What Is the Paraguay Guarani (PYG)?
The Paraguay guarani (PYG) is the national currency of the Republic of Paraguay. First issued for circulation in 1944, the currency has suffered from severe inflation over its lifetime. The name of the money comes from Guarani, the primary native indigenous language and ethnic group in Paraguay. When written, the symbol used locally is ₲.
- The Paraguay guarani (PYG) is the official currency of the Republic of Paraguay.
- Due to rampant inflation and issues with banknote security, the government planned to issue a new guarani, but efforts have failed to materialize.
- The country's currency has also been undermined by counterfeiting schemes and a lack of security features in several series of banknotes.
Understanding the Paraguay Guarani (PYG)
In 1943, the Paraguayan government authorized the replacement of the peso with the Paraguay guarani (PYG) as legal tender. The new currency was exchanged at a rate of one guarani to every 100 pesos. This exchange rate was intended to curb inflation, which was then plaguing the republic.
The pegged exchange rate was one dollar to every 126 guaranies. However, the value of the currency continued to erode on the black market and then more rapidly once the peg was abandoned. Thanks to its rapid devaluation, the Republic of Paraguay introduced larger denominations of bills and coins. The first 50,000 guarani notes were issued in 1990, followed by 100,000 guaranies in 1998.
Since 1985, the value of the guarani has continued to decline sharply. As an example, the USD/PYG exchanged at 4,500 in 2010, and by 2018 that rate was 5,700. By 2020 it fell to 7,000:1.
Modifying the Paraguay Guarani (PYG)
During the 1980s and '90s, multiple printing companies produced official guarani banknotes. Starting in 2004, the existing denominations, except the 50,000 guaranies, were redesigned and included enhanced security features. Printed with the year "2005", several notes illegally circulated before being officially launched. As a result, the central bank, the Banco Central del Paraguay, declared these bills void and worthless.
In 2012, the central bank demonetized the series A and B 50,000 guaranies and the 1,000 guarani notes, removing their status as legal tender. Paraguay continues to improve the security of the currency. On Dec. 22, 2016, new 20,000, 50,000, and 100,000 notes were introduced with upgraded security.
In 2011, the Paraguayan government unveiled plans for the nuevo guarani using the symbol N₲. This currency would have an exchange rate value of one nuevo guarani per 1,000 guaraníes and would not have high denomination notes.
After a planned two-year transition period, the new money would be the only accepted currency. Also proposed was to reuse the already circulating guarani banknotes with three of the zeros crossed out manually. As can be imagined, this plan was scrapped due to its complex nature, the potential for confusion, and fears of making the already dire economic situation worse.
The Paraguayan Economy
Paraguay declared independence from Spain in 1811 which received recognition in 1842. The Republic of Paraguay is a landlocked country in South America that has suffered through a series of dictatorships until 1989. In 1993, the country saw its first multi-party democratic elections.
The primary export is soybeans, and the republic is the 6th largest producer in the world. According to 2019 World Bank data, Paraguay experienced annual gross domestic product (GDP) growth of 0%, with an inflation rate of 2.8%.
The country suffered from double-digit inflation in the early 2000s but has begun to get this problem in check. This high inflation is partially a result of Paraguay's foreign debt, which reached over USD 17.7 billion as of 2017. Also contributing to the problem is a problem with liquidity servicing in 1995. In 1995, several of the country's essential banks were shut down following the revelation of rampant corruption within the financial institutions.