Corruption, drug trading and the normalization of illegal transactions were key to the massive underground market, a new report revealed.
Paraguay's illicit economy last year made up the equivalent of just under 40 percent of the country’s national gross domestic product, according to a new joint report released this month.
While the illegal market appeared to be shrinking slightly, in 2015, the illegal economy totaled over $US11 billion, or 39.6 percent of the Paraguay's GDP, according to the report from the National University of Asuncion and anti-tax evasion organization Pro Desarrollo, translated to Pro Development.
Fraud, corruption, illegal transactions, bribery, money laundering and narcotics trafficking along with a general leniency and normalization of various activities was seen to contribute to the huge illicit market within the landlocked nation.
While a number of large scale criminal and corruption networks played big role in the illegal market, the aggregation of smaller illegal transactions was also a significant factor to the staggering number.
The Paraguayan government was estimated to have lost US$1.1 billion in revenue in 2015 because of lost tax revenues from illegal activities that otherwise would have been taxed.
A similar study from the group said that the illegal economy in Paraguay was US$12 billion in 2014 and since 2002 the illegal economy has increased four times in size.
Paraguay, for a number of years has had a relatively large scale drug trafficking market, particularly for cheap marijuana heading south to Argentina, Uruguay and Brazil, where much continues on to European markets.Given its clandestine nature, tracking the illegal economy is a difficult task. Nevertheless, Paraguay's illegal economy is significantly large. A 2014 study by Paulina Restrepo-Echavarria estimated that the informal economy makes up to 36 percent of GDP in developing countries and 13 percent of GDP in developed countries.