Paraguay dollar-denominated credit and currency hedging grow

The Central Bank of Paraguay (BCP) reports a 23.83% increase in dollar-denominated credit during the first seven months of the year, reaching a total volume of USD 14.126 billion. This growth is evident across most sectors, with the construction sector seeing a 63.89% increase and the services sector growing by 62.39%. Analysts suggest that the appreciation of the local currency is encouraging companies to finance investments and import machinery using dollar-based loans.

Simultaneously, the market for currency forward contracts is expanding as businesses seek to hedge against exchange rate volatility. By the end of August, the volume of forward operations increased by 30% compared to the previous year. In July, the accumulated value of these contracts reached USD 1.721 billion, a 22.8% year-on-year expansion. This trend reflects a growing sophistication in the local financial system, as importers and exporters utilize these instruments to secure financial predictability and manage risks associated with dollar fluctuations.