Direct Investment (DI) in Paraguay has been influenced by various economic and structural factors over the past decades. From the economic boom of the 1970s, driven by major infrastructure projects and active investment incentives, to the liberalizing reforms of the 1990s and sectoral diversification in the twenty-first century, the development of DI has been shaped by a mix of internal and external factors.

In the early months of the year, most economies in the region have shown resilience despite a highly uncertain international environment, characterized by falling commodity prices and rising geopolitical and trade risks. Several economies have experienced a slowdown in real GDP growth and a continuation of the disinflation process, with significant differences across countries.

Latin America and the Caribbean (LAC) face a complex global landscape characterized by geopolitical shifts, trade fragmentation, and heightened uncertainty. Within this environment, the growing trend of nearshoring—the relocation of production activities closer to consumer markets—emerges as a potential source of economic dynamism.

This blog post shares the story behind our recent working paper on how Colombia’s unique Gross Leverage Position in foreign exchange derivatives helped prevent a housing bubble from bursting and what emerging economies can learn from it.

Fiscal policy can significantly impact the rate of inflation in Latin American countries. Governments in the region have historically implemented procyclical fiscal policies, increasing spending and borrowing during periods of economic growth and tightening policies during recessions. This approach has contributed to volatility in inflation rates and economic instability.

In recent years, fiscal matters have taken center stage in both academic research and economic policy debates. This heightened focus is largely a consequence of the significant rise in public debt levels observed across advanced and emerging economies in the aftermath of the COVID-19 pandemic. At the same time, the sharp increase in inflation experienced in many countries led central banks to implement substantial hikes in policy interest rates.

Latin America faced a mixed economic outlook in 2024 amid a slight global economic slowdown driven by geopolitical tensions and uneven performance among major global economies. The region’s economic growth outpaced initial projections (2.3% compared to 1.8% forecasted), supported by resilient external capital flows, robust financial systems, and monetary policies that helped bring inflation closer to target levels.