The world is smaller now, with our faster and cheaper flights, our telecom and internet infrastructure, power transmission lines, online dating tools, translation apps and most important of all, our mindsets.
Turkey has traded goods, services and capital across Europe for centuries. Similarly, laws supporting trade between the US and Turkey go back to the early 20th century. It passed the $1 billion (TL 18.23 billion) checkpoint in trade with our most prominent Asian partner, China, shortly after 2000.
But has the Turkish economy realized its full potential? Can we build new markets for the products of our beloved country or new suppliers that would enable us to support our industries?
Latin America with its 700 million inhabitants is a mystery continent for us Turks. The continent has been able to communicate with almost a single language, Spanish, from Mexico to the icy seas of the Antarctic. The countries of this beautiful continent have met their needs with the help of trade and customs agreements, time zones and their cultural customs.
Turkey has already established trade networks with several large economies such as Mexico, Brazil and Argentina. But this great continent has many hidden gems in its heart. Gems like Paraguay.
Paraguay is a country in the middle of the continent surrounded not only by the countries with large populations of Argentina and Brazil, but also by large rivers suitable for the transport of large ships, rivers that connect the country to the Pacific Ocean, that is, to the world.
The country had closed its borders to the rest of the world until the change of dictatorial government in 1989 and has been governed by democracy since then, most notably in a clear attempt to integrate with the rest of the world with 31 embassies and 61 consulates. within its borders. They have maintained foreign investment-friendly policies, especially since 2013.
The orchid effect
Located between two of the world’s largest economies, it is difficult for Paraguay’s economy to compete with its closest neighbors. According to data obtained from the Organization for Economic Co-operation and Development (OECD) and the World Bank, Brazil is the 11th largest economy in the world with a gross domestic product (GDP) of 1.8 trillion dollars and holds the fourth place on the list. of countries receiving foreign investments. Argentina, on the other hand, is the 31st largest with a GDP of $483 billion and one of the fastest growing economies among the G-20 countries.
Compared to Argentina and Brazil, Paraguay is a small economy with a GDP of $39 billion, thriving in the shadow of the relatively larger economies of its neighbors.
Growing in the shadow of Latin America’s two largest economies has many accelerating effects on growth, employment and cash flow. Although this growth model has served Paraguay for years and made the country one of the world’s largest suppliers of cattle, soybeans, stevia and tung oil products, the latest figures from the International Monetary Fund (IMF) show that the country’s economy Paraguay is in a phase of recession.
Sustainable growth needs freedom at some level. For example, Paraguay’s export products depend mainly on the energy, agriculture or livestock industries. According to statistics collected by the Observatory of Economic Complexity (OEC), 60% of Paraguay’s export earnings depend on Argentina and Brazil alone. This type of statistic is a sign of a dangerous addiction; in other words, Paraguay badly needs to diversify its foreign trade.
Minimum Viable Product
Brazil’s population is 214 million and Argentina’s is 46 million. These two geographically large countries have been integrated with foreign investment since the Great Depression in the 1930s. Although these large economies offer Turkish investors many new opportunities, they are relatively red oceans where many international companies already operate.
The less risky option, rather than putting a lot of resources into a large and tough market, is to start with a relatively safe environment where you can familiarize yourself with the rules, consumer habits and dynamics of the continent. Although Paraguay is a small country compared to its neighbors, it is geographically larger than Germany or Japan. Companies fixated on achieving their goals and looking to expand throughout Latin America can start with a small market in the middle where crime is low, there are many incentives, and where they can find new partners who will enabled them to expand. their operations across the continent on more favorable terms.
MERCOSUR
Paraguay, Brazil, Argentina, Uruguay and Venezuela came together and signed the third most comprehensive and effective free trade agreement after the European Union and the North American Free Trade Agreement (NAFTA), connecting almost 300 million people with a capacity billion dollar trader. .
MERCOSUR, officially known as the Southern Common Market, has a short and effective approach: If you are in one country, you are already in all countries.
Energy costs
The country has two of the world’s largest hydroelectric power plants (HEC) within its borders. According to data obtained from the World Bank, Paraguay consumes less than 25% of its electricity production and produces less than half of its full potential. Surplus electricity is exported, and buyers are often the country’s nearest neighbors, but Argentina and Brazil apply strict conditions.
The most feasible way to transport electricity is on land. The dilemma here is that there is no other way for Paraguay to transport electricity to other countries without going through Brazil or Argentina. As a result, both neighbors buy cheap electricity from Paraguay and sell it for more than three times the price. This leaves Paraguay with only two choices with all the energy it produces: use it domestically or sell it at a cheap price. As a result, electricity prices are 60% cheaper in Paraguay than in Turkey, which is potentially of great value in reducing production costs.
