Fitch Ratings started its annual review of Paraguay's creditworthiness on 31 July 2026, following a meeting between agency analysts and President Santiago Peña. Fitch is the last of the three major agencies still holding Paraguay below investment grade, at BB+ with a positive outlook, which is exactly one notch short.
What Is Actually Being Decided
The meeting itself is routine. Fitch gathers information from public-sector authorities before publishing its assessment, and a presidential meeting is part of that process rather than a signal in either direction.
What makes this review worth watching is where Paraguay already stands. Moody's and S&P both moved the country to investment grade, and we covered that second upgrade when it landed. Fitch raised its outlook from stable to positive in October 2025 without moving the rating itself, which is the conventional way an agency signals that an upgrade is plausible if conditions hold.
A positive outlook is not a promise. It usually indicates a review horizon of a year or two, and it can be returned to stable as easily as it can be converted into an upgrade.
The Case Fitch Made in October 2025
When Fitch improved the outlook, it named four supports: robust economic growth, low fiscal deficits, moderate indebtedness compared with similarly rated economies, and a substantial pipeline of private investment.
Three of those four still hold comfortably. Growth is intact, with the central bank having raised its 2026 forecast to 4.5%. Debt remains moderate against peers. The investment pipeline is arguably stronger than it was, between the industrial projects under construction and the World Bank's eight-year partnership framework.
The One That Has Moved
The fiscal line is the exception, and it moved in the wrong direction. As we reported on Saturday, the Central Administration closed the first half of 2026 with a deficit of 1.2% of GDP, and the annualized figure reached 2.6%, which puts the government's own convergence target in question.
That is the tension in this review. Fitch built its positive outlook partly on "low fiscal deficits", and the deficit has since widened. It does not follow that an upgrade is off the table, because a rating decision weighs the whole picture and Paraguay's debt burden remains modest. But it is the single variable most likely to determine whether the outlook converts into an upgrade or reverts to stable.
Worth noting alongside it: the government has explicitly ruled out raising taxes to close the gap, betting instead on broader compliance and formalisation. Fitch will form a view on whether that is credible.
Why a Third Rating Would Matter to You
Not because it changes your tax position, because it does not. Sovereign ratings govern how the state borrows, not how residents are taxed, and nothing about the territorial treatment of foreign income depends on what Fitch decides.
The relevance is indirect but real. A full house of investment-grade ratings removes the last technical reason for conservative institutional money to stay out, which over time affects the cost of capital, the depth of the local banking system, and the infrastructure that gets built. It also reinforces the argument that Paraguay's low-tax model is a functioning fiscal system rather than an anomaly waiting to be corrected, which is the question thoughtful readers actually have. Our overview of why Paraguay's tax-free reputation holds up works through that distinction.
US citizens and green-card holders: rating changes do not affect you either way. The United States taxes worldwide income on the basis of citizenship, so no decision made in Asunción or by a rating agency alters your filing obligation. Only renunciation ends it, with its own exit-tax consequences.
Frequently Asked Questions About the Fitch Review
When will Fitch publish its decision?
No date has been announced. The 31 July meeting opens the annual review process, and agencies typically publish some weeks after gathering information. Treat any specific date circulating before Fitch says so as speculation.
Does Paraguay already have investment grade?
From two of the three major agencies, yes: Moody's at Baa3 and S&P at BBB-. Fitch is the outlier at BB+, one notch below, with a positive outlook. A Fitch upgrade would complete the set rather than establish the status.
Would an upgrade change Paraguay's 0% on foreign income?
No. Credit ratings assess the state's ability to service its debt; they have no bearing on the territorial tax system, which is set by Paraguayan tax law. The connection to residents is indirect, through capital costs and investment.
Could Fitch downgrade instead?
A downgrade from BB+ is unlikely given a positive outlook, but a return to a stable outlook is a realistic outcome if the fiscal trajectory concerns the agency. That would not be a downgrade, simply a signal that the upgrade window has closed for now.
Weighing Paraguay for the long term rather than the next tax year? A short call can separate what is fixed in law from what depends on politics. Get in touch.
Disclaimer: This article is general information, not investment, tax or legal advice. Rating decisions are made independently and their timing is uncertain. Verify current ratings with the agencies themselves before relying on them.
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About the author
Yannick Schroth
Founder · Paraguay relocation advisor
Lives in Asunción and guides international nomads, entrepreneurs and investors toward residency, a cédula and a tax-efficient structure in Paraguay.
