Standard & Poor’s Awards Paraguay Investment Grade and Redefines the Context for the Economy and Real Estate

Obtaining investment grade consolidates the country's macroeconomic credibility and gradually modifies the foundations on which investment and urban development decisions are made.

Standard & Poor's Global Ratings' decision to raise Paraguay's sovereign rating to BBB- with a stable outlook marks a structural milestone in the country's recent economic history. With this result, Paraguay consolidates its entry into investment grade with two of the three major international rating agencies, positioning itself among the economies with the greatest macroeconomic credibility in Latin America and reinforcing its profile as a reliable destination for long-term capital.

Far from being an isolated or circumstantial achievement, the improvement in the sovereign rating is the culmination of a gradual and sustained process of institutional strengthening, macroeconomic discipline and predictability of public policies, which has allowed the country to navigate an international context marked by high volatility, geopolitical tensions and restrictive financial cycles with remarkable resilience.

In its assessment, Standard & Poor's highlighted Paraguay's proven track record of macroeconomic stability, as well as the consistency and continuity of its economic policies. The rating agency emphasized that the Paraguayan economy has strengthened its capacity to absorb external shocks, supported by an institutional framework that has gained credibility both regionally and internationally.

In fiscal matters, the report highlights the Government's commitment to prudence and discipline, adherence to conservative targets, and the consolidation of public accounts. This approach allowed for the preservation of fiscal space and laid the groundwork for rebuilding fiscal buffers after recent shocks, strengthening the sustainability of public finances in the medium and long term.

The strengthening of state institutions emerges as another central pillar of the recognition. Standard & Poor's particularly valued the modernization of the Ministry of Economy and Finance, the reinforcement of the tax administration, and the progress of structural reforms aimed at improving the efficiency of the public sector and creating a more favorable environment for private investment. These elements, although less visible than traditional macroeconomic indicators, are crucial for assessing sovereign risk and for the confidence of long-term investors.

In the monetary sphere, the rating agency emphasized the growing credibility of the Central Bank of Paraguay, evidenced by the rapid convergence of inflation and inflation expectations toward the target. This performance is particularly relevant considering the recent reduction in the inflation target, a clear sign of the maturity of the targeting regime and the monetary authority's technical capacity to manage the economic cycle.

The monetary policy framework, complemented by a flexible exchange rate and adequate levels of international reserves, has broadened the Central Bank's room for maneuver and strengthened the Paraguayan economy's capacity to withstand external shocks without resorting to disorderly adjustments. For financial markets and institutional investors, this combination is one of the main anchors of macroeconomic confidence.

Beyond stability, Standard & Poor's highlighted the country's robust economic performance, which has shown consistent growth rates even in an adverse global context. This growth has been driven by private investment, dynamic domestic demand, and a progressive diversification of the productive base—factors that improve long-term development prospects and strengthen Paraguay's external position.

This point is particularly relevant: investment grade is not granted solely for stability, but for the capacity to sustain growth over time without compromising macroeconomic equilibrium. In this sense, Paraguay is beginning to be perceived not only as a well-managed economy, but also as one with potential for structural expansion.

The awarding of investment grade status is not an isolated financial event, but rather a signal that gradually filters down to different markets within the economy. In the case of the real estate sector, one of the most capital-intensive and long-term sectors, the impact is particularly significant. This is not because it generates immediate transformations, but because it modifies the underlying conditions upon which investment, financing, and urban development decisions are based.

Paraguay has historically operated with short timeframes and high financing costs, which has limited the scale, pace, and type of many developments. In this new context, the investment grade rating opens the possibility of longer-term financing structures, with greater predictability and less pressure on equity. This is not an automatic reduction in interest rates, but rather a sustained improvement in the economic viability of projects that were previously on the verge of being financeable.

This new scenario also brings with it a qualitative shift in the profile of capital that is beginning to look to the country. The eligibility granted by the investment grade rating places Paraguay on the radar of conservative institutional and private investors, actors who prioritize stability, regulatory clarity, and macroeconomic consistency over extraordinary short-term returns. This type of investor does not transform the market through abrupt shocks, but rather through constant pressure toward professionalization, transparency, and the structural soundness of projects.

Consequently, the real estate market would begin to be evaluated using more demanding criteria. The legal structure, the traceability of cash flows, developer governance, the alignment between product, location, and actual demand, and the capacity to sustain value over time would become central to the analysis. The investment grade rating would not indiscriminately amplify the value of all assets, but rather deepen the distinction between projects conceived with a long-term vision and those driven by more short-term considerations.

This process would also be reflected in price dynamics. Regional experience shows that investment grade does not generate widespread price increases, but rather selective revaluation. Well-located assets with quality construction, adequate scale, and institutional backing tend to be the first to capture the benefits of the new context. Meanwhile, generic or poorly structured products do not necessarily follow this trend. Investment grade, far from inflating the market, introduces a more refined logic of valuation and segmentation.

Another significant effect would be observed in the urban dimension. In economies that achieve investment grade status, real estate capital tends to concentrate in areas with existing or planned infrastructure, good connectivity, services, and clear regulatory frameworks. This fosters urban consolidation and more orderly densification. In the Paraguayan case, where formal and informal growth dynamics coexist, this new context could act as a catalyst for more structured urbanization, especially in Asunción and its metropolitan area.

As the market becomes more closely scrutinized by external actors, it would also become more demanding in terms of information, analysis, and professional practices. Investment grade indirectly drives greater formalization of the real estate ecosystem, fostering higher reporting standards, more robust contractual structures, and progressive integration between real estate and the capital markets. The sector would cease to operate solely as an operational business and would begin to consolidate as an asset class fully integrated into the broader financial system.

For Paraguayan real estate, investment grade is not the end goal, but rather the beginning of a maturation process. Macroeconomic stability is no longer an exceptional advantage but a fundamental requirement. From now on, the true differentiator will lie in the quality of the projects, urban planning, execution capacity, and the institutional integrity of the stakeholders involved.

The challenge ahead is not only to take advantage of better financing conditions or greater international interest, but also to live up to the country's new positioning. In that sense, the investment grade rating does not transform the real estate market on its own, but it does redefine the terrain on which its next stage of growth will be built.

It is worth noting that this recognition is the result of a consistent track record. Over the past two years, Standard & Poor's has reflected this progress through successive improvements in the sovereign rating: an upgrade in February 2024, a change in outlook in January 2025, and finally, the elevation to investment grade in December, after nine years without an upgrade. This sequence confirms the markets' sustained confidence in the macroeconomic and institutional course adopted by the country.

This achievement is the result of coordinated work between the National Government, the Ministry of Economy and Finance, the Central Bank of Paraguay and the State's technical teams, and reaffirms the country's commitment to macroeconomic stability, institutional strengthening and long-term sustainable development.

More than an end point, investment grade represents a new starting point. Paraguay is entering a stage where macroeconomic stability ceases to be an exceptional strength and becomes a structural condition upon which long-term investment decisions, urban development, and capital allocation are based.

In this context, the challenge ahead will not only be to preserve the investment grade rating, but also to capitalize on it intelligently. This will involve raising standards, strengthening institutions, and guiding growth toward more balanced, competitive, and sustainable urban and economic development, where real estate ceases to be merely a short-term opportunity and becomes a mature, integrated, and strategic asset class for the country.