- Transparency and accountability build trust, strengthen the government’s credibility, and create better conditions for economic development.
- Transparency is a strategic investment with tangible effects on trust, access to financing, and the ability to attract investment.
- Paraguay’s experience shows that sustained institutional reforms can strengthen the government’s credibility, improve financing conditions, and contribute to investment-grade status.
In Latin America and the Caribbean, transparency is generally understood as a democratic principle associated with access to information and accountability. However, it also has a tangible economic impact: it improves the quality of public policies, strengthens the trust of citizens and economic actors, and creates better conditions for development.
At the Inter-American Development Bank (IDB), we understand that strengthening transparency and institutional quality is a strategic investment. When a country builds stronger institutions, it reduces uncertainty, makes government action more predictable, and strengthens its credibility with citizens, investors, and markets. That trust influences the perception of risk, access to and cost of financing, and the ability to attract investment.
Paraguay’s recent experience illustrates this link between transparency, institutional quality, and economic development. With support from the IDB, the country pursued a sustained reform process for more than a decade to strengthen its institutions, establish clear rules, and build greater confidence in government action. Our publication, Paraguay: The Path Toward the Consolidation of Investment Grade and Institutional Credibility, analyzes how this process helped improve perceptions of the country and facilitated its access to international credit markets on more favorable terms.
The Paraguayan experience demonstrates how transparency and integrity can lead to greater institutional trust. In 2024, the country achieved an investment-grade rating from Moody’s, one of the leading international credit rating agencies. This achievement was not solely due to specific economic indicators. It also reflected the strength, stability, and capacity of institutions to build trust among investors, markets, and the public.
The main lesson is that the sustainability of an investment-grade rating depends, to a large extent, on institutional quality. Stronger institutions enable policy continuity, the fulfillment of commitments, reduced discretion, and more stable expectations. Over time, this consistency strengthens the government’s credibility.
The reforms promoted by Paraguay shared several characteristics. They were not isolated measures but rather part of a sustained strategy across different administrations. They took a preventive approach, aligned with international standards, and were supported by the IDB in accessing financing, technical assistance, and comparative experiences.
In addition, they simultaneously addressed various areas of government:
- Expanded access to public information and strengthened accountability.
- Reinforce integrity standards and conflict-of-interest prevention.
- Modernized public procurement, fiscal management, and spending controls.
- Advanced civil service professionalization and streamlined government structures.
- Introduced digital tools to improve transparency, oversight and risk detection.
Together, these reforms increased the availability of information, reduced discretionary power, and strengthened accountability, creating a more trustworthy environment for both citizens and economic actors.
Paraguay’s experience shows that institutional credibility is not built solely through laws or regulatory frameworks. Clear rules are essential, but they yield results only when they are consistently enforced and supported by institutions capable of sustaining them over time.
The reforms went beyond simply passing new regulations: they delivered concrete and mesurable improvements. In public procurement, 71% of government procurement officers were certified and trained; the number of goods available in the National Public Procurement Directorate’s online store rose from 390 in 2020 to 856 in 2022, and the proportion of competitive bidding processes with more than one bidder increased from 58% to 74% during that same period. In addition, digital tools were implemented for the early detection of risks and conflicts of interest in public procurement.
Institutional trust also generates economic benefits. When the perception of risk improves, a country gains access to better financing terms and reduces its borrowing costs. This frees up public resources that can be allocated to development priorities.
For this reason, transparency, integrity, and institutional quality should not be viewed as secondary issues. For economic authorities, they represent an opportunity to improve financing conditions. For entities responsible for strengthening public institutions, they serve as a strategic tool to build credibility, reduce uncertainty, and improve the country’s standing with citizens, markets, and investors.
Ultimately, strengthening transparency and institutional quality does more than just improve governance. Paraguay’s experience demonstrates that investing in strong institutions is also an investment in development.
To learn how institutional reforms can strengthen trust, improve access to financing, and create better development opportunities, we invite you to download our publication Paraguay: The Path Toward the Consolidation of Investment Grade and Institutional Credibility.
Keywords:
Public Administration