Paraguay : Financial Sector Review
The report examines the highly vulnerable situation of the financial system in Paraguay, which suffered from a banking crisis in 1995-98, in addition to recent competitive devaluations of the Brazilian currency, the fall in cotton prices, as well a...
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| Format: | Pre-2003 Economic or Sector Report |
| Language: | English en_US |
| Published: |
Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2002/11/2083430/paraguay-financial-sector-review http://hdl.handle.net/10986/13878 |
| Summary: | The report examines the highly
vulnerable situation of the financial system in Paraguay,
which suffered from a banking crisis in 1995-98, in addition
to recent competitive devaluations of the Brazilian
currency, the fall in cotton prices, as well as the regional
economic slowdown. A major factor obscuring the reality of
banking system solvency, is the practice of substituting
needed loan provisions, with collaterals which underlie the
loans. The main issue here is the relative liquidity
absence, and delays inherent in unwinding such collateral,
as well as its potential over-valuation, making it an
ineffective substitute for cash provisions. The report
further examines banking reforms, and restructuring of the
state-owned banks, institutional and regulatory framework,
and the safety net mechanisms and deposit insurance
governing the system. It is suggested the reform of the
pension system is crucial at this juncture, given that the
current pay-as-you-go social security public pension system,
is not fiscally sustainable from an actuarial, and benefits
payment perspective, and, because the current system, even
at its best, delivers very low returns on pension investment
funds. Most importantly, for both the public, and private
systems, the investment regime should permit heavy weighting
in foreign hard currency securities. |
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