User:AndresPY/sandbox

Overview
Expenditures and revenues in Paraguay have presented a positive trend in the last 10 years. In 2010 The Ministry of Finance of Paraguay and the Central Bank of Paraguay reported a remarkable increment of almost 15% in the Gross Domestic Product. This was basically due to the expansion of the primary sector thanks to the increase in world commodities’ prices, which in turn led to the expansion of the third sector as well. Also an interesting phenomenon has been unveiled: the secondary sector, which is led by industrial activity, did not increase but instead decreased its contribution to the GDP in comparative terms. As a consequence of a slightly expansionary policy run by the executive branch since 2008 and implemented through fiscal shocks, the Paraguayan government increased the level of expenditures and also increased the international reserves achieving fiscal stability and international trust whilst decreasing the country’s risk indicator

Revenues
From 2005 to 2009 Paraguay’s government revenue reached average values between 21 - 23% of the GDP, mainly built by the following three subcategories: Taxes, Other Revenues and Grants. Taxes include income tax (not personal, only for businesses), value added tax (VAT), Sin Taxes, property and assets taxes, social insurances and tariffs. Surprisingly in this subcategory, the VAT is the main contributor to the government income, followed by import-export taxes and the so called ISC (Consumption Selective Tax by its acronym in Spanish), which levies luxury goods like watches, cigarettes, alcohol, perfumes, etc. Also, this tax is applicable to pollutants like petrol and oil derivatives. The second sub category includes fines, fees, yields, and income from property or sales. Profits coming from the two bi-national dams (Itaipu, co-owned with Brazil and Yacyreta, co-owned with Argentina) are the main contributors to this group. These dams produce Hydro-electrical power and as a financial compensation for the use of their rivers, both governments receive royalties. Finally, the third group includes grants from other foreign governments, international organizations, and other government units; interest; dividends; rent; requited, no repayable receipts for public purposes (such as fines, administrative fees, and entrepreneurial income from government owner­ship of property). Thanks to the available data it can be clearly seen that all income sub categories have been having a positive trend which caused an increment in government revenues all in all

Expenditures
Since 2005, Paraguayan’s government expenditures reached levels between 18% and 23% of the GDP. Expenditures are mainly built by five subcategories that concentrate a very detailed and sometimes confusing accounting structure, which tends to overlap categories and complicate results oriented monitoring. The main 5 subcategories are: general government final consumption expenditure, military expenditure, expenses (transfers), subsidies and other transfers, and social contributions. The general government final consumption expenditure group stands for all government expenditures for the purchases of goods and services (including compensation of employees). It also includes most expenditure on national defense and security, but excludes government military expenditures that are part of government capital formation. This subcategory presents a fluctuation between 47% and 54% of the GDP between 2005 and 2009. The second group military expenditure refers to all current and capital expenditures in the armed forces (including peacekeeping forces, defense ministries and other government agencies engaged in defense projects), paramilitary forces (if these are considered to be trained and equipped for military operations), and military space activities. Such expenditures include military and civil personnel (including retirement pensions of military personnel and social services for personnel), operation and maintenance, procurement, military research and development, and military aid (in the military expenditures of the donor country). Excluded are civil defense and current expenditures for previous military activities, such as for veterans' benefits, demobilization, conversion, and destruction of weapons. This subcategory remained rather stable in the analyzed period (2005 – 2009) with a 4% of the GDP. The transfers (or expenses) subcategory includes cash payments for operating activities of the government in providing goods and services. Specifically, it includes: interests, grants and other expenses such as profits and dividends. Transfers reached the 25% of GDP value in 2008 because of the efforts of the government to create an anti-cyclical movement that would lessen the effects of that year’s global financial crisis. This effort increased expenditures, which in turned increased the money velocity through fiscal policy efforts. In 2009, expenditures related to this subcategory felt down again to 18% of the GDP. In terms of subsidies and other grants, expenditures have not changed so much in the period of the analysis. The relative value of this subcategory remained the same between 2005 and 2007, decreased 5% in 2008 and increased 22% in 2009. The latter was due mostly to the current government ideology (2008-2013) which emphasizes social expenditure, which is also why the last group social contributions increased between 2008 and 2009, although in a modest 1% of the GDP

Reserves
Paraguay’s economy has been growing in the last 10 years thanks to high commodity prices (soybean and corn), an increment of land production for such commodities, fiscal stability and the money supply control achieved by the Central Bank thanks to its efforts to keep the inflation rate and exchange rate in optimal levels. As a consequence, international reserves have increased in more than a 100% in 3 years (2005 to 2008) reaching unprecedented levels for this country.