Paraguay trims road-builder arrears to $140M-$160M

Economy Minister Óscar Lovera said the arrears had built up because projects that were supposed to finish in 2023 and 2024 were still on the books in 2025, even though their planned execution period was about 36 months and the average at the public works ministry stretched to 60 months. That mismatch between planned and actual delivery is the core problem: it turns infrastructure spending into a hidden liability and pushes the eventual cash bill higher.

The fiscal cost is now showing up in the headline deficit. Lovera said the main factor behind this year’s projected deficit of 3.2% of GDP is the updating or settlement of those arrears, mainly in public works. For investors, that is the key tradeoff: paying down the backlog should help restore credibility with contractors and keep projects moving, but it also consumes budget space at a time when governments across emerging markets are under pressure to keep debt and borrowing costs in check.

The immediate winners are the construction firms and suppliers that can restart work and collect overdue cash. The losers are near-term fiscal balances and any bondholder expecting faster deficit consolidation. But for markets, the more important point is that clearing arrears can be the first step toward a cleaner infrastructure pipeline, which tends to support growth more durably than allowing unpaid bills to pile up off the books.

The next catalyst will be whether Asunción can turn this short-term cash drain into a more disciplined payment system. If the government brings arrears down further without forcing a sharp cut in road investment, it could stabilize the sector and improve budget transparency. If not, the backlog risks returning in the next budget cycle, leaving contractors exposed and investors wary of another round of delayed spending.