Over the years, Paraguayan authorities claim that banking entities have become more responsible.
The economic problems They are not unique to Argentina, but rather it is a very common event in the history of all countries in the world. It is, however, the consequences of these events that make them different, and the government actions so as not to fall back into monetary and social unrest.
Paraguay went through one of its most important financial crises in 1995during the presidency of Juan Carlos Wasmosywho only two years earlier had assumed the presidency. The regulated system was directly damaged, leading to bankruptcy of more than 50% of banks and more than two thirds of the financial companies that operated in the country at that time.
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Economic crisis in Paraguay 1995: these were the causes
Paraguay’s economic crisis in 1995 had several specific causes. Almost a decade earlier, the liberalization of the financial system During the government of Andrés Rodríguez (1989-1993), which was not accompanied by an adequate control and supervision framework, it already caused a hard blow to the system. This allowed the expansion and mass creation of financial institutions, going from 88 at the end of 1988 to 147 at the beginning of 1995.
Furthermore, this brought widespread corruption and non-observance of basic legal norms. Bancosur and Banco Mercantil and the financial companies Urundey, Sauce, Vanguardia and Sur de Finanzas, as well as the housing savings and loan bank Hogar Propio, were intervened. The main directors of the large banks mentioned first were arrested and prosecuted.
International organizations specialized in economic management They tried to warn the Paraguayan authorities of the problem that was brewing from within the country, however there was no reception. In May 1995, the risk warnings became reality. The Bancopar and General banks were intervened, experiencing serious liquidity problems.
Paraguay economic crisis 1995: the harsh consequences
The Paraguayan financial crisis of 95 bankrupted several banks since then, partly influenced by the famous “Tequila Effect”, a financial crisis that occurred in Mexico in the same year. During Wasmosy’s mandate there was also another sharp collapse of the system in 1997, which ended with the eliminate almost all financial companies local, with only financial entities of foreign origin surviving.
The crisis also hit the Paraguayan middle class hard and triggered an economic crisis from which the country has not yet been able to completely overcome.
To the economic damage caused to the country, estimated at 137 million dollars, and for savers, the moral damage caused by scandalous revelations and accusations was added. The final total cost of the crises reached an estimated between 10 and 12% of the gross domestic product, and two laws were enacted to cover it.
Of 40 banking institutions, after the crisis, less than 14 leftthe same as the financial companies, which out of a number close to 60 there were only 13 or 14 left. Everything else went bankrupt, and that meant that many people lost their deposits, many areas of the country were left without banking services.
Source: Ambito
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