Understanding the determinants of economic informality in paraguay a kaleidoscope of measures

1 Introduction: Informality in Paraguayan Context 1 2 Literature Review: The Informal Economy 27 3 Informality Measures and Models 51 4 Logistic Regression Results of In/Formality

Understanding the

Determinants of Economic Informality in Paraguay

Informality in Paraguay

Michael J. Pisani • Fernando

G. Ovando Rivarola Understanding the Determinants of

Economic Informality

in Paraguay

A Kaleidoscope of Measures

ISBN 978-3-030-24392-0 ISBN 978-3-030-24393-7 (eBook)

The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information

in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

This Palgrave Pivot imprint is published by the registered company Springer Nature Switzerland AG

The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Department of Management

Central Michigan University

Mount Pleasant, MI, USA

Centro de Análisis y Difusión de la Economía Paraguaya

Asunción, Paraguay

journey together It is also dedicated to the Cáceres family (Asunción, Paraguay) for their friendship and kindness to a foreigner in their country.

—Michael J. Pisani

A mis padres Elsa y Carlos por la paciencia y apoyo de siempre.

—Fernando G. Ovando Rivarola

Paraguay is a bastion of informality But few know this as Paraguay is often

a bypassed and forgotten land-locked South American country Paraguay,

in spite of its isolation and land-locked location, has achieved remarkable economic growth in the last few years Paraguay is poised to reap the ben-efits of its relatively small but very young and urbanizing population and its abundant natural resources amid a government institutional base that is quickly professionalizing Paraguay is a country on the move that others may seek to learn from

Yet in Paraguay, not only are most workers actively engaged in the informal economy, but a majority of formal business concerns are quick to employ informal competitive methods Everywhere one turns, the infor-mal economy is on display Whether tacit or explicit, informality connects nearly everybody in Paraguay Yet informality is woefully understudied in Paraguay Rare are informed reports or serious studies conducted on the topic; more common are speeches or editorials condemning informality without understanding the basic concepts or foundational evidence This book seeks to provide a strong empirical basis for understanding informal-ity and its determinants in Paraguay

This book began as a series of research projects seeking to elucidate the informal economy’s role in the formal business sector and to offer differ-ent methods of enumerating informality in Paraguay Quickly, the projects expanded and then consolidated into a book to more fully approach infor-mality to fill a gap in knowledge that was empirically based, by utilizing more sophisticated and multivariate statistical tools

Preface

This book is a byproduct of a US Fulbright Scholar appointment to Paraguay during 2019 The Center for the Analysis and Diffusion of the

Paraguayan Economy, CADEP (Centro de Análisis y Difusión de la Economía Paraguaya) served as the first author’s host institution in

Paraguay for five months At CADEP, a partnership formed between the authors uniting a strong knowledge of informality from Mesoamerica with strong knowledge of Paraguayan data and local context

Additionally, the first author taught a class on economic informality at

La Universidad Católica de la Nuestra Señora de Asunción The

inter-change in the class added to the impetus and to the importance of a book

on the subject for Paraguay Beyond CADEP and the classroom, the first

author was invited by the Central Bank of Paraguay (Instituto Central del Banco de Paraguay) to speak on the informal economy in April of 2019

Nearly 100 government officials, functionaries, academics, and mists were in attendance and engaged vigorously in the topic confirming the continued importance of informality in and outside the government

econo-We hope that this book better informs policy-makers inside Paraguay to make decisions utilizing empiricism rather than conjecture We also hope academics and those interested in economic informality in the Americas and beyond find this work to be of value both as a case study and as a comparative tool to understand informality

of Emory University and David González of Paraguay David connected

me to several groups in Paraguay, chief among them was Centro de Análisis

y Difusión de la Economía Paraguaya (CADEP).

At CADEP, Belén Servín and Fernando Masi graciously agreed to host

me while I was in Paraguay Fernando Masi happily translated two early reports related to informality Fernando Ovando quickly became the go-to

person for all things related to the EPH (encuesta permanente de hogares)

and data sources at CADEP. Fernando Ovando cheerfully agreed to co- author this book and without him, this book would never have been writ-ten He is more than a co-author; he is a friend and colleague Other members of CADEP that assisted me during my time in Paraguay include

Dr Dionisio Borda, Renatta Samaniego, Belén Servín, Rosita Cañete, Julio Ramírez, Christopher Valiente, Ariel Cáceres, Gloria Correa, María Cristina Notario, David Borda, and Brenda Colffer Special thanks go to

mi amigo Gustavo Rojas, my good friend and lunch buddy at CADEP.

Helpful in the Fulbright application process, orientation, and country placement are CIES personnel Peter Raucci, Maya Andelson, and Angelica Serna Special thanks go to Angelica Serna as it was under her watch that the switch from Nicaragua to Paraguay was made and she was extremely helpful in the transition Most helpful at the US Embassy in Asunción, Paraguay are Jazmín Ramírez and Daniel Getahun from the Public and Cultural Affairs sections Jazmín Ramírez was always attentive to my many questions.

At La Universidad Católica, Dr Emilio Trepowski put me in contact

with the economics club Two student members of the club, Max Rieder and Alcides Cáceres, took me under their wings and administered our economic informality course with passion, compassion, and perfection Both are friends and mean more to me than they can know I thank the 30 plus members of the class as a whole for robust discussions and their dili-gence in working on their course projects María Elena González and Sebastián Acha, the two members of Pro Desarrollo, shared with me their interest in the informal economy Jonas Richter from the World Bank in Paraguay shared with my class his work with firm formalization in Paraguay, and with me his master’s thesis on the same topic

My home institution, Central Michigan University (CMU), was also instrumental in making my stay in Paraguay possible Past College of Business Administration Dean Chuck Crespy permitted me to adjust my teaching schedule to be in Paraguay during the spring 2019 semester Interim Dean Karl Smart actively supported my Fulbright award as did my department chair, Dr Luis Perez-Batres, and Provost, Michael Gealt Professor Emeritus Van Miller, dear friend, scholar, and mentor encour-aged me all the way Special thanks go to Dr John Sargent, University of Texas Rio Grande Valley, who mentored me through my doctoral studies and wrote a letter in support of my Fulbright application

In Paraguay, the Alcides Cáceres family took me in as one of their own and showed me what it means to be Paraguayan Their friendship and sup-port showed me the meaning of family, love, and generosity Thank you does not do them justice, but thank you to Alcides (dad), Vivi (−ana), Alcides (ito), Noelia, Chini (abuelita), Rosa (tía), Sara (tía), Cristi (tía), José (tío), and Víctor (tío) May good blessings follow you all always

My wife Jana sacrificed much for me to be in Paraguay Jana is my life partner in all ways and experienced a bit of Paraguay to boot Our children (William, Carina, and Geoffrey) are not children anymore, we are so proud

of all their accomplishments, but more proud of the fine people they have

become (that includes you too, Leila) A special shout out to Geoffrey who came to Paraguay to share time with his dad… we had an awesome time.

I wish to express my gratitude to Palgrave Macmillan for the foresight

to publish academic scholarship innovatively in the digital era through the Pivot series The publishing team at Palgrave Macmillan has been a joy to work with, especially Elizabeth Graber and Sophia Siegler Also appreci-ated are the reviewers who made insightful comments in pushing us to improve our scholarship

Fernando Ovando acknowledges the following supporters, institutions,

and individuals

I especially thank Mike Pisani for the opportunity he has given me to learn about the Paraguayan job market during his entire stay in Paraguay The application of rigorous econometric methods for the analysis of household data has allowed us to obtain different views for the same prob-lem: informality In this way, we were able to arrive at a more complete diagnostic about the behavior of the Paraguayan economy that we hope others may learn from I also thank CADEP for giving me the space to participate in the writing of the book with Mike and the leaders and col-leagues at CADEP for constantly motivating me to continue growing pro-fessionally in research activities

1 Introduction: Informality in Paraguayan Context 1

2 Literature Review: The Informal Economy 27

3 Informality Measures and Models 51

4 Logistic Regression Results of In/Formality in Paraguay 69

6 Policy Recommendations and Conclusions 143 Appendix 167 Index 175

Fig 1.1 Estimates of labor informality in Paraguay, 1950–2017

(Sources: Arturo León (1986), Gamón and Campos (1988),

Authors’ estimates from CICRED (1974), ILO (2014),

Tornarolli et al (2014), DGEEC (2018b) and Authors’

estimations) 3 Fig 1.2 Map of Paraguay (Source: Authors’ drawing) 10 Fig 1.3 Map of the five regions utilized in the empirical analyses

Fig 2.1 The continuum of economic informality perspectives (Source:

Fig 3.1 Modeling work informality in Paraguay (∗Source: Authors’

calculations from EPH, 2017 (weighted)/Authors’

conceptualization) 65 Fig 5.1 Robust predictor variables–The relationship between education,

income, and in/formality (Source: Authors’ calculations from

list of figures

list of tables

Table 3.1 Size of the informal workforce by informality proxies—2017 62 Table 3.2 Descriptive statistics—Independent variables (2017) 63 Table 4.1 Logistic regression: do you have medical insurance (yes = 1)

Table 4.2 Logistic regression: do you have a pension plan (yes = 1) as a

Table 4.3 Logistic regression: do you receive ten days or more of paid

vacation? (yes = 1) as a proxy for informality (2017) 79 Table 4.4 Summary of logistic regression estimations for social benefits

(2017) 83 Table 4.5 Logistic regression: does the organization you work for have

a RUC? (yes = 1) as a proxy for informality 85 Table 4.6 Logistic regression: does the organization you work for

provide receipts (Facturas) to clients (yes = 1) as a proxy for

Table 4.7 Logistic regression: do you belong to a union or association

(yes = 1) as a proxy for informality (2017) 94 Table 4.8 Logistic regression: do you have a formal worker contract

(yes = 1) as a proxy for informality (2017) 98 Table 4.9 Summary of logistic regression estimations for organizational

Table 4.10 Logistic regression: principal occupation of self-employed

(=1) as a proxy for informality, 2017 103 Table 4.11 Logistic regression: 5 employees or less (yes = 1) as a proxy

Table 4.12 Logistic regression: 10 employees or less (yes = 1) as a proxy

Table 4.13 Summary of logistic regression estimations for firm

Table 5.1 Summary of the empirical results for social benefits: the

Table 5.2 Summary of the empirical results for organizational practices:

Table 5.3 Summary of the empirical results for firm characteristics: the

Table 5.5 Robust and good predictor variables of in/formality 137

Table 6.2 Overview of the size & value of labor informality in

Table A.1 Logistic regression: do you have a pension plan [social

security] (yes = 1) as a proxy for formality, EPH 2018 167 Table A.2 Logistic regression: do you work for an organization with

a RUC (yes = 1) as a proxy for formality (2018) 170 Table A.3 Logistic regression: do you work for an organization with a

5 or fewer employees (yes = 1) as a proxy for informality

(2018) 172

Vignette 1.2 “Underground, Contraband, Informality as Synonyms?” 22 Vignette 2.1 “25.000 Guaranies or a $4.20 Informal Haircut” 29

Vignette 3.1 “An Obsession with Informality’s Share of GDP” 52 Vignette 3.2 “Poof! Fixing ‘Informality’ Just Takes Action” 54

Vignette 5.1 “The Sharing Economy: An Informal Studio Apartment” 124

Vignette 5.3 “La Feria de Plaza Italia- Craft Fairs and Farmers’ Markets” 130 Vignette 6.1 Headline: “Lowering Informality by 5% Yearly” 144

list of Vignette

© The Author(s) 2019

M J Pisani, F G Ovando Rivarola, Understanding the

Determinants of Economic Informality in Paraguay,

https://doi.org/10.1007/978-3-030-24393-7_1

Introduction: Informality in Paraguayan

Context

Abstract This chapter introduces the subject and importance of

informal-ity in Paraguay It also outlines our research question: “What are the minants of economic informality in Paraguay?” and our purpose in writing the book To contextually situate informality in Paraguay, we provide a brief overview of the nation’s history, geography, society, economy, and polity We offer insights into contemporary informal activities and the cur-rent ongoing debate as to the economic threat and promise of informality

deter-in Paraguay

Keywords Informal economy • Paraguay • Determinants • Research

question

Morning and night, the whistle or the call of the chipera1 announces the

arrival of fresh chipa throughout the capital city of Asunción and beyond

in Paraguay Many passersby succumb to the simple, traditional, tasty, and inexpensive treat made from the base ingredients of manioc and cheese

Ubiquitous and innocuous, the street trade in chipa occurs almost sively “off the books” This market exchange in chipa is part and parcel of

exclu-1 A chipa salesperson.

a wider exchange outside the purview of government authorities This is but one example of a myriad of routine informal market exchanges

in Paraguay

From household services such as tile repair and replacement, cleaning, laundry, and chauffer services to more extensive and public market exchanges involving commercial electrical wiring and installation, auto-motive maintenance and body repair, and the contracting of “off the books” labor, the Paraguayan informal marketplace is on full display And

on full display the informal economy may be found at Mercado Cuatro in Asunción at the intersection and area of Avenida Silvio Petirossi, Avenida

Dr Francia, and Avenida Perú Mercado Cuarto is a public labyrinth of footpaths and hidden walkways with many hundreds, perhaps thousands

of market stalls of all sizes stretching and snaking from the street to the alley ways Everything under the sun is seemingly for sale here for a price where tens of thousands of shoppers navigate vendors and government authority

Mercado Cuatro is so popular because the prices are often a cant fraction of comparable or even the same goods in the formal mar-ketplace In some locales in the market, it is possible to get a sales receipt often for an added charge because sales documentation requires

signifi-the collection of signifi-the value-added tax (impuesto al valor agregado [IVA])

of 10%, the reporting of sales income, and the added paper work of the transaction and subsequent bookkeeping As such, some transactions actually follow fully legal procedures; the vast majority of sales, how-ever, do not The intermingling of the permissible, but illegal and the legal is all around

The high rate of economic informality ranks Paraguay among the est in South America and in the upper tier within the whole of Latin

high-America The Paraguayan La Dirección General de Estadística, Encuestas y Censos (DGEEC) or census bureau estimates that more than 70% of the

workforce is actively employed in the informal sector (DGEEC 2018a) Persistent and structural labor informality of around 70% is part and parcel

of the economic history of Paraguay (see Fig. 1.1).2 Pro Desarrollo

esti-2 Using various sources, we offer an estimate of informality dating back to 1950 Although the first study of informality in Paraguay does not appear until 1974, we aggregate economic labor activities in agriculture, artisanal production, and personal services to provide a best estimate of informality in 1950, 1962, and 1972 Throughout the range of years, the average percentage of informality is 68%, a number that appears to be structural in nature.

mates that these informal workers contribute and generate 40% of GDP in Paraguay (Pro Desarrollo 2018) and Medina and Schneider (2018) report that the Paraguayan shadow economy represents an average of 34.5% for the period 1991–2015 (a number that includes much of the informal and underground economies).

The size and scope of informality cannot be ignored in Paraguay Informality is everywhere But what does it really mean for market transac-tions to occur outside the legal purview of government authorities any-way? Informality simply means that market transactions go unrecorded, untaxed, and unregulated from the perspective of the government It is as

if the transaction never occurred from the standpoint and perspective of the government

However, the informal producer and/or seller may keep business records to better understand market demand, market trends, product margins, inventory movement, and customer credit While taxes are not collected by a government entity, a toll maybe assessed to the seller for access to public market space such as sidewalks, plazas, and streets.3

3 But the government may be partially present as some stall operators in Mercado Cuatro pay a monthly fee to the municipality for selling space, yet avoid wider taxation and regulation.

Fig 1.1 Estimates of labor informality in Paraguay, 1950–2017 (Sources:

Arturo León ( 1986 ), Gamón and Campos ( 1988 ), Authors’ estimates from CICRED ( 1974 ), ILO ( 2014 ), Tornarolli et  al ( 2014 ), DGEEC ( 2018b ) and Authors’ estimations)

Unstated regulations may exist for vending times, cleanliness, and space allocation, perhaps imposed by associations of similar sellers, by geographically bound markets, or by corrupt officials.

Informal exchanges may take place in public or private spaces; after all the good or service is wholly legal In the capital city of Asunción, some informal exchanges take place outside or adjacent to the most formal of institutions—the Congress building, government ministries, and embassies As of late 2018, it was reported that 22 congressmen

had failed to register for the personal income tax (impuesto de la renta personal), indicating an abject disregard for the law even from congres-

sional lawmakers (5días 2019) So if the leaders of the government don’t abide by the law, as many Paraguayans argue, why should Paraguayans writ large follow the law? Consequently, informality is in essence “baked” into the psyche of Paraguayans; it is part and parcel the legacy of governmental illegitimacy This is an illegitimacy borne of

a non-democratic past that stretches back to the colonial era through the Stronato (the last dictatorship of General Alfredo Stroessner end-ing in 1989)

In some ways, informality in Paraguay is reflective of informality across the Americas Generally, governments, elites, labor unions, and the public view informality as an obstacle to economic growth, a blight

on the economy, and as a sign of economic backwardness This view is often clouded by what is missing with informality—social benefits, tax revenues, and worker and consumer protections—and does not imag-ine or consider what informality provides—such as jobs, incomes, and market complementarity and innovations An alternate perspective to the general view sides with what informality produces, be it because the state has made formality too costly and cumbersome or because the informal economy displays marketplace dynamism In this latter instance, informality serves as an economic engine and may be the pri-mary driver of economic growth In other ways, informality differs from Latin America particularly at cross- border junctions, its persistent elevated level, and informality’s near universal acceptance and practice Due to its size, a healthy Paraguayan economy cannot exist without a healthy informal sector

The purpose of this book is to better understand the contemporary environment of informality in the democratic era (1989 to the present) in

Paraguay While the government devotes much attention, description, and public speech to the topic of informality, there has yet to be a comprehen-sive empirical study into the determinants, across measures, of informality

in Paraguay Beyond description, empiricism seeks to uncover the statistical links between a multitude of variables or determinants associated with informality In essence, we use the science of economics to help explain informality in Paraguay

More formally, we seek to address this knowledge gap through our endeavor to answer the following research question: “What are the

shed light on this question, we utilize the premier in-country data

source—the Encuesta Permanente de Hogares (EPH) (Permanent

Household Survey), years 2017 and 20185—and employ several proxies that approximate informality in relation to various predictor variables in hopes of triangulating a set of findings that reveal the primary determi-nants of informality in Paraguay Sharpening this informal view from the EPH are new perspectives regarding self-employment in Paraguay seg-mented by performance We create three sub-groups—survivalist enter-prises, latent gazelles, and top performers—that permit a more focused and nuanced view of informality and potential policy intervention (dis-cussed in Chap 5)

Complementing findings from the EPH are several vignettes inserted throughout the book that serve as a source of qualitative perspectives to enrich the empirical analyses We intersperse science with first-hand examples of informality to provide personal insights and depth into the phenomenon (see Vignette 1.1) Before embarking on our empirical study, we place Paraguay in its appropriate historical, geographical, social, economic, and political setting This brief overview positions informality within the national context

4 The World Bank (Banco Mundial 2018 , p. 126) in its 2018 diagnostic of Paraguay noted

a gap in knowledge on informality specifically calling for “research on the determinants of informality” We are answering this call with this research question and book In the same report, the World Bank lists informality as a structural challenge and one of four broad national priorities the government of Paraguay must address.

5 The 2018 survey became available after an advanced draft of the book was completed The 2018 survey scale was much reduced from 2017 (see Chap 3 ), yet the 2018 survey is incorporated throughout the book to enhance and complement the 2017 survey.

2 HIstorIcal trajectory

Contemporary Paraguay is a relatively peaceful place where the people are friendly and the sun shines brightly Behind this placid veneer, is a tortu-ous (literally) history of dictators, authoritarian leaders, and wars Only recently has democracy come to Paraguay with the institutionalization project still very much underway Paraguay was part of the Spanish colo-nial empire from its beginning; the city of Asunción was founded in 1537 Early on, Spanish explorers found few objects of immediate value, relegat-ing the area to the backwaters of the empire Later in the sixteenth cen-tury, Asunción and its hinterlands were administered through Buenos Aires and the viceroyalty of the Río de la Plata This change in administra-tive control created the seeds for an inherent rivalry with Buenos Aires and

later Argentina with Paraguayos (Paraguayans).

For most of the colonial period, Asunción and Paraguay were Spanish

outposts dominated by trade in yerba mate (a local tea) and the Native

American population unified through Guaraní, the lingua franca of the

Vignette 1.1 “Tourism Informality”

Contributor: Anonymous

“Santiago” drives foreign tourists from Asunción (the capital of Paraguay) to the primary tourist locations across the country International tourism in Paraguay is quite small, but not insignifi-cant The primary barriers to more tourism are a lack of infrastruc-ture (particularly roads), promotion, and foreign language capacity The most popular sites are the colonial Jesuit missions and the Iguazú Falls (actually located just outside Paraguay) Since Santiago specializes in accommodating foreign tourists, he is paid in cash, typically US dollars Santiago offers no receipt for his services, declares no revenue, and pays no income or value-added taxes on these trips For a three-day excursion to the Jesuit ruins and to the Iguazú Falls in May 2019, Santiago charges $600–$650 and nets about $350 (the equivalent of the monthly minimum wage) after expenses Santiago enjoys an upper middle class lifestyle—new car, home, and swimming pool, private education for his children—par-tially at the expense of state tax collections

region Poor, isolated, and mostly abandoned by the Spanish, the religious evangelization was left to the Jesuits and Franciscans More notable was the presence of the Jesuits (1609–1767) whose presence certainly changed the social, cultural, religious, and economic landscape of native popula-

tions This change occurred through self-reliant communities (or ciones) and is part of a controversial historical presence that impacted

reduc-indigenous communities profoundly Slave raiders and profiteers from

Brazil (bandeirantes) trafficked in Native Americans from Paraguay, a real danger for local tribes The Jesuit reducciones were relative safe zones from these raiders enhancing their significance At their peak, reduccions com-

prised about 100,000 Amerindians in nearly three dozen communities

Concomitantly, the reducciones were successful in building export- oriented enclave economies producing yerba mate, hides, tobacco, and forest prod- ucts The economic success of the reducciones ultimately led to jealously

whereby local elites pushed to expel the Jesuits because they absorbed too much native labor, labor that elites wished to exploit Though the Jesuits were expelled in 1767, the Amerindians and the Guaraní language per-sisted, mostly unorganized

Independence for Paraguay was a result of the machinations of Napoleon in Europe Napoleon’s invasion of Spain in 1808 threw the Spanish American empire into tumult The immediate colonial response was mixed, but eventually Napoleon’s invasion was the harbinger of independence in much of Latin America, including Paraguay Paraguay became the first independent country in South America rebuking a colo-nial force from Buenos Aires in two battles at Paraguarí and Tacuarí in

1811 The battle losses for the Argentinians fostered more tension between the two adversaries resulting in a long period where Argentina refused Paraguayan recognition and blocked Paraguayan commercial access to the Atlantic Ocean

At independence, Paraguay was a landlocked nation with uncertain borders surrounded by the two primary, if not hostile, powers on the con-tinent—Brazil and Argentina With independence, Paraguay looked inward for self-survival and self-reliance This look inward also produced authoritarian leadership, perhaps necessary for the establishment of national sovereignty First elected as a rotating leader among three men,

Dr José Gasper de Francia (1814–1840) quickly became the unitary

leader and after 1816 dictador perpetuo (dictator for life) Dr Francia

essen-tially closed off the country and economy In doing so, Dr Francia lized and isolated the nation, limited the use of Guaraní (though he was

stabi-fluent in the language), fostered national economic self-reliance, and kept

the continental powers at bay The process of miscegenation (mestizaje)

continued within the population Dr Francia is often viewed as the ing father of Paraguay The legacy of dictatorship and one-person rule has persisted through nearly all of Paraguayan history, and it may be argued that from the colonial period to 1989 Paraguay was ruled by either by a king, dictator, military junta, or an authoritarian strongman

found-Three authoritarian leaders dominated the beginning years of Paraguay The first dictator ensured its survival The second, Carlos Antonio López (1840–1862), opened Paraguay to the world, secured recognition from Argentina and Brazil, gained unfettered access to the Atlantic Ocean via the Paraná River and Argentina, and promoted industrialization, and economic growth, through the state apparatus Technically, Carlos Antonio López was the first constitutional presi-dent of Paraguay and is revered today as a leader who brought Paraguay into its Golden Age (Cantero 2018) Many students today know of Carlos Antonio López through the foreign scholarship program for

graduate study named after him (Becas de Postgrado en el Exterior Don Carlos Antonio López [BECAL]) The third dictator, Francisco Solano

López (1862–1870) was the son of Carlos Antonio López Before becoming the country’s leader upon his father’s death, Francisco Solano López was the commander of the military, honoring himself with the title of Mariscal (Marshall) He also was widely traveled (Europe) and read and prepared the nation for war with a military modernization project based upon European technology and techni-cians Within three years of his assuming the reins of power, Paraguay was engaged in the War of the Triple Alliance (1865–1870) against Brazil, Argentina, and Uruguay

The war decimated the Paraguayan population, perhaps as many as 50%

of the total population and 90% of the male population died The omy was shattered Brazil and Argentina settled their border claims by annexing territory and extracting war reparations from Paraguay Brazilian troops occupied and maintained troops in the capital of Asunción for over half a decade (1869–1876) Nonetheless, Mariscal [Marshall] López (self- honored) remains a popular historical figure today in Paraguay as a man who fought to the end for the love of his country The Paraguayan gov-ernment was in retreat and in financial dislocation Political parties were established, in part, to fill the void The economy continued its highly unequal distribution dominated by those who controlled land By 1900,

econ-Roett and Sacks (1991, p. 34) report 79 individuals owned 50% of the national territory Most Paraguayans remained impoverished and rural

Primary exports continued to be yerba mate, tobacco, and wood, with

meat becoming more prominent in the export basket

Paraguay fought one more war in the 1930s, this time with its northern neighbor Bolivia This war, initiated by Bolivia’s repeated incursions into the Chaco, was “won” by Paraguay Winning meant a permanent border with Bolivia that mostly benefitted Paraguayan territorial claims to the Chaco, a dry, forsaken, and mostly and uninhabited region While the Chaco War (1932–1935) brought much loss of life, it elevated the national pride within the country, honored Paraguayan soldiers, and brought noto-riety to the use of Guaraní on the field of battle for messaging without enemy understanding The war also ushered in a new group of strongmen affiliated with the Colorado party who were to lead the country until the dawn of the twenty-first century, but not before a bloody and brutal civil war in 1947 that left one-third of the population in exile (Roett and Sacks 1991)

Compared to Argentina and Brazil, Paraguay seems small, but it isn’t that small at all Paraguay’s land mass is about the same size of California (406,752 square kilometers or about 157,000 square miles) The north

of the country is defined by the hot and dry Chaco comprising about 60% of the country, but 3% of the population (see Fig. 1.2) The Paraguay River flows from Brazil to the east and converges at Asunción and the Argentine border to the west This river splits the country into the arid northwest and the wet southeast Most of the population lives southeast

of the Paraguay River The nation is bordered by Argentina to the west and south, by Brazil to the east and Bolivia to the north

Travel throughout the country is slowly getting easier as paved roads reach various departments Eastern Paraguay was connected by paved roads in the early 1960s providing another access to international mar-kets through Ciudad del Este (originally Puerto Presidente Stroessner) and the Friendship Bridge into Brazil The eastern connection to Brazil has deepened the integration of this tri-border region This integration includes a vast transit network of legal, informal, and underground goods, which in sum play an important role in the local, regional, and national economies It is the exchange in informal and underground

goods that has given Ciudad del Este a reputation as a smugglers’ dise (Neuwirth 2011) The traffic in licit and illicit goods often goes undistinguished, lumped together as one However, the informal trade

para-in licit goods, often the result of the arbitrage of national legal and regulatory differences or corruption, may be regularized This is not so for illicit goods

Fig 1.2 Map of Paraguay (Source: Authors’ drawing)

This opening to the east has also led to widespread deforestation, a serious concern as Paraguay’s natural patrimony is stripped for farm-land and communities Before the establishment of Ciudad del Este during the 1960s, Paraguay’s lifeline to the world flowed through the Paraná River and Argentina Hence, Argentina looms large as protago-nist and antagonist in Paraguay’s historical quest to reach the out-side world.

About 7 million people live in Paraguay, while roughly 35–40% lives in the capital and surrounding areas Over the last 50 years, the nation has seen a large movement of people from the countryside to the city flipping the traditionally more rural country to one that is more urban Cities now house 61% of the population as of 2016

Following Servín and Masi (2018), we situate the 17 districts and Asunción into five regions These five regions with adjoining districts are: (1) the Metropolitan Region (Asunción and Central), (2) the Dynamic Border Region (Alto Paraná, Itapuá, Caaguazú, and Canindeyú), (3) the Less Dynamic Border Region (Ñeembucú and Amambay), (4) the Region

of Economic Transition (Concepción, San Pedro, Cordillera, Guairá, Paraguarí, Caazapá, and Misiones), and (5) the Region of Economic Take- off (Presidente Hayes, Boquerón, and Alto Paraguay) In their book length treatment of regions in Paraguay, Servín and Masi (2018) con-structed these five regions based upon intensive study and analysis of departmental production and product specializations, levels of economic and business development, social cohesion and connectedness, and quality

of employment (see Fig. 1.3)

Briefly, the Metropolitan Region of the capital area represents the lifeblood of the country leading in industrial, commercial, and service activities The Dynamic Border Region is dominated by agricultural production and commodity exports, as well as the re-export trade with Brazil through Ciudad del Este The Less Dynamic Border Region is characterized by mostly small scale agricultural producers and artisans, and generates low levels of employment The Region of Economic Transition supports peasant farmers producing both traditional and cash crops, though modern industrial farming has arrived in the region Additionally, this region also houses important beef processing and cement production units Lastly, efficient and productive businesses in cattle, cereals, and dairy dominate the sparsely populated Region of Economic Take-off

the population Both Guaraní and Spanish are official languages of Paraguay

as enshrined in the Constitution of 1992 Culturally, Paraguayans are proud

to be able to communicate effectively in either language However, the cational system, particularly at the tertiary level, favors Spanish Additionally, households where Guaraní is primarily spoken at home earn far less on aver-age (at 39% of the amount) than households that speak mostly Spanish at home In 2017, households that spoke Guaraní at home earned just 39% of the income of households that spoke Spanish Recently, the government has recognized the importance of the political value of Guaraní with the estab-

edu-lishment of the Secretaría de Políticas Lingüísticas6 (Secretariat of Language

Policies) Also tereré, a tea- based drink made of yerba mate, water, and other

ingredients, is a local cultural standard Drunk communally or by oneself,

rarely are Paraguayans without their guampa (gourd) or bombilla (metal straw) filled with fresh tereré, a cherished cultural legacy of Paraguay’s indig-

enous past and cultural present

Paraguay is relatively young with about half its population below 30 years

of age (World Bank 2018) This poses challenges for the educational tem, but may prove to be a windfall for the productive sector if the econ-omy can absorb the growing population (presently growing at about 1.3% per year) The quality of education has not caught up to the average num-ber of years of school attendance (high school); perhaps educational out-comes reflect half of what might be expected (middle school) (World Bank

sys-2018) Health services are also underdeveloped and problematic, where health insurance is only enjoyed by one-fifth of the population

Out-migration has been a relief valve for underemployment and ployment in the country Over the last 20 or so years, nearly 10% of Paraguayans (roughly 550,000 people) have left the country, many in search of work in Argentina, Spain, and Brazil This out-migration serves

unem-as a national safety valve when available  jobs cannot keep pace with the number of workers When economic times turn sour in destination countries, migrants find their way back to their country of origin

A recent study by Arrúa and Bruno (2018) of this phenomenon for Paraguay reports a wave of return migrants representing about 10% of the original migrant wave and 1.5% of the total population (or 67,000 peo-ple) Most of this back flow comes from Argentina (69%), Spain (17%), and Brazil (6%) Of relevance for our present study, much of the return flow finds work in the informal economy as self-employed persons (57.4%)

6 The website is http://www.spl.gov.py/

or domestic servants (8.1%) and work in the commerce and personal vices sectors (67.1%), perhaps returning to their original occupations When migrants resided abroad, 43.2% reported sending remittances back home to Paraguay.

ser-Within the southern cone region of South America, Paraguayans are generally viewed as hard working and honest This view is in part a result

of regional interactions with Paraguayans who have migrated to Brazil and Argentina in search of work opportunities and better pay Conversely, Paraguayans in search of work in Argentina and Brazil often find employ-ment in lower paying service sectors, work that is often neglected by in- country nationals This may promulgate a parallel negative stereotype of Paraguayans as relatively poor, less educated, and less cultured where regional rivalries date back to the independence era Paraguayans certainly recognize this cultural dualism, but remain fiercely independent and

important regional actors such as in (Mercado Común del Sur [Southern

Common Market]) MERCOSUR

Part of this independence is borne of the long struggle of liberation from the Argentinian stranglehold on access to the ocean, legacy of war, and territorial dismemberment The Paraguayan people are relatively homogeneous, a process of miscegenation that started with the autarkic policies of Dr Francia A very small indigenous population exists, but they remain poor and excluded from much of Paraguayan life Small pockets of other groups exist from the early years of the twentieth cen-tury, including Mennonites and Japanese, both relatively closed and enclave-like communities

Most Paraguayans report religious affiliation with Catholicism (83.6%),

if not by practice (about 30% rarely attend church, 40% attend church weekly, and the remainder attend church about once a month)7 (Americas Barometer 2016) The connection to the Catholic Church reflects a gen-erally conservative society, relatively unsympathetic to progressive causes (the women only received the right to vote in 1963) (Roett and Sacks 1991)

Culture plays an important role in the maintenance of informality in Paraguay Informal occupations are often passed on from one generation

to the next This may be by trades (carpenters, masons, market sellers) or

by tradition (domestic employment, farming) The strength of the family

7 Authors’ calculations derived from the Latin American Public Opinion Project for Paraguay, 2016.

unit protects those engaged in informal production Culturally, there is a widespread acceptance of informality, whether it is by work, market exchange, or government avoidance (and evasion) Informal consumption mirrors consumption patterns of previous generations where the circum-vention of government, rules, regulations, and taxation is normal Together, both buyer and seller protect one another in a cultural dance of mutual acceptance and rejection of the legitimacy of government author-ity over the market exchange and the extraction of taxes.

In the larger global economy, Paraguay is a small open economy ing about $40 billion8 worth of goods and services a year While the econ-omy is not highly industrialized, it has grown at the annual rate of 4.5% from 2004 to 2017 (World Bank 2018) International trade constitutes about 65% of GDP and the top two trade partners are neighbors Brazil and Argentina, with the third being nearby Chile Other important mar-kets include Russia, Turkey, and China (via Argentina) Present-day pri-mary exports include commodities such as soya (processed and unprocessed) and meat (processed and unprocessed cattle), and hydro-electricity (to Brazil and Argentina, as Paraguay is electricity independent) Top imports include oil and fuel, intermediate goods, and manufactured goods In order to capitalize on low cost and abundant Paraguayan labor, the government approved maquiladora assembly plants in 2001 which today are concentrated in the eastern border zone Low taxes and a ready market in Brazil have helped this industrialization initiative to grow mod-estly to about 16,000 workers in approximately 170 plants mostly focused

produc-on producing auto parts and textiles (Masi 2017) Annual per capita income in Paraguay today hovers around $5500

The economic history of Paraguay is dominated by inequality, primary production, and periods of growth and collapse Inequality comes in the form of access to land, income, health, and education Paraguay has the most unequal distribution of land in the world The World Bank (Banco Mundial 2018) reports that nearly three-quarters of all farmland is con-trolled by 1% of farmers, thus creating an elite class of very large farm producers and land owners The richest 10% of the population control 35% of national income, even more concentrated for wealth The GINI

8 All monetary values reported in this book have been converted to US dollars.

coefficient, a measure of income inequality, in Paraguay is representative

of high income inequality The actual GINI measure was 0.48 for 2016 down from 0.55  in 2003, though this particular data is suspect based upon general observation (World Bank 2018) The incipient national tax system does not redistribute much of any income from the wealthiest to the poorest sectors of the economy perpetuating a structural inequality in access to quality education and medical services and additionally limits social mobility (World Bank 2018)

Often within Paraguay, primary production derives from export-

oriented enclaves The first such enclaves surrounded the Jesuit nes discussed previously The extension of export monocultures focused

reduccio-on yerba mate, wood, and tobacco creduccio-ontinued in the natireduccio-onalist period

under Carlos Antonio López Today, export enclaves are dominated by soya bean production, cotton, corn, and meat (processed and on the hoof) The reliance on a small handful of commodity exports creates an extreme economy-wide vulnerability to commodity price changes This vulnerability and self-manufactured economic crises has promulgated an economy characterized by episodes or cycles of boom and bust

Presently there are 20 banks in the country, 16 private and 4 public Banks and access to financial institutions have always been in short supply

in Paraguay Even actual physical money was limited until the twentieth century (Cantero 2018) Banks, until recently, have not been well regu-lated As such, with economic crises, banks established before often quickly folded during cyclic downturns With lack of internal financing options, the state has opted to borrow abroad Borrowing is not necessarily bad if done to create wealth or new opportunities, but often state borrowing was

undertaken to fill fiscal deficits, promote clientelismo (patronage systems),

or to fill individual pockets This too caused macroeconomic instability However, since the turn of the present century, the Central Bank has been given more regulatory and independent monetary authority to control both financial institutions and inflation The current banking system and inflation are stable and fiscal deficits and external debt are manageable.The discussion of informality in Paraguay is often mixed with contra-band smuggling of goods that may or may not be licit Indeed, the last

dictator, Alfredo Stroessner often pronounced, “el contrabando es el precio

de la paz” [contraband is the price of peace] (Roett and Sacks 1991,

p.  76) This contraband “dividend” during the Stroessner era simply reflected the way trade had always been—mostly unregulated—unless the trade caught the attention of the state Hence, these “off the books”

activities continue to be a natural part of the economic rhythm of life In our study, we seek to be very specific as to include legal goods that may have origins in informal or illicit processes, but to exclude underground goods and services deemed always illegal and criminal (e.g., human traf-ficking, weapons trafficking, stolen and counterfeit goods, illegal drug transshipment) We leave this discussion and empirical analysis to the chapters that follow.

The Paraguayan state as an economic actor has always been relatively small and small relative to the size of the economy The economic power

of the state has traditionally been used and seized as an opportunity for patronage and clientelism The role of the state in the economy did change with the ouster of Stroessner The new economic paradigm closely resem-bled the Washington Consensus9 which relied upon free market forces to grow and develop the economy In essence, the economy was opened to free trade, foreign investment, and capital movements, all coupled with civil service reforms—mostly efficiency measures (Birch 2011) Yet the Washington Consensus was less applicable in Paraguay because the state was already austere, never having gone through a period of industrializa-tion nor engaged in widespread social welfare (Nickson and Lambert

2002) Nevertheless, the state privatized what it could—four enterprises

—the national airline, a steel plant, a shipping line, and a distillery The Paraguayan state was a neoliberal state without much encouragement from Washington-based international institutions The focus is on foster-ing the private sector, including agricultural expansion and processing, as the engine of growth and the catalyst for generating wealth Yet, much work is yet to be done as far as competitiveness and business friendliness goes, as Paraguay ranks in the middle of the pack for competitiveness in Latin America (95th out of 140 globally, [World Economic Forum 2019]) and 113 out of 190 for ease of doing business (World Bank 2019)

In this respect, Paraguay is different from the neoliberal phases and fate

of most of Latin America in the 1980s and 1990s where much of the region and the largest economies were mired in low growth, debt crises,

9 In all, the Washington Consensus or development “recipe” includes the following ten ingredients: a reduction of public sector fiscal deficits; re-prioritization of public spending away from subsidies and toward education, health and infrastructure; tax reform for revenue enhancement; the creation of market-based interest rates; a floating exchange rate; liberal trade policy (e.g., free trade); emphasis on attracting foreign direct investment; privatization

of parastatals; deregulation to foster competition and competitive forces; and securing vate property rights (Williamson 1990 ).

pri-and popular resistance while democratizing Paraguay suffered through a series of financial crises in the 1990s and early 2000s, but this was much different from the neoliberal impulse affecting Mexico, Brazil, and Argentina Yet, Paraguay did ride the commodities boom spurred by China’s development in the first decade of this century.10 One commodity that dominates exports in Paraguay is soybeans and has led one observer

to call it neoliberalization of nature or sojización (“soya-ization”) (Correia

2019) The post-financial crises of 2008/2009 also altered the global economy raising the profile of China in Latin America and on the world economic stage even further (which it has continued with its current Belt and Road Initiative) This period ushered in a temporary alternative to Paraguayan neoliberalism under the presidency of social democrat Fernando Lugo (2008–2012), but was quickly reversed after his removal from office

Paraguay today remains a fragile democracy with generally weak tions The democratic era began in 1989 with the ousting of longtime dictator Alfredo Stroessner, who ran the country as a police state from

institu-1954 to 1989 (known as the Stronato), and the opening of freer tions Presidents now are elected for five-year terms with no re-election, though there has been a strong tendency of outgoing presidents to test the no re- election mandate This is a remnant of the legacy of rule by a

elec-“strong man” And one president, President Lugo (from the Patriotic Alliance) did not make it through his term because he was impeached and removed from office Unions, squashed under the Stronato, begin

to re-emerge at the end of the dictatorship, and grew with new vigor in the 1990s with the growth of the state Additionally, Paraguay’s low tax rates inhibit institutional strengthening, for example the personal income tax rate of 10% brings in only an effective tax rate of 0.1% because

of extensive deductions (IMF 2019)

The political environment remains fragile and dominated by two well- established parties, the Colorado party and the Liberal party Roett and Sacks (1991) suggest party membership is more conditioned by familial identity and tradition than ideology The Colorado party has enjoyed

10 Ordóñez and Sánchez ( 2017 ) call this period fueled by commodity exports as developmentalism; Siegel ( 2016 ) labels it neo-extractivism.

neo-nearly uninterrupted rule since the end of the Chaco War The Colorado party also ruled after the War of the Triple Alliance until the beginning of the twentieth century when the Liberal party was in power (1904–1936) until the end of the Chaco War Nevertheless, politics remain very much embedded in personalism, clientelism, and patronage in an environment where corruption is more rule than exception.

On the international front, several important initiatives took hold since the 1970s The dam at Itaipú on the border of Paraguay and Brazil and on the Paraná River was built in the 1970s and early 1980s and began producing power in 1984 Itaipú is the largest hydroelectric plant in the world with much of the power going to Brazil with Paraguay earning a modest return (this is an area of contention; the current agreement expires in 2023) In 1994, another large hydroelec-tric dam opened on the Paraná between Paraguay and Argentina with much of the energy going to Argentina, again with modest returns to Paraguay (there is concern that Argentina’s payments are in arrears as

of 2019) In both cases, Paraguay is unable to use its allotted electricity which it sells back to its neighbors

Paraguay is a founding member of MERCOSUR created in 1995 Other founding members include Argentina, Brazil, and Uruguay (Venezuela joined later as a full member, but as of this writing in 2019 is

a suspended member) This initiative is hailed as a common market, but has many exemptions; so it behaves as an integration pact somewhere between a customs union and common market Regardless, it has been successful in more tightly integrating the economies of the members and negotiating as a group trade agreements (at various levels of integration) with other areas, including all of South America, Israel, Egypt, Mexico, India, and South Africa

As a bloc, MERCOSUR as of 2019 is negotiating trade agreements with the European Union, the European Free Trade Area, South Korea, and Singapore Paraguay was suspended briefly (2012–2014) from MERCOSUR after the removal of President Lugo from office, but regained regular status following new presidential elections The dam projects and MERCOSUR illustrate Paraguay’s desire to work with rather than against the behemoths of Brazil and Argentina along its borders This solves a centuries old problem of Paraguayan access to the Atlantic Ocean.Recent Paraguayan relations with the United States have been friendly Even during the period of the Stroessner dictatorship, relations remained

cordial if not close as Paraguay was a bulwark against “communism” ing the Cold War in spite of its human rights and non-democratic records

dur-So the United States is most concerned with security and Paraguay seeks amicable relations for developmental aid and investment Commercially, the United States is not as important as regional actors and both Chinas Paraguay is the only country in South America that recognizes Taiwan instead of Mainland China and in doing so receives much financial sup-port Products from Mainland China, however, are plentiful in Paraguay; only exports from Paraguay to Mainland China require a circuitous route because of Taiwanese recognition

Even during a decade and a half of strong economic growth, ity has persisted in the economy In relative scope, the annual economic magnitude of informality in Paraguay may be thought of differently as (Pro Desarrollo 2016):

informal-• Three times the size of annual revenues of Itaipú dam;

• Eighteen times the size of the annual Itaipú payment to Paraguay;

• Five times the value of the annual collections from the 10% value-

added tax (IVA);

• Almost twice the size of the national governmental budget; and

• As seven in ten workers work informally

For over a generation, the government has made tackling informality a national priority The overarching rationale is that informality produces very negative economic outcomes Chief among these from the perspec-tive of the government is lost tax revenue Initiatives, many of which are novel to Paraguay, have sought to move the economy toward greater for-malization through an emphasis on consumption patterns rather than a focus on suppliers and enforcement

In 2011 after a decade of debate, one such initiative the impuesto a la renta personal (IRP) or national income tax came into force Essentially,

the IRP forces consumers to document their expenditures as a way to deduct personal income tax liability The more one’s spending was docu-mented vis-à-vis earned income, the less tax exposure one faced Official receipts are utilized to document expenditures In this way, consumers subject to the IRP (there are minimum income thresholds to qualify for the IRP) become more selective in consumption, spending where they are

provided a personalized receipt (in Paraguay a factura) and avoiding shops

or vendors that do not provide them In essence, this is a consumer-driven business formalization process.

While this innovative system has moved more businesses into tering with the government in order to provide requesting customers receipts, progress is slow (Richter 2018) Furthermore, tax revenues derived from the IRP are minimal as most declared income is matched with concomitant documented expenses One positive externality of the IRP is the collection of the value-added tax (IVA), which is 10% of most sales Nonetheless, the government, desperate for financial resources to operate, still believes that further formalization of the economy will bring enhanced revenues in a country that has one of the lowest tax rate systems

regis-The informal economy is often the sector of choice to blame for a lack

of sufficient government revenues More than a generation of

pronounce-ments against “informalidad” (informality) reinforces this belief across

elite and popular sectors And government action plans are abundant For

example, The Paraguay National Development Plan 2030 [el Plan Nacional de Desarrollo Paraguay 2030] established in 2014 directed gov-

ernment ministries to substantially reduce informality Following this plan, the Ministry of Work, Employment and Social Security (Ministerio de Trabajo, Empleo y Seguridad Social [MTESS]) has set in motion internal decrees to reduce informal employment to 10% by 2030 But the MTESS

is not alone; this concern to reduce informality is pronounced throughout the government

Seprelad (Secretaría de Prevención de Lavado de Dinero [Secretariat Against Money Laundering (or the financial intelligence unit)]) is charged with reducing money laundering in the country However, the concern to combat money laundering (an underground activity and not an informal

activity) is conflated in country with informalidad within the secretariat

This conflation was uncovered by the first author at an April 2019 tation on the topic of economic informality at the Central Bank of Paraguay11 is widespread (see Vignette 1.2) Through a greater apprecia-tion of the nuances of informality, more targeted and effective public pol-icy may be instituted

presen-11 Michael J.  Pisani, “Informality in the Public Sphere: Connections, Contexts, and Measures,” presentation at the Instituto del Banco Central de Paraguay, Asunción, Paraguay, April 5, 2019.

And the public debate is not exclusively about informality and lected taxes, but also includes the quality of employment (OIT 2014) Precarious employment typically reflects workers who are paid less than the minimum wage and work without social protections and benefits (e.g., lack of pensions or health care) Less debated is the morality if informality,

uncol-as it is generally accepted without a moral lens, nonetheless this issue is important for some (Pro Desarrollo 2018) Informality does not exist in isolation or in perfect segmentation, where one is either informal or not There are many shades of gray Indeed most formal businesses in Paraguay confront like formal businesses utilizing many informal hiring and sales strategies (Pisani 2019)

Returning to the larger discussion of informality leads to a focus on mality as a voluntary choice (Maloney 2004) or somehow conditioned by other forces such as the inability of the formal economy to absorb new labor entrants (House 1984), the structure and nature of capitalism in the exploitation of labor (Portes and Walton 1981), or a hostile legal environ-ment obstructing formalization (De Soto 2000) The size of the informal economy may also ebb and flow with the performance of the macroecon-

infor-Vignette 1.2 “Underground, Contraband, Informality as

of these three terms by journalists, politicians, business people, teachers, students, and citizens, is a common and persistent chal-lenge to the discourse on economic informality in Paraguay

Adapted from: ABC Color (2019)

omy and is often gendered (Pisani 2003; Pisani and Pagán 2003) In the absence or the retreat of government, informality reduces abject poverty regardless of how it is conditioned, though informal workers are typically worse off than the informal self-employed (Pisani and Pagán 2004) Rarely discussed are the environmental issues connected with informality, except perhaps the focus on garbage pickers (Birkbeck 1978).

For these reasons and many more explored throughout this book, the study of informality is critical to better understanding the economy of Paraguay and derivative public policy The remainder of the book is orga-nized as follows Chapter 2 reviews the pertinent literature, Chap 3 high-lights the data employed and the methodology utilized Chapter 4 presents our results and Chap 5 discusses and contextualizes the results The final chapter concludes the book with an overview of the policy implications, considerations and debates, recommendations, and closes with a summary (and recommendations for further inquiry) Throughout the chapters, we juxtapose vignettes of informal connections (personal contributions and news accounts), from producers to consumers, to provide a colorful com-plement to the empirical exposition

5días (2019, March 18) El áspero camino hacia la formalidad 5días Available at:

dad/ Accessed 18 Mar 2019.

https://www.5dias.com.py/2019/03/el-aspero-camino-hacia-la-formali-ABC Color (2019, April 7) Plantean Archivar Reforma y Trabajar para Reducir

Economía Subterránea ABC Color Available at: http://www.abc.com.py/ edicion-impresa/economia/plantean-archivar-reforma-y-trabajar-para-reducir- economia-subterranea-1802867.html Accessed 22 Apr 2019.

Americas Barometer (2016) Paraguay Available at: https://www.vanderbilt edu/lapop/studies-country.php Accessed 15 Mar 2019.

Arrúa, E., & Bruno, S (2018) Migración de Retorno en el Paraguay: Características

e Inserción Sociolaboral Notas de Población, 106(Enero–Junio), 185–216 Banco Mundial (2018, June) Paraguay: Diagnóstico Sistemático del País Available

at: http://documents.worldbank.org/curated/en/827731530819395899/ pdf/Paraguay-SCD-06292018.pdf Accessed 19 Feb 2019.

Birch, M (2011) Generando Crecimiento Sustenable en un Contexto

Democratico, 1989–2009 In F. Masi & D. Borda (Eds.), Estado y Economía en

Paraguay 1870–2010 (pp. 245–282) Asunción: CADEP.

Birkbeck, C (1978) Self-employed proletarians in an informal factory: The case

of Cali’s garbage dump World Development, 6(9/10), 1173–1185.

Cantero, J (2018) Paraguay: Atrocidad, Atasco, Auge y la Reinvención (2nd

ed.) Asunción: José Cantero Publisher.

CICRED (La Coordinación de las Investigaciones Nacionales en Demografía)

(1974) La Población de Paraguay: Año Mundial de la Población Asunción:

Escuela Técnica Salesiana.

Correia, J (2019) Soy states: Resource politics, violent environments and

soy-bean territorialization in Paraguay Journal of Peasant Studies, 46(2), 316–336.

De Soto, H (2000) The mystery of capital: Why capitalism triumphs in the west and

fails everywhere else New York: Basic Books.

DGEEC (2018a) Principales Resultados Encuesta Permanente de Hogares

Agosto Available at: http://www.dgeec.gov.py/Publicaciones/Biblioteca/ Resultados%20EPH/PRINCIPALES%20RESULTADOS%20EPH%202017 pdf Accessed 14 Feb 2019.

DGEEC (Dirección General de Estadística, Encuestas y Censos [Paraguay]) (2018b, October) Ocupación Informal: Encuesta Permanente de Hogares EPH

2012–2017 Available at: http://www.dgeec.gov.py/Publicaciones/ Biblioteca/ocupacion%20informal/1.%20Documento.%20Ocupacion%20 Informal.%2025%2010%2018.pdf Accessed 27 Oct 2018.

Gamón, E. E., & Campos, L. A (1988) Estudio Sobre le Economía Informal en

Paraguay San Lorenzo: Fundación Hanns-Seidel.

House, W. J (1984) Nairobi’s informal sector: Dynamic entrepreneurs or surplus

labor? Economic Development and Cultural Change, 32(2), 277–302.

ILO (2014) Notes on formalization: Slight decline and key challenges in informal

employment in Paraguay Available at: https://www.ilo.org/wcmsp5/groups/ public/%2D%2D-americas/%2D%2D-ro-lima/documents/publication/ wcms_245890.pdf Accessed 4 Apr 2019.

IMF (2019, March 6) Paraguay: Staff concluding statement of the 2019 article IV

mission Available at: https://www.imf.org/en/News/Articles/2019/03/06/ mcs030619-paraguay-staff-concluding-statement-of-the-2019-article-iv-mis- sion#.XH_xT1wmlGg.email Accessed 7 Mar 2019.

León, A (1986) Women in the informal sector in Latin America methodological

aspects ECLA Available at: dle/11362/33212/S8600485_en.pdf?sequence=1&isAllowed=y Accessed

Medina, L., & Schneider, F (2018) Shadow economies around the world: What did

we learn over the last 20 years? IMF working paper [WP/18/17] Available at:

Economies-Around-the-World-What-Did-We-Learn-Over-the-Last-20- Years-45583 Accessed 25 Apr 2019.

https://www.imf.org/en/Publications/WP/Issues/2018/01/25/Shadow-Neuwirth, R (2011) Stealth of nations: The global rise of the informal economy

New York: Pantheon Books.

Nickson, A., & Lambert, P (2002) State reform and the ‘privatized state’ in

Paraguay Public Administration and Development, 22(2), 163–174.

OIT (2014, June) Políticas de Empleo Paraguay, Mesa de Diálogo Social

Available at: americas/%2D%2D-ro-lima/%2D%2D-sro-santiago/documents/genericdoc- ument/wcms_248872.pdf Accessed 9 Apr 2019.

https://www.ilo.org/wcmsp5/groups/public/%2D%2D-Ordóñez, S., & Sánchez, C (2017) Latin American ‘neo-developmentalism.’ State action and supranational realignment: What consequences to multipolar-

ity? World Review of Political Economy, 8(3), 365–389.

Pisani, M.  J (2003) The negative impact of structural adjustment on sectoral

earnings in Nicaragua Review of Radical Political Economics, 35(2), 107–125.

Pisani, M. J (2019) From informal to formal: An exploration of the firm-level

determinants of sectoral graduation in El Salvador Academia Revista

Latinoamericana de Administración, 32(1), 79–92.

Pisani, M. J., & Pagán, J. A (2003) Sectoral queuing in a transitional economy:

The case of Nicaragua in the 1990s LABOUR: Review of Labour Economics

and Industrial Relations, 17(4), 571–597.

Pisani, M.  J., & Pagán, J.  A (2004) Sectoral selection and informality: A

Nicaraguan case study Review of Development Economics, 8(4), 541–556 Portes, A., & Walton, J (1981) Labor, class, and the international system

New York: Academic Press.

Pro Desarollo Paraguay (2016) Economía Subterránea: el Caso Paraguayo (4th

ed.) Asunción: Pro Desarollo Paraguay.

Pro Desarollo Paraguay (2018) Paraguay y el Reto de Formalizar la Economía

Informal (6th ed.) Asunción: Pro Desarollo Paraguay.

Richter, J (2018) Formalisation through taxation: Paraguay’s approach and its

implications Master’s thesis in development studies, Oxford University.

Roett, R., & Sacks, R.  S (1991) Paraguay: The personalist legacy Boulder:

Westview Press.

Servín, B., & Masi, F (2018) Territorios y Empresas: Aproximación al Desarollo de

las Regiones en Paraguay Asunción: Centro de Análisis y Difusión de la

Economía Paraguaya, CADEP.

Siegel, K. M (2016) Fulfilling promises of more substantive democracy? Post-

neoliberalism and natural resource governance in South America Development

and Change, 47(3), 495–516.

Tornarolli, L., Battistón, D., Gasparini, L., & Gluzmann, P (2014) Exploring

trends in labor informality in Latin America Working paper, no 159,

Universidad Nacional de La Plata, Centro de Estudios Distributivos, Laborales

y Sociales, La Plata Available at: https://www.econstor.eu/bitstream/10419/ 127667/1/cedlas-wp-159.pdf Accessed 4 Apr 2019.