Paraguay govt seeking to pay US$600mn debt to private companies

Paraguay’s government is seeking to get a bill approved that would allow it to issue bonds or obtain external loans to pay the US$600mn debt the public works (MOPC) and health ministries (MSPBS) racked up.

The MOPC owes US$350mn to construction firms and the MSPBS US$250mn to pharmaceutical firms, senator Derlis Maidana was quoted as saying in a recent press release.

The bill already passed the senate and while explaining it to the lower house, public works minister Claudia Centurión said, “construction firms are drowning and without financing capacity. The rhythm of public works is halted because firms can’t even use their operative capital.”

Approval would temporarily lift the deficit limit to 4.1% of GDP from 1.5%.

Construction firms warned that late payments endangered the sector and delay key infrastructure projects.

Last year, works on the US$130mn Asunción-Chaco’I bridge were halted for around a month because the ministry didn’t pay. 

Roadworks chamber Cavialpa estimated that MOPC’s debt had even reached around US$400mn, plus US$80mn interest, within the 18 months through August, when the current government term started.

The ministry’s lack of resources stems from fiscal restrictions that were implemented in the wake of the COVID-19 pandemic and forced a stop to new public works tenders. The previous government instead focused on projects with multilateral funding, but that source is set to be slashed in the 2024 budget bill.

The previous government also implemented a mechanism that allowed contractors to transfer the right to charge for work certificates to local banks, which would pay the firms and get reimbursed by the ministry.

But companies claimed the banks were not paying the associated interest.