 2013-2014.”

-4.0

13.1

4.3

-1.2

14.2

4.0 4.5

-5

-3

-1

1

3

5

7

9

11

13

15

2009 2010 2011 2012 2013 2014 2015F

Private consumption Public consumptionGross Fixed Investment Net ExportsGDP

Agriculture18%

Wholesale and retail trade15%

Industry11%

Binational dams9%

General government8%

Taxes in products7%

Livestock5%

Transport and Communicat-ions8%

Construction4%

Finance3%

Other services11%

Forest products, fishing, and mining1%



between 2001 and 2011 (latest data), with a strong increase taking place in 2011, adding 70,000 individuals to the total of 480,000 employees (Exhibit 3).

EXHIBIT 3

High-quality employment, thousands

Sources: United Nations Development Program (UNDP), Moody’s Investors Service

Institutional Strength: Very Low (+)

Recent legislation reflects a strengthened institutional framework

Factor 2


+ -

Institutional strength evaluates whether the country’s institutional features are conducive to supporting a country’s ability and willingness to repay its debt. A related aspect of institutional strength is the capacity of the government to conduct sound economic policies that foster economic growth and prosperity. Institutional strength is adjusted for the track record of default. This adjustment can only lower the overall score of institutional strength.

Improvement in governance despite comparatively weak indicators The World Bank Governance Indicators for Paraguay (specifically, government effectiveness, rule of law, and control of corruption) compare poorly relative to peers. For Paraguay, government effectiveness, rule of law and control of corruption are consistently among the lowest 15% of rated countries, rendering a weak position compared to the median for Ba-rated countries (Exhibit 4). On other measures of the business environment, Paraguay has been making progress and its rank has improved among regional peers. On the World Bank doing business indicator, Paraguay’s ranking has improved from 124 in 2010 to 92 in 2015. The Brazilian higher education institute, Fundação Getulio Vargas, ranks Paraguay’s business environment as among the best performers in Latin America in 2014/15.

0

50

100

150

200

250

300

350

400

450

500

2001 2003 2006 2009 2010 2011

http://en.wikipedia.org/wiki/Higher_education



EXHIBIT 4

World Bank Governance Indicators 2013

Sources: World Bank, Moody’s Investors Service

The Cartes administration is governing effectively and combating corruption As mentioned in last year’s report, government effectiveness has improved since the Cartes administration took office and was able to enter into a governing pact with the second-largest party, the PLRA, and secure passage of several laws in the first few months in office. These laws included the Fiscal Responsibility Law, the Law to Modernize the State’s Financial Administration, the PPP Law, and a revision of the sovereign bond law, among others.2

Furthermore, the President has cracked down on corruption, including an investigation into, and publication of, the salaries and spending practices of each member of Congress. This investigation ultimately resulted in public outrage against corruption in Congress, and perceptibly improved the public’s perception of government corruption and led to widespread demands for cleaner politics. Ultimately, this event also reduced Congress’ clout, a positive development in terms of institutional balance between the executive and legislative branches, because Congress in Paraguay has typically been very strong and had the capacity to approve large salary increases in the budget, reducing the government’s ability to expand capital spending. The new Fiscal Responsibility Law also aims to limit Congress’s power by placing a cap on the annual increase in budgeted current primary expenditures, a cap that the 2015 budget observed (details in Factor 3 section).

Monetary policy framework effectively anchors inflation The central bank of Paraguay has operated under an inflation targeting regime since 2011. In December 2014, it reduced its target from 5% to 4.5% +/- 2 percentage points, further narrowing the 5% +/- 2.5 percentage-point range that it adopted originally. Since adoption, inflation has mostly remained within the target range, and inflation volatility has declined over the past five years. Expected inflation appears to be well-anchored at the central bank’s target (Exhibits 5 and 6).

In the context of an improved monetary framework, financial dollarization has been declining from elevated levels, and hovers around 45%-50% of deposits and loans, with some increase in foreign currency credit since 2013 (Exhibits 7 and 8). Risks stemming from financial sector dollarization appear contained, as foreign currency credit is limited to naturally hedged borrowers, typically soya exporters. The authorities are also in the process of formulating a new framework for supervising the banking sector, one that would allow the central bank to introduce macro-prudential tools to manage banking sector risk.

2 See “Paraguay's New Legislation Set to Bolster Country's Fiscal and Institutional Framework,” 6 March, 2014.

0

25

50Political Stability

Government Effectiveness

Rule of Law

Control of Corruption

Voice & Accountability

Regulatory Quality

Paraguay Median - Ba Mean - L F2




EXHIBIT 5

Nominal PGY/USD Exchange Rate

Sources: Central Bank of Paraguay, Reuters, Moody’s Investors Service

EXHIBIT 6

Inflation, y/y (%) and the Target Range

Sources: Central Bank of Paraguay, Reuters, Moody’s Investors Service. Note: Blue lines indicates inflation target range.

EXHIBIT 7

Composition of Total Banking System Deposits (%)


EXHIBIT 8

Composition of Banking System Loans to the Private Sector (%)


3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

0

2

4

6

8

10

12

14

30

35

40

45

50

55

60

65

70

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Local Currency Foreign Currency

30

35

40

45

50

55

60

65

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Local Currency Foreign Currency



Fiscal Strength: High (+)

Fiscal metrics have improved relative to peer medians

Factor 3


+ -

Fiscal strength captures the overall health of government finances, incorporating the assessment of relative debt burdens and debt affordability as well as the structure of government debt. Some governments have a greater ability to carry a higher debt burden at affordable rates than others. Fiscal strength is adjusted for the debt trend, the share of foreign currency debt in government debt, other public sector debt and for cases in which public sector financial assets or sovereign wealth funds are present. Depending on the adjustment factor the overall score of fiscal strength can be lowered or increased.

Debt metrics are favorable compared to Ba and Baa peer medians Paraguay’s key fiscal and government debt metrics compare favorably against the medians for Ba- and Baa-rated countries (Exhibits 9-12). Owing to eight consecutive years of budget surpluses, general government debt fell to less than 10% of GDP in 2011. It has since risen to 14.5% of GDP in 2014, well below both the Ba and Baa medians. As a percent of revenues, government debt amounted to an estimated 88% in 2014, also well below the Ba and Baa medians.

EXHIBIT 9

Fiscal Balance/GDP (%) vs. Peers

Sources: National Sources, Moody’s Investors Service p=preliminary

EXHIBIT 10

Debt/GDP (%) vs. Peers


-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0Paraguay Median Ba Median B

0

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30

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60

70Paraguay Median Ba Median B



EXHIBIT 11

Debt/Revenue (%)


EXHIBIT 12

Interest Payments/Revenues (%)


Government debt dynamics remain favorable Paraguay’s external debt (60% of total) is owed to multilateral development banks and bilateral creditors with average maturity of 8.5 years (Exhibits 13-16). As a result, debt affordability is very high; interest payments amounted to just under 2% of government revenues in 2014, well below the medians for Ba- and Baa-rated countries (Exhibit 12).

In 2013 and 2014, the government accessed the global markets, issuing two bonds totaling $1.5 billion. The bonds shifted the composition of the government’s debt and reduced the share of multilateral and bilateral debt. However, we do not expect the shift to alter debt dynamics significantly. Despite the large share of foreign currency debt, exchange rate risk is low. The sovereign balance sheet is naturally hedged on the revenue side because of the steady flow of foreign currency revenues of around $600 million per year from the Itaipú and Yacyretá dams, which is roughly three times the government’s foreign currency-denominated debt service. Debt metrics are projected to remain favorable over the medium term.

EXHIBIT 13

Government Debt Composition, 2013 (%)

Sources: Ministry of Finance of Paraguay, Moody’s Investors Service

EXHIBIT 14

External Debt Composition, 2013 (%)


0

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100

150

200

250


0

2

4

6

8

10


Foreign Debt64%

Domestic Debt36%

Multilaterals72%

Bilaterals17%

Market Debt11%



EXHIBIT 15

Bilateral Debt Composition, 2013 (%)


EXHIBIT 16

Multilateral Debt Composition, 2013 (%)


Tax reforms are yielding strong results with further room to grow Paraguay’s tax revenues collection improved significantly in 2014, following the passage of a tax reform package the previous year and improved enforcement and collection efforts. Tax revenue increased by 18.4%, and income tax increased by 25%. The tax reform package included gradual implementation of a personal income tax (IRP); a transformation of the agricultural income tax (IRAGRO) from a progressive rate to a simple rate of 10% for all producers; and introduction of a new 5% agricultural sector value-added tax (VAT). At 18.7% of GDP, Paraguay’s government revenue remains low, compared to the Ba median of 27.8%. Efforts to improve collection and compliance are expected to continue to bring Paraguay’s revenue collection in line with its peers.

The fiscal deficit reached 2.3% of GDP in 2014, up from 1.9% in 2013, largely because of above-average execution of capital spending in the last quarter of 2014 (Exhibit 17). In 2015 and beyond, the government is aiming to ramp up its capital spending ambitiously, with the objective of reaching $1 billion in capital spending in 2018. It will finance the increased capital spending through containing current expenditure, in line with the fiscal responsibility law, and through sustaining the high level of tax revenue collection.

EXHIBIT 17

Government Revenues and Expenditures (% of GDP)

Source: Ministry of Finance of Paraguay, Moody’s Investors Service

Japan75%

China20%

Spain5%

IADB66%

World Bank23%

CAF5%

Other6%

Tax

Current

Tax

Current

Tax

Current

Tax

Current Tax

Current

Tax

Current

Non-tax

Capex

Non-tax

Capex

Non-tax

Capex

Non -tax

Capex Non-tax

Capex Non-tax

Capex

0

5

10

15

20

25

2009 Rev.

2009 Exp.

2010 Rev.

2010 Exp.

2011 Rev.

2011 Exp.

2012 Rev.

2012 Exp.

2013 Rev.

2013 Exp.

2014 Rev.

2014 Exp.



The Fiscal Responsibility Law is an important step, but implementation is uneven The government passed the Fiscal Responsibility Law (FRL) in 2013 and its implementation started with the 2015 budget law. According to the FRL, the central government deficit should not exceed 1.5% of GDP except in years of crisis, and current expenditure should be capped at 4% plus inflation. The FRL also restricts salary increases and election-year spending, and aims to curtail Congress’s ability to increase expenditures, while simultaneously increasing the line item for “other revenues” without actually identifying the source of those revenues.

Compliance with FRL has been uneven. While observing the limit on current spending was an important development, the actual budget deficit approved by congress was 3.4%, well above the 1.5% limit set by the FRL. At the same time, the budget law included a clause that excludes from the calculation of the overall deficit any capital spending financed through international bond issuance. Excluding the bond-financed spending resulted in a budget deficit of 1.2% of GDP. Increasing capital spending is desirable; however circumventing the FRL in its first year of implementation sets a precedent and undermines the law as a fiscal anchor. It also signals a lack of commitment to improving the budget process.

Greater adherence to the FRL as a fiscal anchor is desirable because it would ensure that additional resources are not diverted away from productive capital spending, especially as the government steps up efforts to increase revenue collection and continues to access global markets. Successive governments in Paraguay have traditionally managed public finances soundly. However, the lack of a fiscal anchor and Congress’s repeated approval of expansionary budgets have left the door open for future administrations to be less fiscally responsible. The passage of the FRL ameliorated this risk, and we expect compliance with the law to reduce it further.

Box 1: Fiscal Responsibility Law

In late October 2013, Congress approved Law 5098, the Fiscal Responsibility Law. The law includes the following stipulations:

» The central government’s fiscal deficit is not to exceed 1.5% of GDP beginning in 2015, or 1% of GDP in the medium-term (i.e., 3 years from now); in crisis years, there may be an exception, but even in those years, the deficit may not exceed 3% of GDP;

» The annual increase in current primary spending of the public sector shall not exceed the inflation rate plus 4%;

» There may be no salary increases, except when there is an increase in the minimum wage, and the minimum wage may be increased only when inflation exceeds 10% year-over-year (y/y). When a salary increase takes place it shall, at a maximum, be equivalent to the increase in the minimum wage and will be incorporated into the budget for the following year;

» Congress may no longer adjust the revenues in the budget submitted to it by the Executive branch; » In general election years, central government current primary spending during January-July may not

exceed 60% of the budget for that year; » The government will create a multi-year (3-year) budget for referential purposes, in order to determine

the adequate provision of revenues and expenditures over the medium-term.

The overarching purpose of this law is to strengthen fiscal institutions and oversight, with an added goal of managing the growth of current expenditure in order to focus on stronger growth of capital expenditure.



Susceptibility to Event Risk: Low (+)

The most significant risk involves climate-related shocks

Factor 4

Scale VL- VL VL+ L- L L+ M- M M+ H- H H+ VH- VH VH+

+ -

Susceptibility to Event Risk evaluates a country’s vulnerability to the risk that sudden events may severely strain public finances, thus increasing the country’s probability of default. Such risks include political, government liquidity, banking sector and external vulnerability risks. Susceptibility of Event Risk is a constraint which can only lower the preliminary rating range as given by combining the first three factors.

Political risk is low With the exception of President Lugo’s impeachment in 2012, there is little to suggest that Paraguay could face significant political instability in the near future. In addition, the impeachment tested the resilience of Paraguay’s institutional framework, which demonstrated adequate strength and flexibility to handle a political transition in a way that had no clear impact on the economy or on the government’s willingness or ability to service its debt obligations. The current administration of President Cartes is able to govern effectively and seems to enjoy strong support from the electorate to fight corruption. There is scope to step up communication efforts to raise awareness and build more support for the government’s ambitious reform agenda.

Government liquidity risk remains low As discussed, we expect Paraguay’s debt dynamics to remain favorable with low refinancing and foreign currency risks. The fiscal deficit excluding capital spending financed through global bond issuance is projected at a moderate 1.2% GDP. The central government’s external debt service in 2015/2016 amounts to less than 1% of projected GDP. The fiscal deficit will be comfortably financed through domestic debt issuance and draw down of government deposits, as well as disbursements of multilateral/bilateral credit. In addition, Paraguay has a steady stream of foreign currency revenues equivalent to 2% of GDP from the Itaipu and Yacyreta hydroelectric exports.

Exhibits 18 and 19 show Paraguay’s debt service schedule, which demonstrates no major spikes in the foreseeable future.

EXHIBIT 18

Debt Service Schedule, USD mn External vs. Domestic Debt Service


EXHIBIT 19

Debt Service Schedule, USD mn Principal, Interest, and Commissions


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600

2015 2016 2017 2018 2019 2020 2021

External Debt Domestic Debt

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2015 2016 2017 2018 2019 2020 2021

Principal Interest Commission



Balance of payment dynamics remain favorable Over the last decade, Paraguay’s current account has typically posted surpluses, supported by steady hydroelectric exports and rising prices for Paraguay’s agriculture exports (soy and meat). We expect this trend to reverse and the current account to post small deficits, between 0.5% and 1% of GDP, over the next couple years due the catching-up effect of Paraguay’s growth and falling soy prices (Exhibits 20-23).

Exhibit 20 Current Account Components (% GDP)

E=estimate Sources: Central Bank of Paraguay, Moody’s Investors Service

Exhibit 21 Current Account and FDI (% GDP)

E=estimate, F=forecast Sources: Central Bank of Paraguay, Moody’s Investors Service

EXHIBIT 22

Exports by product, % total value


-20

-15

-10

-5

0

5

10

15

20

2006 2007 2008 2009 2010 2011 2012 2013 2014E

Goods Services Income Transfers

-2

-1

0

1

2

3

4

5

6Current Account Balance Foreign Direct Investment

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013 2014

Soy Electric Energy Other Meat Flour Grains Vegetable oil Wood Cotton



EXHIBIT 23

Food prices, $ per ton


FDI is set to increase, because of the new PPP law and revisions to the sovereign bond law Net foreign direct investment (FDI) averaged around 1.4% of GDP over the past five years, which is low compared to the Ba median of 2.5%. Ongoing improvements to the business environment and development of the maquila industry have kept FDI flows at relatively elevated levels since 2011. Approval of the PPP law and the government strategy to attract foreign investors to support infrastructure investments should provide an additional boost to FDI flows. According to IMF projections, FDI flows are expected to nearly double by 2020.3

EXHIBIT 24

Foreign Direct Investment Stock (% total, by sector), 2013


Export markets have become more diversified and Brazil dependency has declined Paraguay’s export markets are well diversified with dependence on regional trading partners is declining. The largest trading partners are MERCOSUR members – Argentina, Brazil and Uruguay – which together accounted for 40% of Paraguay’s exports in 2014, down from 56% in 2009, followed by the European Union (15%), Russia at (11%), and Asia at 12%; all of which expanded their share of Paraguay’s export over the past five years (Exhibits 25 and 26).

3 IMF (2015) Paraguay Article IV Consultation, Country report No. 15/37

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700

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1,000

1,500

2,000

2,500

3,000

3,500

4,000

2009 2010 2011 2012 2013 2014

Meat (LHS) Soy (RHS) Corn (RHS) Wheat (RHS)

Financial intermediation23%

Trade20%Communications

13%

Production of oils11%

Transport10%

Beverage and Tobacco7%

Chemical Products5%

Agriculture4%

Other7%



EXHIBIT 25

Goods Export Markets, 2009 (%)


EXHIBIT 26

Goods Export Markets, 2014 (%)


External vulnerability is low, with climate-related shocks as the most significant risk The economy has been resilient to recurring climate-related shocks, which mostly hit the agriculture sector and impact the current account through lower soy exports. Government revenues have been resilient to agriculture shocks because of the sector’s limited tax contribution. In addition, Paraguay’s flexible exchange rate typically absorbs some of the impact of commodity-related shocks and the associated depreciation raises the value of US dollar-denominated revenues in guaraní terms, thus compensating for some of the revenue loss associated with lower growth. However, as the VAT on agricultural producers is fully implemented, the impact on revenues may become larger.

Overall, the country’s financial buffers and policy space are adequate to withstand climate-related shocks or a decline in commodity prices; however, external the vulnerability indicator remains high. Gross international reserves have grown nearly six-fold over the past decade to an estimated $6.5 billion in 2014, about 21% of GDP, and provide over six months of import cover. Due to the stronger reserves cushion, external liquidity indicators and debt coverage ratio have markedly improved over the past several years (Exhibit 27). The external vulnerability indicator remains high and above Baa median, although it is well-below the Ba median (Exhibit 28).

EXHIBIT 27

Total External Debt/Official Foreign Exchange Reserves (%)

Sources: National Sources, Moody’s Investors Service F=forecast

EXHIBIT 28

External Vulnerability Indicator (%)

Sources: National Sources, Moody’s Investors Service F=forecast

Mercosur56%

European Union10%

Asia7%

Russia5%

ROW22%

Mercosur40%

European Union15%

Asia12%

Russia11%

ROW22%

0

200

400

600

800

1000

1200

1400

1600Paraguay Median Baa Median Ba

0

50

100

150

200

250

300

350

400Paraguay Median Baa Median Ba


16 MARCH 26, 2015

CREDIT ANALYSIS: PARAGUAY, GOVERNMENT OF

Rating Range

Combining the scores for individual factors provides an indicative rating range. While the information used to determine the grid mapping is mainly historical, our ratings incorporate expectations around future metrics and risk developments that may differ from the ones implied by the rating range. Thus, the rating process is deliberative and not mechanical, meaning that it depends on peer comparisons and should leave room for exceptional risk factors to be taken into account that may result in an assigned rating outside the indicative rating range. For more information please see our Sovereign Bond Rating Methodology.

Sovereign Rating Metrics: Paraguay

Economic Strength

How strong is the economic structure?

Economic Resiliency

Sub-Factors: Growth Dynamics, Scale of the Economy, Wealth

VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL-

+ -

Institutional Strength

How robust are the institutions and how predictable are the policies?


+ -

Government Financial Strength

Sub-Factors: Institutional Framework and Effectiveness,

Policy Credibility and Effectiveness


+ -

Fiscal Strength

How does the debt burden compare with the government's resource mobilization capacity?


+ -

Sub-Factors: Debt Burden, Debt Affordability


+ -

Susceptibility to Event Risk

What is the risk of a direct and sudden threat to debt repayment?

Sub-Factors: Political Risk, Government Liquidity Risk,

Banking Sector Risk, External Vulnerability Risk

VL- VL VL+ L- L L+ M- M M+ H- H H+ VH- VH VH+

+ -

Rating Range: Baa3 – Ba2

Assigned Rating: Ba1



17 MARCH 26, 2015


Comparatives

This section compares credit relevant information regarding Paraguay with other sovereigns rated by Moody’s Investors Service. It focuses on a comparison with sovereigns within the same rating range and shows the relevant credit metrics and factor scores.

Paraguay’s economic strength of moderate (-) is weaker than most key peers due to the economy’s small size, low income per capita, lack of diversification, and growth volatility. Institutional strength of very low (+) is slightly below to key peers, owing to the country’s low ranking in the World Bank’s governance indicators, however recent legislation in Paraguay should help strengthen the institutional framework in the years ahead. The government’s fiscal strength is high (+), which compares favorably to key peers because of very low debt ratios as a percent of revenues and GDP. Moreover, most of the government’s debt is concessional, leading to a low interest payments/revenues ratio. Susceptibility to event risk at low (+) compares favorably to key peers and reflects not only Paraguay’s resilience to a recent political shock, but also healthy government liquidity and the country’s strengthened external position..

EXHIBIT 31

Paraguay Key Peers

Year Paraguay Bolivia Angola Guatemala Panama Uruguay Ba1 Median Latin America &

Caribbean Median

Rating/Outlook Ba1/STA Ba3/STA Ba2/STA Ba1/STA Baa2/STA Baa2/STA Ba1 Ba2

Rating Range Baa3 - Ba2 Ba2 - B1 Ba1 - Ba3 Baa3 - Ba2 A3 - Baa2 Baa1 - Baa3 Baa3 - Ba2 Baa3 - Ba2

Factor 1 M- M- M+ M- H- M+ M M-

Nominal GDP (US$ Bn) 2013 28.9 30.6 127.3 53.9 42.6 55.7 80.9 36.6

GDP per Capita (PPP, US$) 2013 8,064 5,928 7,978 7,290 19,080 19,679 17,283 12,776

Avg. Real GDP (% change) 2009-2018 4.7 5.0 4.7 3.2 7.0 4.5 2.0 2.7

Volatility in Real GDP growth (ppts) 2004-2013 5.6 1.0 7.6 1.5 2.4 2.0 3.0 2.4

Global Competitiveness Index, percentile [1] 2014 5.3 14.1 0.0 31.8 57.5 30.9 42.0 28.3

Factor 2 VL+ L- VL- L+ M H- M+ M-

Government Effectiveness, percentile [1] 2013 7.8 25.9 0.7 13.3 53.5 55.9 48.8 37.7

Rule of Law, percentile [1] 2013 14.1 5.5 1.5 3.9 40.1 61.4 46.4 29.9

Control of Corruption, percentile [1] 2013 7.0 21.2 0.0 22.0 35.4 81.8 45.7 34.6

Avg. Inflation (% change) 2009-2018 4.7 5.2 9.8 4.1 3.8 7.7 3.7 4.0

Volatility in Inflation (ppts) 2004-2013 2.7 3.7 10.2 2.8 2.4 1.3 2.3 2.3

Factor 3 H+ H VH M+ H+ M M- M+

Gen. Gov. Debt/GDP 2013 13.6 32.6 22.5 24.6 36.8 39.8 50.4 34.4

Gen. Gov. Debt/Revenues 2013 79.0 88.5 57.0 211.5 169.9 186.8 196.3 168.9

Gen. Gov. Interest Payments/Revenue 2013 1.8 1.7 2.0 13.3 8.2 11.5 9.4 9.0

Gen. Gov. Interest Payments/GDP 2013 0.3 0.6 0.8 1.6 1.9 2.5 2.6 1.8

Gen. Gov. Financial Balance/GDP 2013 -2.0 1.4 0.3 -2.1 -2.9 -1.6 -3.7 -2.3

Factor 4 L+ M+ M M- M- L M M-

Current Account Balance/GDP 2013 2.1 3.3 6.6 -2.5 -11.5 -5.2 0.8 -3.9

Gen. Gov. External Debt/Gen. Gov. Debt 2013 62.9 49.3 49.9 52.6 33.3 34.5 45.7 49.3

External Vulnerability Indicator 2015F 125.0 13.6 32.5 40.3 6.9 69.8 67.1 64.5

Notes: [1] Moody’s calculations. Percentiles based on our rated universe. Source: Moody’s, [ ]


18 MARCH 26, 2015


Appendices

Chart Pack

Paraguay EXHIBIT 32

Economic Growth

Source: Moody’s Investors Service

EXHIBIT 33

Investment and Saving


EXHIBIT 34

National Income


EXHIBIT 35

Population

Source: Moody’s Investors Service, World Bank

EXHIBIT 36

Global Competitiveness Index Rank 120 out of 148 countries

Source: World Economic Forum

EXHIBIT 37

Inflation and Inflation Volatility


0.0

1.0

2.0

3.0

4.0

5.0

6.0

-5

0

5

10

15

2020

04

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

Real GDP Volatility, t-9 to t (ppts) (RHS)Real GDP (% change) (LHS)

0

5

10

15

20

25

30

35

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

Gross Investment/GDPGross Domestic Saving/GDP

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

GDP per capita (US$) GDP per capita (PPP basis, US$)

1.55

1.60

1.65

1.70

1.75

1.80

1.85

1.90

1.95

2.00

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

Population (Mil.) (LHS)Population growth (% change) (RHS)

0 50 100 150

Angola (Ba2/STA)

Paraguay (Ba1/STA)

Bolivia (Ba3/STA)

Uruguay (Baa2/STA)

Guatemala (Ba1/STA)

Panama (Baa2/STA)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

Inflation Rate Volatility, t-9 to t (ppts) (RHS)Inflation Rate (CPI, % change Dec/Dec) (LHS)


19 MARCH 26, 2015


EXHIBIT 38

Institutional Framework and Effectiveness

Notes: [1] Composite index with values from about -2.50 to 2.50: higher

values correspond to better governance. Source: World Bank Governance Indicators

EXHIBIT 39

Debt Burden


EXHIBIT 40

Debt Affordability


EXHIBIT 41

Financial Balance


EXHIBIT 42

Government Liquidity Risk


EXHIBIT 43

External Vulnerability Risk


0.0

0.5

1.0

1.5

2.0

2.5

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Government Effectiveness[1] Rule of Law[1]Control of Corruption[1]

0

20

40

60

80

100

120

140

160

180

200

0

5

10

15

20

25

30

35

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

Gen. Gov. Debt/GDP (%) (LHS)Gen. Gov. Debt/Gen. Gov. Revenue (%) (RHS)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

Gen. Gov. Interest Payment/GDP (%) (LHS)

Gen. Gov. Interest Payment/Gen. Gov. Revenue (%) (RHS)

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

Gen. Gov. Financial Balance/GDP (%)Gen. Gov. Primary Balance/GDP (%)

0

5

10

15

20

25

30

35

0

10

20

30

40

50

60

70

80

90

100

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

Gen. Gov. Debt/GDP (%) (RHS)

Gen. Gov. External Debt/Total Gen. Gov. Debt (%) (LHS)

0

50

100

150

200

250

300

350

400

450

500

0

50

100

150

200

250

300

350

400

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

F

2015

F

External Debt/CA Receipts (%) (LHS)External Vulnerability Indicator (%) (RHS)


20 MARCH 26, 2015


Rating History

Paraguay

Government Bonds Foreign Currency Ceilings

Foreign Currency Local Currency Outlook Bonds & Notes Bank Deposit Date

Long-term Short-term Long-term Short-term

Rating Raised Ba1 Ba1 Stable Baa3 P-3 Ba2 -- March-14

Rating Raised Ba2 Ba2 Positive -- -- Ba3 -- February-14

Rating Raised Ba3 Ba3 Stable Ba1 -- B1 -- January-13

Rating Raised B1 B1 Stable Ba3 -- B2 -- December-10

Review for Upgrade B3 B3 RUR+ -- -- -- -- June-10

Rating Raised B3 B3 Stable B2 -- B3 -- April-08

Review for Upgrade Caa1 Caa1 RUR+ -- -- -- -- November-07

Rating Raised -- -- -- B3 -- -- -- May-06

Rating Lowered Caa1 Caa1 Stable Caa1 -- Caa2 -- April-03

Rating Assigned B2 B1 Stable B2 NP B3 NP July-98


21 MARCH 26, 2015


Annual Statistics Paraguay

2007 2008 2009 2010 2011 2012 2013 2014E 2015F

Economic Structure and Performance

Nominal GDP (US$, Bil.) 13.8 18.5 15.9 20.0 25.1 24.6 28.9 30.4 32.2

Population (Mil.) 6.1 6.2 6.3 6.5 6.6 6.7 6.8 6.9 7.0

GDP per capita (US$) 2254.1 2970.0 2512.8 3107.7 3825.0 3685.8 4258.3 4399.7 4582.7

GDP per capita (PPP basis, US$) 6032.9 6426.9 6110.0 6875.1 7197.9 7116.0 8064.3 8385.5 --

Nominal GDP (% change, local currency) 15.7 16.3 -2.0 20.0 10.8 3.4 14.7 8.5 9.0

Real GDP (% change) 5.4 6.4 -4.0 13.1 4.3 -1.2 14.2 4.3 4.5

Inflation (CPI, % change Dec/Dec) 5.9 7.5 1.9 7.2 4.9 4.0 3.7 4.2 4.5

Gross Investment/GDP 15.8 16.4 13.8 16.2 17.1 15.1 15.4 15.9 17.0

Gross Domestic Savings/GDP 25.6 20.9 20.6 19.8 19.3 16.3 20.1 18.5 19.0

Nominal Exports of G & S (% change) 25.0 27.8 -17.8 34.5 19.4 -6.9 16.2 2.0 2.0

Nominal Imports of G & S (% change) 23.8 41.8 -22.2 44.7 22.3 -5.1 7.8 7.9 3.1

Openness of the Economy [1] 103.5 103.5 96.3 106.6 102.8 98.6 94.1 93.8 90.6

Government Effectiveness [2] -0.8 -0.9 -0.9 -0.9 -0.8 -0.9 -0.9 -- --

Government Finance

Gen. Gov. Revenue/GDP [3] 15.7 15.8 17.6 17.1 18.1 19.0 17.2 18.2 18.7

Gen. Gov. Expenditures/GDP [3] 14.8 13.6 17.5 15.9 17.3 20.8 19.2 20.5 21.1

Gen. Gov. Financial Balance/GDP [3] 0.9 2.3 0.1 1.2 0.7 -1.8 -2.0 -2.3 -2.3

Gen. Gov. Primary Balance/GDP [3] 1.6 2.8 0.6 1.6 1.0 -1.6 -1.7 -2.0 -2.0

Gen. Gov. Debt (US$ Bil.) [3] 2.2 2.2 2.4 2.5 2.3 3.2 3.8 4.2 4.2

Gen. Gov. Debt/GDP [3] 15.3 13.8 13.8 11.9 9.8 12.5 13.6 14.5 13.3

Gen. Gov. Debt/Gen. Gov. Revenue [3] 97.9 86.9 78.7 69.4 54.2 65.8 79.0 87.7 71.2

Gen. Gov. Int. Pymt/Gen. Gov. Revenue [3] 4.7 3.5 3.1 2.1 1.5 1.3 1.8 1.7 1.6

Gen. Gov. FC & FC-indexed Debt/GG Debt [3] 83.9 84.0 80.2 80.5 83.4 59.6 62.9 59.8 60.0

External Payments and Debt

Nominal Exchange Rate (local currency per US$, Dec) 4875.0 4945.0 4610.0 4573.8 4439.9 4288.8 4524.0 4626.3 4649.0

Real Eff. Exchange Rate (% change) 10.0 15.0 -8.4 1.9 11.8 -1.6 5.2 3.2 --

Current Account Balance (US $ Bil.) 0.8 0.2 0.5 -0.1 0.1 -0.2 0.6 -0.1 -0.3

Current Account Balance/GDP 5.6 1.0 3.0 -0.3 0.4 -0.9 2.1 -0.4 -0.9

External Debt (US $ Bil.) 15.9 16.2 15.7 16.0 15.7 16.2 16.2 16.0 16.1

Public Sector External Debt/Total External Debt 15.6 17.1 18.0 18.2 17.7 18.0 20.5 18.8 19.1

Short-term External Debt/Total External Debt 22.6 25.1 25.8 27.4 27.8 28.8 28.7 28.4 28.6

External Debt/GDP 115.3 87.7 98.6 79.7 62.7 65.9 56.1 52.7 49.9

External Debt/CA Receipts [4] 188.5 151.3 175.9 136.0 111.6 122.7 106.8 103.4 102.1

Interest Paid on External Debt (US$ Bil.) 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2

Amortization Paid on External Debt (US$ Bil.) 0.3 0.3 0.3 0.3 0.7 1.7 1.5 1.6 1.6

Net International Investment Position/GDP -93.4 -69.3 -66.6 -49.3 -39.4 -43.9 -34.1 -- --

Official Foreign Exchange Reserves (US$ Bil.) 2.4 2.8 3.6 3.9 4.7 4.4 5.4 5.7 5.8

Net Foreign Assets of Domestic Banks (US$ Bil.) 0.2 0.3 0.3 0.2 -0.1 -0.4 -0.8 -- --


22 MARCH 26, 2015


Paraguay

2007 2008 2009 2010 2011 2012 2013 2014E 2015F

Monetary, External Vulnerability and Liquidity Indicators

M2 (% change Dec/Dec) 39.4 42.7 25.8 16.5 17.4 12.6 18.0 -- --

Short-term Nominal Interest Rate (% per annum, Dec 31) [5] 5.0 3.1 1.5 1.2 4.0 3.9 4.2 -- --

Domestic Credit (% change Dec/Dec) 26.2 53.5 16.4 31.7 22.6 20.9 14.5 -- --

Domestic Credit/GDP 17.3 22.8 27.1 29.7 32.9 38.4 38.3 -- --

M2/Official Forex Reserves (X) 1.0 1.4 1.2 1.3 1.5 1.7 1.7 -- --

Total external Debt/Official Forex Reserves 667.2 586.7 432.6 405.9 331.7 372.4 302.8 283.2 277.6

Debt Service Ratio [6] 4.7 4.0 4.8 3.8 6.0 14.5 11.8 12.0 4.4

External Vulnerability Indicator [7] 250.5 163.0 158.1 120.4 129.3 128.9 142.7 117.5 125.0

Liquidity Ratio [8] 51.4 69.2 45.7 57.7 101.5 92.3 111.8 -- --

Total Liab. due BIS Banks/Total Assets Held in BIS Banks 67.3 63.9 45.3 63.6 87.2 81.4 99.3 -- --

"Dollarization" Ratio [9] 42.5 43.9 39.8 42.1 39.1 38.5 40.4 43.7 --

"Dollarization" Vulnerability Indicator [10] 53.0 65.0 52.7 63.0 65.8 71.8 79.6 -- --

Notes: [1] Sum of Exports and Imports of Goods and Services/GDP [2] Composite index with values from -2.50 to 2.50: higher values suggest greater maturity and responsiveness of government institutions [4] Current account receipts [5] Deposit Rate [6] (Interest + Currently Maturing Long-Term Debt)/Total Current Account Receipts [7] (Short-Term External Debt + Currently Maturing Long-Term External Debt + Total Nonresident Deposits Over One Year)/Official Foreign Exchange Reserves [8] Liabilities to BIS Banks Falling Due Within One Year/Total Assets Held in BIS Banks [9] Total Foreign Currency Deposits in the Domestic Banking System/Total Deposits in the Domestic Banking System [10] Total Foreign Currency Deposits in the Domestic Banking System/(Official Foreign Exchange Reserves + Foreign Assets of Domestic Banks)


23 MARCH 26, 2015


Moody’s Related Research

Credit Opinion: » Paraguay, Government of

Issuer Comments: » Paraguay: Fiscal Position to Remain Robust Despite Growth Volatility, May 2014 (169941)

Statistical Handbook: » Moody’s Statistical Handbook, November 2013 (159963)

Rating Methodologies: » Sovereign Bond Ratings, September 2013 (157547)

» Sovereign Default and Recovery Rates, 1983-2013, November, 2014 (177644)

Moody’s Website Links:

» Sovereign Risk Group Webpage

» Sovereign Ratings List

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients.

Related Websites

For additional information, please see:

» The Central Bank website: www.bcp.gov.py

» The Ministry of Finance website: www.hacienda.gov.py

MOODY’S has provided links or references to third party World Wide Websites or URLs ("Links or References") solely for your convenience in locating related information and services. The websites reached through these Links or References have not necessarily been reviewed by MOODY’S, and are maintained by a third party over which MOODY’S exercises no control. Accordingly, MOODY’S expressly disclaims any responsibility or liability for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on any third party web site accessed via a Link or Reference. Moreover, a Link or Reference does not imply an endorsement of any third party, any website, or the products or services provided by any third party.

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24 MARCH 26, 2015


» contacts continued from page 1

Analyst Contacts:

NEW YORK +1.212.553.1653

Anne Van Praagh +1.212.553.3744 Managing Director - Sovereign Risk [email protected]

Report Number: 180071

Authors Samar Maziad Carlos Morales-Villarreal

Production Associate Sol Vivero

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