This chapter assesses the state of social protection in Paraguay in comparison with peer countries. It reviews non-contributory social assistance and health, as well as contributory health and pension schemes. The chapter identifies key gaps in coverage and adequacy alongside related financing challenges.
Financing Social Protection in Paraguay
The Role of General Revenues and Social Security Contributions
Abstract
As in most countries, Paraguay’s social protection system spans the entire life cycle, with distinct programmes targeting children, working-age adults and older persons. Non-contributory social assistance programmes provide a basic social protection floor, targeting vulnerable groups such as low-income households, children and older persons (for a more detailed description see Chapter 4). For example, the Tekoporã programme provides cash transfers and guidance regarding vaccination and school enrolment to poor households with children, pregnant women or disabled family members; the programme includes a different benefit targeted at indigenous households. Another social assistance programme, Adulto Mayor, offers a minimum non-contributory pension to elderly individuals without other pension entitlements. A recently introduced programme, Hambre Cero, ensures free school meals for all children enrolled in public schools. The programmes are complementary and target different groups. Another initiative, Tenonderã, aims to promote economic inclusion among previous beneficiaries of Tekoporã by providing seed capital for establishing small enterprises, along with training. In addition, public health services are available free of charge to individuals not covered by private health insurance. The contributory social protection pillar consists primarily of two large social insurance funds: the Instituto de Previsión Social (IPS), which provides health, maternity, sickness and pension benefits to private sector employees, and the Caja Fiscal, which operates as a pension fund for public sector workers. A number of smaller public pension funds also exist, as well as private health insurance and private pension funds (see Chapter 3).
Social protection coverage—including healthcare—remains limited in Paraguay relative to regional peers. In 2024, only 38% of the population aged 15 or above contributes or benefits from social insurance—such as contributory pensions and health insurance—either directly or indirectly as a dependent member of the family (see Chapter 2 for more detail). The share of the population covered by social insurance is well below the average of the Latin America and Caribbean (LAC) countries (49%) presented in Figure 1.1, Panel A. According to household survey data, coverage of the main social assistance programmes, reached 14% of the population in 2024, compared to an average of 16% in LAC countries (Figure 1.1, Panel B). These figures highlight substantial gaps in social protection coverage across the Paraguayan population. However, coverage of the free school meals programme Hambre Cero, and the social pension Adulto Mayor increased significantly in 2025.
Coverage of social assistance and social insurance (incl. healthcare) in Paraguay and benchmarking countries, 2024 or latest year available
Notes: The social protection coverage indicators displayed include health benefits and in-kind benefits. For health insurance benefits, only the population aged 15 years or older is considered (Panel A).
Source: OECD KIIbIH database based on country household surveys.
In Paraguay, around one-fifth of the population is poor, while approximately 15% experiences multidimensional poverty. Poverty is measured using two indicators: those who live below the poverty line (e.g. less than PYG 897 168 per month per person in urban areas) are considered monetarily poor and those deprived in housing conditions, education, and/or employment are considered multidimensionally poor. Poverty is particularly prevalent among children, based on both monetary and multidimensional poverty indicators. Among adults, poverty levels are more evenly distributed across age cohorts, with no strong differences between men and women. Poverty levels are also substantially higher in rural areas compared to urban areas under both measurement approaches.
Only around half of individuals living in poverty receive social assistance benefits and only 6% are covered by contributory social insurance. According to own estimates from the Encuesta Permanente de Hogares Continua (EPHC) survey, approximately half of those living in monetary and/or multidimensional poverty do not receive any social assistance benefit, whether cash transfers or in-kind benefits, including non-contributory pensions, Tekoporã transfers or other public benefits. Conversely, about 32% of non-poor households receive social assistance benefits, indicating that benefits extend beyond poor families and there are inclusions errors.
Social assistance expenditure in Paraguay has increased in recent years but remains below levels observed in most other Latin American countries. Paraguay has increased social assistance expenditure in recent years reaching 1.5% of Gross Domestic Product (GDP) by 2025. Nonetheless, these expenditure levels are below those observed in several regional peer countries (e.g. 2% of GDP in Brazil and 4.1% of GDP in Chile) (Figure 1.2, Panel A). The largest share of expenditure is allocated to the Adulto Mayor programme (0.75% of GDP), which provides a non-contributory pension to older people without other pension entitlements (Figure 1.2, Panel B). Until 2024, the second largest programme was Tekoporã, representing 0.15% of GDP. However, the recently introduced Hambre Cero programme, which provides free meals in public schools, has become the second largest programme, amounting to 0.58% of GDP in 2025. Other social assistance programmes remain marginal, together presenting only around 0.01% of GDP.
Note: The category Others in Panel B includes subsidies for off-season fishers and benefits of the Tenonderã programme.
Source: World Bank ASPIRE database, https://www.worldbank.org/en/data/datatopics/aspire. Data on Paraguay provided by MEF.
Coverage gaps in social assistance programmes remain significant. Figure 1.3, Panel A shows the share of the eligible population receiving benefits under each programme and those excluded. According to own calculations based on the EPHC, only 17% of families eligible for Tekoporã received the conditional cash transfer because they are monetarily and/or multidimensionally poor in 2024.1 Coverage among eligible indigenous families reached 92%, according to administrative data.2 Based on the EPHC, the Adulto Mayor programme covered 62% of the eligible population aged 65 or above in 2024. The programme aims for universal coverage of eligible individuals aged 65 and above but is still in its roll-out phase. In 2024, Adulto Mayor only included individuals aged over 73, whereas by March 2026 it already included individuals aged 69 and above. Adulto Mayor also provides coverage to severely disabled people over the age of 60 and indigenous persons aged over 55. However, the programme’s coverage among these subgroups cannot be assessed with the EPHC survey data. The Hambre Cero programme has achieved rapid and broad coverage due to its categorical targeting of children enrolled in public schools. Coverage is nearly universal at the initial and basic education levels, while at the secondary level only around 19% of students in public schools were reached in 2024. All programmes aim to expand coverage further in the coming years, contingent on the availability of adequate funding, and state capacity.
Notes: The EPHC survey excludes the departments of Boquerón and Alto Paraguay, indigenous communities, collective housing and live-in domestic workers. Panel A: To calculate coverage rates for Tekoporã, pre-transfer monetary poverty is considered to identify the eligible population. The coverage rate for Adulto Mayor refers to individuals aged 65 years or above and excludes indigenous or disabled people who are eligible for the benefit at earlier ages. Exclusion rates denote the share of the eligible population not receiving the benefit. Panel B: The graph in Panel B shows the average per capita benefit for Tekoporã (i.e. the benefit divided by the number of family members) expressed as a share of the urban and rural poverty lines (PYG 897 168 and PYG 654 657 per month per person). The average benefit per person is PYG 699 577 per month for Adulto Mayor in 2024 and PYG 224 001 per month for Hambre Cero.
Source: OECD based on EPHC (2024[1])
Benefit adequacy under Paraguay’s social assistance programmes remains low. Across all three schemes, benefit levels fall below the poverty line, except for the Adulto Mayor benefit in rural areas (Figure 1.3, Panel B). Adulto Mayor’s social pension is intended to cover basic food consumption and set at 25% of the minimum wage. The benefit per person equivalent to 78% of the urban poverty line and 107% of the rural poverty line may constitute the sole source of income for older people above 65 without other pension entitlements. Hambre Cero’s per-capita benefit corresponds to the average cost per meal and amounts to 25% of the urban poverty line. As the programme is designed to provide meals within schools, there are no concerns regarding the adequacy of the benefit. The benefit levels for Tekoporã appear very low compared to those of the other two programmes, equivalent to only 9-12% of the poverty line. This partly reflects the fact that Tekoporã benefits are calculated on a per-capita basis at the family level, whereas the other programmes provide benefits to individuals. However, it also reflects the relatively low benefit amounts provided under Tekoporã.
Unlike Adulto Mayor and Hambre Cero, Tekoporã benefits are not indexed to inflation. Both Hambre Cero and Adulto Mayor have built-in mechanisms that protect the benefit value over time: Hambre Cero’s school meal reference prices are adjusted through the national food price index, and Adulto Mayor pensions are legally tied to the minimum wage, which is updated annually. By contrast, benefit levels under Tekoporã have remained largely unchanged in nominal terms since the programme’s launch in 2005, except for a 25% increase in 2023. The Ministry of Development estimated that if Tekoporã had been indexed to food price inflation since its inception, its benefit today would be around 3.5 times higher than its current level.
Paraguay’s public health system, administered by the Ministry of Public Health and Social Welfare (MSPBS), provides universal coverage. However, effective access to healthcare services remains incomplete in cases of illness or injury. According to the household survey (EPHC, 2024[1]), approximately 30% of individuals reported that they were sick or injured in the preceding three months and of those 73% sought professional medical care. Among those not receiving medical treatment for financial, proximity or quality of healthcare reasons, 55% live in rural areas, 51% are women, and 19% are above age 65. The gap between intended universal coverage and actual access to healthcare could be explained by long distances to the nearest health facility in rural areas, long waiting times for appointments and treatment, or high out-of-pocket expenditures for medications and other essential services not fully covered by the public system.
Access to health insurance in Paraguay remains strongly correlated with household income. Only 27% of the total population is covered by health insurance and coverage through public social security (IPS) or private insurance schemes increases progressively with income (Figure 1.4, Panel A). In 2024, over 96% of individuals in the lowest household income quintile lacked any form of health insurance, highlighting significant gaps in social insurance coverage among the poorest households. By contrast, nearly 57% of individuals in the highest household income quintile were health insured, primarily through the IPS (35.5%) and private providers (19%). Among the working population without health insurance, 70% earn less than the minimum wage.
Lack of health insurance in Paraguay is concentrated among individuals under the age of 65 and varies significantly across regions, with lower coverage in more remote areas. For example, less than half of the population in Asunción have no health insurance (45%) compared to 87% in the region Canindeyú (Figure 1.4, Panel B). Overall, 56% of all individuals without health insurance live in urban areas and half are women. Among the uninsured 93% are under the age of 65, indicating that health insurance coverage among the elderly is not so low (38% aged above 65 have health insurance).
Notes: The EPHC does not include the departments of Boquerón and Alto Paraguay (displayed in grey), indigenous communities, collective housing or live-in domestic workers. The horizontal axis in Panel A depicts per capita household income quintiles.
Source: OECD based on EPHC (2024[1]).
Health outcomes have improved over time but regional disparities persist
Life expectancy at birth in Paraguay remains slightly below the LAC average but has improved steadily over recent decades. It increased from 67 years in 1990 to 78 years for women and 73 years for men in 2024. Across the LAC region, life expectancy rose from 68 years to 76 years on average over the same period. According to projections by the INE, life expectancy at birth in Paraguay is expected to reach 82 years for women and 77 years for men by 2050.
Infant health outcomes in Paraguay have improved over the past two decades, although notable regional disparities in vaccination rates remain. The infant mortality rate—measured as infant deaths per 1 000 live births—declined from 37.7 in 1990 to 15.1 in 2023 (Figure 1.5, Panel A), reflecting progress in child health outcomes. However, Paraguay’s rate of improvement has lagged behind the LAC regional average. While Paraguay’s infant mortality rate was below the LAC average in 1990, it now slightly exceeds it, indicating scope for improvement. In addition, vaccination coverage is another key determinant of infant health outcomes. Figure 1.5, Panel B presents the share of children under one year of age who are vaccinated, revealing significant regional disparities. Coverage is notably lower in rural departments such as Boquerón and Presidente Hayes. These lower vaccination rates are correlated with higher infant mortality in the same regions (World Bank, 2018[2]). This finding is consistent with the lower availability of health specialists in these departments.
Note: Vaccination rates are lowest in dark blue regions and highest in light green/yellow regions. The high vaccination rate (yellow, above 100%) in Alto Paraguay is due to frequent migration between the regions.
Source: Infant mortality data from World Development Indicators, World Bank; Vaccination rates by MSPBS; Population estimates by INE available in 2025.
Public expenditure on health in Paraguay has increased yet remains below its target
While public expenditure on health in Paraguay has increased substantially over the past decade, it remains low by international standards. Between 2013 and 2023, public health spending (from MSPBS, IPS and other public providers) rose from 2.7% to 4.7% of GDP, reflecting a clear commitment to strengthening the health system (Figure 1.6, Panel A). Despite this progress, Paraguay’s spending remains below the 6% of GDP benchmark target set by the MSPBS and the 5% of GDP benchmark recommended by the WHO for achieving universal health coverage. Moreover, Paraguay continues to allocate less to public health than many other countries in the LAC region (Figure 1.6, Panel B). To advance towards universal healthcare and improve the provision of essential health services and medicines, a sustained increase in public health expenditure will be necessary.
Note: The government health expenditure comprises health expenditure by the MSPBS and IPS but excludes government subsidies for private health insurance provided to public sector workers.
Source: WHO Global Health Observatory (2024[3]).
Government health expenditure in Paraguay, through the MSPBS and IPS schemes, accounts for only half of total health spending, which is low by regional standards. In countries such as Colombia, Uruguay, and Guyana, government schemes finance nearly 70% of total health expenditure (Figure 1.7), highlighting Paraguay’s comparatively limited public expenditure in the health sector. The remaining health expenditure in Paraguay is predominantly financed through out-of-pocket payments by individuals (approximately 36%) and voluntary private health insurance schemes (around 10%). This financing structure places a disproportionate burden on households and may hinder equitable access to healthcare services. The high out-of-pocket costs for medicines and health treatment can lead to impoverishment and creates barriers for people to timely access healthcare, as individuals may need to mobilise funds before seeking treatment. According to a study by the World Bank, out-of-pocket expenditure on health puts a higher burden on the poor, rural and indigenous population in Paraguay (World Bank, 2018[2]). Further improvements of the public health system, alongside broader coverage through health insurance, could contribute to a further reduction in out-of-pocket health expenditure. The financing of healthcare and in particular of health insurance is discussed in Chapter 2.
Health expenditure per capita in USD as a share of total health expenditure
Note: Public health expenditure from government schemes includes expenditure from the non-contributory health scheme by the MSPBS and the contributory health scheme by the IPS, but not the health subsidies to public sector workers.
Source: WHO Global Health Observatory (2024[3]).
Overall pension coverage in Paraguay remains low by regional standards. Approximately 34% of individuals aged 65 and over do not receive any form of pension, highlighting significant gaps in the social protection system for the elderly (Figure 1.8). Of the population aged 65 or above, 52% benefit from the non-contributory Adulto Mayor social pension, while just 14% receive a contributory pension through either public pension funds such as the IPS, Caja Fiscal, or other sector-specific cajas, or private pension funds.
Share of population aged 65 or above receiving a pension by income quintile
Notes : Non-contributory pensions include Adulto Mayor and Tekoporã. Contributory pensions include public pension funds (e.g. IPS, Caja Fiscal and other public pensions funds) and private pension funds. The horizontal axis depicts per capita household income quintiles.
Source: OECD based on EPHC (2024[1]).
Coverage of contributory pensions is concentrated among higher-income groups and remains limited overall. In the highest income quintile, only 36% of elderly individuals receive a contributory pension (public or private), and nearly half do not receive any pension at all, suggesting a reliance on private savings or other income sources in retirement. In contrast, approximately 70% of elderly individuals in the bottom two income quintiles receive non-contributory pensions. Notably, eligibility for the Adulto Mayor pension is based solely on the age criteria and the absence of registered income (such as wages from formal employment or pension benefits) and does not involve proxy-means testing. As a result, some recipients may be situated in higher-income quintiles.
While contributory pension schemes in Paraguay provide generous replacement rates, their population coverage remains limited. The contributory pension system is characterised by significant institutional fragmentation, comprising eight distinct public pension funds (cajas) that serve various groups of formal private and public sector workers. The two principal schemes—the IPS for private sector workers and the Caja Fiscal for public sector workers—account for approximately 97% of all insured individuals. While benefit levels under these schemes are generous for individuals who meet the required contribution thresholds, those with limited contribution histories may receive no pension benefits (see Chapter 3). In addition to public pension schemes, individuals may also participate in voluntary private retirement savings schemes.
Pension expenditure has increased, but deficits in public pension funds remain
In 2024, total public expenditure on pensions in Paraguay amounted to 4.2% of GDP (Figure 1.9, Panel A). This included 1.5% of GDP allocated to the IPS, 1.7% to the Caja Fiscal, and 0.3% to other sector-specific pension funds (including Caja Bancaria, Caja Parlamentaria, Caja Ferroviaria, Caja Municipal, and Caja ANDE). Spending on the non-contributory pension Adulto Mayor reached 0.7% of GDP in the same year. Since 2020, pension-related public expenditure has shown a clear upward trend, particularly in the IPS, Caja Fiscal, and Adulto Mayor pensions (Figure 1.9, Panel B).
Note: Other cajas comprise Caja Bancaria, Caja Parlamentaria, Caja Ferroviana, Caja Municipal and Caja ANDE. The spending of the IPS and the cajas is partly financed by contributions.
Source: MEF.
The Caja Fiscal has recorded sustained deficits for a decade, indicating the need for parametric and systemic reforms to ensure long-term solvency. In 2024, the deficit of the Caja Fiscal amounted to 0.66% of GDP or a quarter of Paraguay’s total fiscal deficit. In particular, the teachers’ fund and military and police funds contribute to the growing deficit of the Caja Fiscal. The deficits are financed with surpluses from other civil pension funds (in the case of the teachers’ fund) or through general tax revenues (in case of the military and police funds). This raises equity concerns, as one group of workers or the general public pays for the generous schemes of another professional group (see Chapter 3).
Paraguay does not have an unemployment insurance scheme. In South America, several countries have implemented unemployment insurance systems for formal workers (e.g. Argentina, Brazil, Uruguay), while others have not (e.g. Bolivia, Peru, Guyana) (ILO, 2025[4]). Table 1.1 presents an overview of unemployment protection schemes implemented across South American countries. Six countries have social insurance schemes offering unemployment protection, financed either entirely through contributions or partially tax financed. Chile operates a mandatory individual savings account complemented with subsidized insurance. In contrast, five countries in the region, including Paraguay, do not provide unemployment insurance and rely solely on separation payments.
Unemployment protection as anchored in law by type of scheme, 2023 or latest available year
Source: Adapted from ILO (2025[4]), World Social Protection Report 2024-26, Figure 4.25.
The absence of an unemployment insurance scheme in Paraguay constitutes a gap in social protection coverage, increasing the risk of poverty for workers who lose their formal employment. However, introducing unemployment benefits in economies with high informality poses significant challenges: financing costs can be substantial, as workers frequently transition between formal and informal employment and could claim benefits while working informally. Thus, the establishment of an unemployment insurance would require an increase in social security contributions and the development of robust monitoring and enforcement mechanisms to ensure eligibility compliance. Given current budget constraints within the social security system, the government may choose to prioritise stabilising the financing of health care and pension schemes before introducing unemployment insurance.
Paraguay’s ability to finance expanded and more inclusive social protection is severely constrained by its low tax-to-GDP ratio. The tax-to-GDP ratio, including social security contributions, stood at 14.5% in 2023, which is among the lowest in the region (see Chapter 5). The current tax revenue is not sufficient to cover the wages of public sector workers, pensions and debt services (MEF, 2024[5]). As mentioned before, the deficit of the Caja Fiscal represents a particularly pressing challenge. In this context, there is currently very limited fiscal space for additional spending to extend social assistance programmes, improve benefit adequacy, or support long-term sustainability of the contributory system.
The mandatory contributory health insurance scheme administered by the IPS faces increasing financial pressures, as expenditure growth continues to outpace revenues. In its current financial position, where health insurance costs per worker exceed the contributions received, the IPS faces limited incentives to expand coverage in the short term (see Chapter 2). This represents a key constraint on efforts to broaden social insurance coverage to additional workers and professional groups.
The share of workers contributing to social insurance is very low. In 2024, only 24% of the population contributed to a pension fund and approximately 12.6% of the population contributed to the IPS health insurance. Most public sector workers contribute to private health insurance except for certain professions that are covered under the IPS health insurance (see Chapter 2). Social security contribution rates under the IPS are broadly aligned with those observed in the LAC region, with employers contributing 16.5% and employees 9% of gross earnings. However, lack of social insurance remains particularly high in Paraguay, with 76% of the workforce being not covered. Independent workers are only covered on a voluntary basis, and most opt not to contribute (see Chapter 6). This narrows the contribution base and restricts revenue generation for social protection.
Over time, Paraguay will need to progressively increase tax revenues to finance essential public spending, including social protection and other key areas such as education and infrastructure. These reforms should be accompanied by measures to formalise the economy, and to ensure that future economic growth will be conducive to tax revenue growth. The remainder of the report explores the financing challenges associated with Paraguay’s social protection system and outlines potential avenues for mobilising additional financial resources from taxes and social security contributions as well as policies to expand social insurance coverage.
Chapter 2 analyses the fiscal risks within the health sector, with particular attention to enhancing revenues of the IPS Health Fund.
Chapter 3 examines the financing challenges of contributory pension schemes, focusing on the IPS Pension Fund and the Caja Fiscal.
Chapter 4 describes Tekoporã, Hambre Cero, and Adulto Mayor in detail and presents costing scenarios for the expansion of these key social assistance programmes.
Chapter 5 reviews the structure of Paraguay’s tax system and assesses options for increasing domestic revenue mobilisation.
Chapter 6 discusses the prevalence of individuals that do not have access to social insurance and evaluates policy measures to extend coverage.
References
[1] EPHC (2024), Encuesta Permanente de Hogares Continua de Paraguay, Instituto Nacional de Estadística (INE) Paraguay, https://www.ine.gov.py/microdatos/Encuesta-Permanente-de-Hogares-Continua.php.
[4] ILO (2025), World Social Protection Report 2024-26, International Labour Organization, https://www.social-protection.org/gimi/ShowWiki.action?id=52.
[5] MEF (2024), Public Finance Report of the Republic of Paraguay, Ministerio de Economía y Finanzas de Paraguay, Asunción, https://www.mef.gov.py/dependencias/viceministerio-administracion-financiera/gerencia-gestion-financiera-estado/direccion-general-presupuesto/informes-las-finanzas-publicas.
[3] WHO (2024), The Global Health Observatory, World Health Organization, https://www.who.int/data/gho.
[2] World Bank (2018), Paraguay Public Expenditure Review in the Human Development Sectors and Fiscal Management, World Bank, Washington DC, https://documents1.worldbank.org/curated/en/947381713366044473/pdf/Paraguay-Public-expenditure-review-in-the-human-development-sectors-and-fiscal-management-spending-better-for-better-lives.pdf.
← 1. Estimating the total number of Tekoporã beneficiary households using the EPHC faces several limitations. However, as the EPHC is the primary data source for measuring poverty. This study assumes that the estimated share of poor households receiving Tekoporã is accurate.
← 2. The EPHC excludes the provinces of Alto Paraguay and Boquerón where there is a high concentration of indigenous population. As a result, the coverage of Tekoporã among indigenous population cannot be estimated using the EPHC.