Moody's affirms Paraguay at Baa3, cementing double investment grade
Paraguay has secured double investment-grade status after Moody's affirmed its Baa3 rating, lowering sovereign borrowing costs and opening cheaper capital markets access for the nation's corporate sector.
Moody’s Ratings has affirmed Paraguay’s Baa3 sovereign credit rating with a stable outlook, cementing the country’s double investment-grade status following a similar upgrade from S&P Global Ratings in December. The January 23 affirmation marks a third consecutive year at the lowest investment-grade rung for a nation now standing alongside Chile, Mexico, Uruguay, and Colombia. This consistency sets Asunción apart in a region where sovereign credit ratings have frequently drifted downward.
Holding ratings from two major agencies removes a critical barrier for global institutional capital. Many portfolio managers require dual investment-grade designations before allocating to a jurisdiction. For Paraguayan corporate borrowers, the sovereign ceiling sits at A3 for foreign-currency debt, a level that should translate into cheaper cross-border financing.
The ratings reflect an economy expanding at a pace that leads Latin America. Moody’s projects real GDP growth of 5.8% for 2025, driven by a 9.5% surge in agriculture and a 7.4% jump in manufacturing during the third quarter. Broad-based momentum is also visible in gross fixed capital formation, which climbed 12.7% in the first quarter of 2025, marking six consecutive quarters of positive growth.
Analysts attribute this investment cycle directly to large-scale foreign direct investment in forestry and manufacturing. S&P expects total investment to reach 17% growth for 2025, pushing investment to 27% of GDP between 2026 and 2028, up from a 24% average over the prior three years.
Credit strength is equally rooted in fiscal discipline. The government posted a monthly surplus of 0.2% of GDP in May 2025, putting the cumulative deficit at a negligible 0.3%. Moody’s views Paraguay as on track to hit its 1.9% deficit target for 2025 before tightening to 1.5% in 2026 under its Fiscal Responsibility Law. Public debt remains well below the median of Baa3-rated peers.
Policymakers are actively reducing the share of foreign-currency debt to mitigate exchange-rate vulnerability. Fitch Ratings currently holds Paraguay at BB+, one notch below investment grade, but shifted its outlook to positive in October 2025. A third investment-grade designation could further compress risk premiums as GDP per capita approaches $9,000 by 2027, up from under $7,000 in 2024.
