Historical Sketch
Paraguay became part of the Spanish colonial empire in the 16th century. The province was subordinated to the viceroyalties of Peru and, after 1776, Rio de la Plata. In 1811, Paraguay declared independence with a territory being largely disputed with its neighbors. The various claims led to the War of the Triple Alliance with Brazil, Argentina and Uruguay after which Paraguay got occupied by Brazilian troops. In 1876, it finally regained independence.
Monetary History Overview
In 1811, Paraguay declared independence from Peru. Due to the remoteness of the landlocked country and the poorly developed economy the introduction of a national currency did not happen for the next 60 years. Only in 1847, the government passed first ordinances for the issuance of state paper money. The denomination "Peso" was not specified but corresponded to the circulating currency from neighbouring Argentina. A distinct currency was not created at this moment. The war against the Triple Alliance (Argentina, Brazil, Uruguay) in the 1860s devastated the country. The state paper money proliferated, and the invading armies brought large amounts of debased and cut money into the country. The remediation of the monetary situation started in 1871. The abundant state paper money was withdrawn, and deposits and loans were devalued. In 1875 finally, a currency law was passed to create the
Paraguayan Peso
in the bimetallic standard of the Latin Monetary Union. The state did, however, not have the means to issue more than subsidiary coins. Therefore, Argentine money was declared legal tender in July 1885. Argentina suspended its gold peg in 1914 but managed to maintain currency stability throughout the next decade. Not so neighbouring Paraguay where the government accelerated the money issuance. The Argentine Peso received higher and higher premiums, such that in 1923 finally, the Paraguayan Peso was devalued by 95% against the Argentine currency. More devaluations were done throughout the 1930s until in 1941 another 75% of the value had gone. In 1943, a currency reform was carried out. Two zeros were cut, and the
Paraguayan Guaraní
became the new unit. A state-owned commercial bank took over selected central bank functions for the next decade until the proper Central Bank of Paraguay could take over in 1952. Currency stability could be maintained for eight years, until in 1951 the Guaraní got devalued by almost 50%. Further devaluations were done in the 1950s, reaching 95% in total until October 1960. The currency got then pegged to the US Dollar and foreign exchange became massively restricted. In the 1980s, the exchange policy was gradually liberalised. The official rate became mostly inoperative, and the commercial rate depreciated quickly to about 10% of it. In 1989, the exchange rates were unified and floated. During the next decade, the Guaraní continued to depreciate, culminating in the early 2000s. During the remainder of the 2000s, some of the losses could be recovered, but since the mid-2010s, devaluation has started again.
Paraguay joined the International Monetary Fund (IMF) on
28.12.1945
as a founding member.