Paraguay Guarani (Pyg): Meaning, History, Economy

What Is the Paraguay Guarani (PYG)?

The Paraguay guarani (PYG) is the national currency of the Republic of Paraguay. The guarani is abbreviated as PYG in the foreign exchange (forex) market and is represented by the symbol ₲.

Banknotes in circulation range in value from ₲1,000 to ₲100,000 while coins are minted from ₲50 to ₲1,000. One guarani is divided into 100 céntimos, which are no longer in use. The guarani, which isn't pegged to any other currency, has suffered from severe inflation over its lifetime.

Understanding the Paraguay Guarani (PYG)

Paraguay's currency is called the guarani. The currency is printed in ₲1,000, ₲2,000, ₲5,000, ₲10,000, ₲20,000, ₲50,000, and ₲100,000 banknotes while the bank mints coins in values of ₲50, ₲100, ₲500, and ₲1,000. Centimos are no longer used or in circulation.

The guarani is issued and maintained by the country's central bank, Banco Central del Paraguay, which translates to the Central Bank of Paraguay. The central bank was established in 1952 under government decree. At the time, the bank printed notes in ₲1, ₲5, ₲10, ₲100, ₲500, and ₲1,000 denominations while coins were minted in London.

The currency isn't pegged to any other currency in the foreign exchange market and no currency is pegged to it. As of Aug. 2, 2022, US$1 was equal to ₲6,855.

Special Considerations

Multiple printing companies produced official guarani banknotes during the 1980s and 1990s. Existing denominations (except the ₲50,000) were redesigned with enhanced security features in 2004. Printed with the year 2005, several notes illegally circulated before the new bills were officially launched. As a result, the central bank declared these bills void and worthless.

In 2012, the central bank demonetized the ₲1,000 notes along with the series A and B ₲50,000, 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 features.

Plans for the New Guarani

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. This plan was scrapped due to its complex nature, the potential for confusion, and fears of making the already dire economic situation worse.

History of the Paraguay Guarani (PYG)

In 1943, the Paraguayan government authorized the replacement of the peso with the PYG as legal tender. It was exchanged at a rate of one guarani to every 100 pesos. This exchange rate was intended to curb inflation. But the guarani suffered from the 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 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 notes were issued in 1990, followed by ₲100,000 in 1998. 

Since 1985, the value of the guarani has continued to decline sharply. For instance, US$1 was equal to ₲4,500 in 2010, and by 2018 it was worth ₲5,700. By 2020 it fell to 7,000:1.

The Paraguayan Economy

Paraguay declared independence from Spain in 1811 which received recognition in 1842. The country, which is landlocked in South America, lived through a series of dictatorships until 1989. In 1993, the country saw its first multi-party democratic elections.

Paraguay's economy depends on its exports. It is the world's sixth largest producer of soybeans, which is its primary export. The country is also one of the fastest-growing exporters of electricity. Paraguay's annual gross domestic product (GDP) growth rate in 2021 was 4.5%, resulting in total GDP of $38.99 billion that year. Inflation sat at 4.8% in 2021.

The country suffered from double-digit inflation in the early 2000s but was able to control the problem. This high inflation was partially a result of Paraguay's public debt, which reached over 19.5% of the country's 2017 GDP or $7.753 billion. Also contributing to the inflationary pressures is its 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.