Keywords

1 Introduction

The Republic of Paraguay is a South American country that is neighbouring Argentina (south and southwest), Brazil (east and northeast), and Bolivia (northwest). Figure 1 shows a typical scene in eastern Paraguay. With an estimated population of 7,253,000 in 2020, it has one of the most homogenous populations in South America, mainly of European (especially Germany, Italy, Spain) and Guaraní ancestry (Simão et al., 2017). One of our Guarani informants is featured in Fig. 2.

Fig. 1
figure 1

Oxcart near Piribebuy; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 2
figure 2

Guarani informant; photo © 2021 by Léo-Paul Dana

Full size image

Thousands of Brazilians also immigrated to Paraguay in the 1970s (Blanc, 2015). Its population follows the culture and customs of Guaraní, which is extensively evident in various aspects of their lives, including arts, festivals, carnivals, and even their daily habits. Most people feel proud of speaking the Guaraní language, which in 1992, became an official language in its constitution (Nickson, 2009). The official institutions and the public predominantly use Spanish; an important Mennonite minority uses German (Fig. 3), and Paraguayans prefer to speak in the Guaraní language in their daily communications (Garvin & Mathiot, 2017). Paraguay’s name was derived from a Guaraní word which means “river that gives birth to the sea”. Figure 4 shows a boat docking at Asuncion.

Fig. 3
figure 3

Bilingual signage; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 4
figure 4

Docking at Asuncion; photo © 2021 by Léo-Paul Dana

Full size image

Indeed, rivers have long been an integral part of life in Paraguay, and the economy (Barclay, 1909). They could access the Atlantic Ocean, produce electricity, export and import goods, and enjoy the riverside lifestyle. Besides, due to the country’s geographic location, they have become experts in producing hydropower, agricultural products such as soybeans, and many other related products (Blanco et al., 2017). Paraguayans enjoy the subtropical climate, and the Chaco (Fig. 5) is considered to be semi-arid, but, farmers also experience periodic floods (Fig. 6) and droughts (Fig. 7) harmful to their agricultural sector.

Fig. 5
figure 5

The Chaco; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 6
figure 6

After a flood; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 7
figure 7

Drought; photo © 2021 by Léo-Paul Dana

Full size image

Paraguay is the home of numerous entrepreneurs. Its GNI per capita is 5680, which puts it in the upper-middle-income countries (Salas-Pilco & Yang, 2020). The government also supports entrepreneurial activities through initiatives such as pushing a free trade agenda to improve the business environment. Free trade agreements signed with countries like Colombia, Chile, and Peru are examples of such initiatives (Beck et al., 2019). Besides, the government has negotiations with other regional powers such as the European Union to expand its business and entrepreneurial activities (Cano et al., 2017). Decreased taxes, considering the diverse economy, and improved fiscal responsibility are among the other issues to be considered while studying entrepreneurship in Paraguay. Therefore, this chapter aims to review the country’s historical context, which is of paramount importance to learn more about entrepreneurship in Paraguay. Then, the environment for entrepreneurship is elaborated accordingly. Next, based on the aforementioned issues, the authors propose some directions for the future. Finally, a case is discussed to highlight how entrepreneurs act in this context.

2 Historical Context

The country has gone through several historical periods. For more than a millennium, the indigenous Guaraní used to live in that area, until the Spanish arrived (Sarreal, 2014). Guarani people were primarily involved in agricultural activities, especially near the Paraguay River. Besides, they were known for their warrior traditions (The Pre-Columbian era) (McRostie et al., 2017). In the next period (the Colonisation era), the Spanish entered the country and shaped the Spanish colonisation of the Americas (Nickson, 1989). As a result, they tried to expand their traditions and religion. Then, people started to convert to Christianity, and slavery was fading away. The Jesuit Missions of La Santísima Trinidad de Paraná and Jesús de Tavarangue, listed as the World Heritage Sites by UNESCO, are among the main testimonies of the country’s history (Santiago-Vendrell, 2018). Nevertheless, the nomadic Guaycuru and other nomads resisted this religious movement, especially after the sixteenth century.

In 1811, the new era began (Independence and rule of José Gaspar Rodríguez de Francia), and the Spanish were overthrown from Paraguay by José Gaspar Rodríguez de Francia (El Supremo), who ruled over the country until his death in 1840 (Cooney, 1983). He attempted to create a Utopian society according to the French theorist’s views of Jean-Jacques Rousseau (García, 2008). He put many limitations at national and international levels, restricting freedom and international collaborations with other countries. After his death, various military officers ruled over the country until 1841, when Carlos Antonio López became the ruler (Rule of the López family) (Krauer, 1982). Unlike Francia, López opened the economy and started collaborating with various countries. Paraguay declared its independence in 1842 and commissioned the construction of the Legislative Palace (Fig. 8) at Independence Square in Asuncion.

Fig. 8
figure 8

Legislative Palace in Asuncion; photo © 2021 by Léo-Paul Dana

Full size image

López’s son Francisco Solano López became the ruler after his death in 1862 (Saeger, 2007). Although he seemed to be a more diminutive dictator than his father, still liked to control most of the economy. Both modernised the economy and socioeconomically developed the country. In 1864 Asuncion’s new train station (Fig. 9) contributed to the economy.

Fig. 9
figure 9

Train station, Asuncion; photo © 2021 by Léo-Paul Dana

Full size image

The Paraguayan War lasted from 1864 to 1870 (Williams, 1977). In 1864, Brazil initiated a war with the Republic of Uruguay and the Paraguayan War was started, as they had already warned Brazil not to do so. Argentina also became a part of this war. In 1865, the three countries signed a secret treaty against the Paraguayan government. The war ended in 1870 by killing Marshal Solano López, who refused to surrender (Whigham, 2018). According to estimations, the country lost more than half of its population and many resources due to this war. Thus, the war became a catastrophe that will not be removed from its history. Furthermore, the Brazilian army took the national archives to Rio de Janerio; therefore, some parts of Paraguayan history are missing (Blinn Reber, 1999).

The first half of the twentieth century witnessed much socio-political instability. As a notion of such instability, one could mention the 31 presidents who governed the country between 1904 and 1954 (Chesterton, 2013). In addition to this, the civil wars of 1922 and 1947 (Lambert, 2008) and the Chaco War in the 1930s (Fogelquist, 1949) worsened the situation. Finally, Alfredo Stroessner overthrew the previous ruler in his military coup in 1954, and the new era began (Alfredo Stroessner era) (Lewis, 1980). They ruled over the country until 1989. As a dictator, his office dealt with the modernisation of the economy, but he overlooked the human rights and internationalisation related issues (Birch, 1996). In 1989, history repeated itself, and General Andrés Rodríguez overthrew Stroessner in a military coup (Stroessner’s overthrow era) (Abente-Brun, 1999). Although police and military are very visible (Fig. 10), this new era brought socio-economic development for the country, and a democratic system of governance established in 1992 (Duarte Recalde, 2017). Today, the Republic of Paraguay is experiencing further developed socio-economic development in light of its remarkable history that is full of lessons for its politicians and the general public.

Fig. 10
figure 10

Forces keeping control; photo © 2021 by Léo-Paul Dana

Full size image

3 The Environment for Entrepreneurship

The country represents less than 0.5% of the world economy in terms of its GDP. Nevertheless, Paraguay is a key producer of hydroelectricity and renewable energy, especially near the Paraná River. Its average growth rate between 1970 and 2013 was almost 7.2% annually, making it the leading country in South America. As one of the leading countries in the agriculture sector, it stands in second place as a producer of stevia and tung oil, and sixth place for producing soybeans and corn. Nevertheless, the country is poor as many of its population could not afford their basic needs (Grassi, 2014). Therefore, it makes the country an exciting place to establish social enterprises, agricultural firms, and other ventures.

Entrepreneurship is a critical concern and solution for those at the bottom of the pyramid (Hall et al., 2012). There are some factories (Fig. 11), making bricks (Fig. 12) or roof tiles (Fig. 13), for example, and some individuals own shops (Fig. 14) while other entrepreneurs own restaurants (Fig. 15), but poorer self-employed people manage much smaller-scale operations, such as a fruit stand (Fig. 16). Many sell from impromptu stalls (Fig. 17). Some business is even less formal (Fig. 18). The emergence of water entrepreneurs is another evidence of paying attention to the basic needs of society (Schaub-Jones, 2008, 2011).

Fig. 11
figure 11

Factory in Tobatí; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 12
figure 12

Making bricks; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 13
figure 13

Making roof tiles; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 14
figure 14

Butcher; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 15
figure 15

Restaurant owner; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 16
figure 16

Fruit stand; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 17
figure 17

Impromptu stall; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 18
figure 18

Informal deal; photo © 2021 by Léo-Paul Dana

Full size image

It is noteworthy that the context of business is very significant (Dana et al., 2022). Hopefully, as the ICT industry has developed significantly (Grazzi & Vergara, 2012), the cell phone penetration rate has increased during the past decade, and investors could enjoy the available entrepreneurial opportunities in this technological context. Nevertheless, according to the Ease of Doing Business reports, in 2021, starting a business is not an easy task, as the country is ranked 160th in the world. Moreover, the index is not well enough in terms of protecting minority investors (143rd), getting credit (132nd), trading across borders (128th), paying taxes (126th), getting electricity (109th), and resolving insolvency (105th). However, its situation is much better in terms of registering property (80th), dealing with construction permits (75th), and enforcing contracts (72nd) (Llamosas et al., 2021).

Besides, the government has marginally facilitated foreign direct investment and capital inflow/outflow, and therefore, interested investors could invest in various projects. Nevertheless, tax exemptions are not good enough to motivate foreign investors. For instance, foreign investors are obliged to pay a 5% additional tax, or nonresidents must pay 15% on any international remittances. Also, to establish and manage a company as a member of the board of directors, one must be a resident. Otherwise, one might find a local partner to face this restriction. Like many similar countries, Paraguay witnesses corruption and a lack of sufficient transparency. It makes it hard for one to compete in global markets, which oblige companies to be transparent and corruption-free. In addition, workforce rights and child labours are dark sides of the economy (Larrouqué, 2019). Women entrepreneurship is also a concern for them as women are marginalised to some extent (Ajjan et al., 2014).

The number of community-based entrepreneurship projects has increased during the last two decades. These projects are generally defined and established to alleviate poverty by helping poor people increase their capacity and making them capable of earning money by identifying, evaluating, and exploiting entrepreneurial opportunities. The PRODECO is a perfect example of such projects designed to improve community-based entrepreneurship (Gallardo & Raufflet, 2014). In addition, entrepreneurship education and promotion of startup creation are other critical aspects of entrepreneurship promotion in Paraguay (Gonzalez, 2019).

The country’s entrepreneurship ecosystem is young, and a limited number of startups and new ventures are playing marginal roles in its economy (Villalba Benítez & Ortega Carrasco, 2021). Nevertheless, co-working spaces (such as Loffice and Welco), incubators (mostly university-based), accelerators (such as Startup Lab- FPUNA, and Bono Plus Creativo), and such mechanisms are finding their way of contributing to the knowledge-based economy of Paraguay. A positive point of the ecosystem is that the young generation of Paraguay includes around 70% of the whole population. For instance, the “Jóvenes Empresarios del Paraguay”Footnote 1 provides a fertile ground for helping young entrepreneurs contribute to the country’s sustainable development. Besides, entities such as “Fundación Paraguaya” are active players in this entrepreneurial ecosystem that help startups and entrepreneurs (Maak & Stoetter, 2012). Also, some of the existing Paraguayan startups have targeted international markets to render their services or sell their products.

The Paraguayan government has proposed various initiatives to increase total entrepreneurial activities. These initiatives are quite new. For instance, in 2009, they initiated INCUPAR,Footnote 2 which after some years, offered a new startup programme called Innovandopy in 2015. In 2017, Karakú Emprendedor was created to connect public and private sector players to increase their synergy. In 2018, the DINAEMFootnote 3 was proposed by the Ministry of Industry and Commerce that improved entrepreneurial activities throughout the country (Esteche et al., 2020). Besides, the Law of Simplified Stock Companies, which Congress passed, facilitated easy, fast, digital, and free new venture creation. Finally, CEEFootnote 4 was another initiative to support entrepreneurs.

Hopefully, Paraguay became a partner country in GEMFootnote 5 and is then included in the 2019/2020 GEM Global Report. Several partners were involved in this new wave of improving entrepreneurship through GEM-based surveys. These partners include: Asociación de Emprendedores de Paraguay,Footnote 6 MIC,Footnote 7 GEN,Footnote 8 Koga Impact Lab, Karaku Emprendedor, and UPA.Footnote 9 According to the GEM 2019/2020 report, the country’s NECIFootnote 10 score was among the last three studied ones among 54 economies. All the country scores were lower than the average GEM scores for various countries. It reveals that the entrepreneurial ecosystem is not perfectly developed.

Religion and culture are also critical factors to be considered in scrutinising the entrepreneurial ecosystem in Paraguay (Dana & Dana, 2008a, 2008b; Kraybill et al., 2010). Many Paraguayans follow the Guarani culture, which is respected by the general public and led to increased collective entrepreneurship (Aponte & Álvarez, 2017). Besides, as Masi (2013) argued, various stakeholders, including the general public, public and private sectors, international bodies, universities, and research centres, agree that these players do not have enough capability and readiness to efficiently use their expertise and resources. It should be noted that public universities and state agencies have limited access to financial support, and therefore, entrepreneurship research is limited.

Considering all the issues mentioned above, one could argue that the country’s entrepreneurial ecosystem is not well-developed, and there would not be an easy entrepreneurial journey for those who want to establish their business, initiate their ventures, or start their startups in this context. However, on the other hand, there are many entrepreneurial opportunities in the country, especially in terms of clean energy, agricultural, and social issues. Nevertheless, one should take the formal and informal issues, such as bribery, embezzlement, and corruption, into account (Jurik, 2018; Wilhelm, 2002).

4 Toward the Future

Based on its fascinating history, potentials, and developments of the entrepreneurial ecosystem of Paraguay, the country needs to be more focused on various aspects of its ecosystem. On the one hand, policymakers might consider various actions to facilitate entrepreneurship development throughout the country. On the other hand, they need to take necessary actions to remove barriers in front of the potential and existing entrepreneurs. In this sense, the data published by GEM, ASEPY, or other surveys and studies could provide them with a more precise big picture of the country.

As the level of trust affects the propensity to act entrepreneurially and take risks, the Paraguayan society, which suffers from a low trust level, is less prone to act entrepreneurially (Sohn & Kwon, 2018). Therefore, policymakers and officials must pay more attention to solving this problem to facilitate entrepreneurial activities. Besides, as Pathak et al. (2009) and Ibrahim et al. (2020) mentioned, the internationalisation behaviours of Paraguayan SMEs and entrepreneurs must be strengthened to make them more capable of exporting their products and rendering services to customers from other countries. In addition, according to the potentials of social entrepreneurial activities, the country could be a perfect destination for globally well-known social entrepreneurs and social enterprises, such as Yunus Social Business. Therefore, by improving entrepreneurship at the bottom of the pyramid, the country’s socio-economic development will not remain a dream or hard-to-achieve goal. As Burt (2013) argued, poverty elimination at various levels is possible if the government works closely with civil society, firms, and entrepreneurs.

In addition, policymakers must pay more attention to entrepreneurship-related policies that could affect rent-seeking, opportunity exploration, risk-taking, innovative and creative behaviours of potential and existing entrepreneurs (Sánchez-Báez & Avancini-Schenatto, 2017). Motivating entrepreneurs and helping them in exploring, evaluating, and exploiting entrepreneurial opportunities will absolutely affect the total entrepreneurial activity index. Besides, increasing indigenous entrepreneurial activities could improve the entrepreneurial ecosystem (Dana, 2015).

5 Toward the Future

Like several South American countries in which entrepreneurial ecosystems are not mature sufficiently, the Paraguayan government must pay particular attention to developing such an ecosystem. Sanitation conditions are not always optimal (Fig. 19). Many areas still have no running water (Fig. 20). Infrastructure such as good roads is also important; some roads are better (Fig. 21) than others (Fig. 22).

Fig. 19
figure 19

Meat exposed to flies in a small shop; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 20
figure 20

Pumping water; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 21
figure 21

A main street in Tobati; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 22
figure 22

Dusty; photo © 2021 by Léo-Paul Dana

Full size image

By unleashing the power of [potential] entrepreneurs, many socio-economic problems could be solved, and several entrepreneurial opportunities might be explored, evaluated, and exploited by these change agents of the society. In this chapter, the Mennonite communities and their role in promoting collective entrepreneurial activities have briefly discussed as an example of how the entrepreneurial wave could change the current status.

Besides, policymakers and government officials might expand and promote more initiatives to facilitate this wave of change. By doing so, Paraguayan society could be revitalised, and this might become a U-turn in the history of this country. Also, identifying the formal and informal institutionsFootnote 11 and considering them in policymaking will improve the entrepreneurial ecosystem of Paraguay. In addition to the policy-related issues, as the research on entrepreneurial activities is relatively new in the country, and since, hopefully, Paraguay has recently joined the GEM consortium, researchers could investigate entrepreneurship-related issues more precisely.

6 Case Study

Collective entrepreneurship is “linked to the existence of groups of individual entrepreneurs involved in the development of the business, whilst maintaining the organization and freedom of the individual” (Comeche & Loras, 2010). In other words, it is defined as an association of [potential] entrepreneurs. In fact, the ownership or control rights are shared among entrepreneurs rather than being individually allocated to some of them. Such an approach could exist in all types of collectives, especially in societies with closer connections and relationships (Manouchehrabadi et al., 2021).

For example, collective entrepreneurship exists in a MennoniteFootnote 12 community in Paraguay. According to a study conducted by Dana and Dana (2008b), the Mennonite community which migrated to Paraguay has initiated such collective entrepreneurial activities during the past centuries. The Mennonites are very industrious in Paraguay (Fig. 23) and they provide jobs to local indigenous people (Fig. 24), many of whom start the day drinking mate (Fig. 25). Figure 26 shows a third-grade class of Chaco Indians near a Mennonite community.

Fig. 23
figure 23

Mennonite factory; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 24
figure 24

Employee; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 25
figure 25

Tradional mate; photo © 2021 by Léo-Paul Dana

Full size image
Fig. 26
figure 26

Class; photo © 2021 by Léo-Paul Dana

Full size image

Grant and Rosenstock (2006) argued, Mennonite stick to a series of ethno-religious values, which might have been the reason for shaping collective entrepreneurial activities in their community. These values include, but are not limited to, (i) their strong work ethics, (ii) self-efficacy and self-reliance, which are among the main drivers of entrepreneurship, (iii) family cohesiveness and familiness, which are generally an integral part of immigrant minorities in various societies, and (iv) mutual aid and support. In addition to these values, as discussed by Dana and Dana (2008b), “Old Colony Mennonites have traditionally been opposed to two tenets of capitalism; namely, self-interest and the centrality of private property. According to their worldview, Gelassenheit, people should help their neighbours and share resources. Given this communal ethic, cooperatives can receive a high level of support from Mennonites”.

Three major Mennonite communities are living in the Paraguayan Chaco, including (i) the Menno Colony, which are the oldest residents of this region, (ii) the Fernheim Colony, which shaped in the 1930s, and (iii) the Neuland Colony, which was established in 1947. These minorities have significantly contributed to the socio-economic development of Paraguay through mechanisms such as the MEDA.Footnote 13 In their seminal work, Dana and Dana (2008b) have focused on the entrepreneurial activities of these collective entrepreneurs by interviewing 128 Paraguayan entrepreneurs. They have revealed that Mennonite cooperatives in the Chaco were successfully operating in this region, and those entrepreneurs could be role models for those acting in similar societies. Besides, interestingly, their success rate and the number of their success stories were higher than Chaco Indian cooperatives.