What is the Paraguay Guarani (PYG)?
The Paraguay guarani (PYG) is the national currency of 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 ₲.
As of September 2020, U.S. $1 is worth roughly 7,000 PYG.
- 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
In 1943, the Paraguayan government authorized the replacement of the peso with the Paraguay guarani (PYG) as legal tender. The new currency exchanged at a rate of one guaraní to every 100 pesos. This exchange rate was intended to curb inflation, which was then plaguing the republic.
Eventually, the guarani suffered from the same inflationary problems as its predecessor, and the government initiated a peg to the United States dollar (USD) in 1960, which would last until 1985. The pegged exchange rate was one dollar to every 126 guaraníes. 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 guaraníes notes were issued in 1990, followed by 100,000 guaraníes in 1998.
Since 1985, the value of the guaraní has continued to decline sharply. As an example, the USD/PYG exchanged at 4,000 in 2008, and by 2018 that rate was 5,700. By 2020 it fell to 7,000:1.
Replacement with the Paraguay Guarani
During the 1980s and '90s, multiple printing companies produced official guaraní banknotes. Starting in 2004, the existing denominations, except the 50,000 guaraníes, were redesigned and included enhanced security features. Printed with the date '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 guaraníes and the 1000 guaraníes notes, removing their status as legal tender. Paraguay continues to improve the security of the currency. On December 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 guaraní using the symbol N₲. This currency would have an exchange rate value of 1 nuevo guaraní 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 guaraní 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
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 16 billion as of 2016. Also contributing to the problem is a problem with liquidity surfacing in 1995. In 1995, several of the country's essential banks were shut down following the revelation of rampant corruption within the financial institutions.
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 zero percent, with an inflation rate of 2.8%.