The Gran Chaco, a vast and ecologically diverse region, spans over half of Paraguay’s territory yet remains sparsely populated, with only about 3 percent of the country’s population residing there. Despite its size, the region’s economic activity is limited primarily to livestock farming, “accounting for only one-third of total economic activity, and a smaller, less-developed forestry sector in the south,” informed the director of a leading global think tank.  

In recent years, the Gran Chaco has emerged as a focal point for Paraguay’s development ambitions, bolstered by global investment flows and major infrastructure projects such as the Bi-Oceanic Corridor, which “is being constructed rapidly” and “is further contributing to the region’s development,” noted the director. Nevertheless, the region presents considerable environmental, infrastructural and socio-political challenges. 

One of the most urgent concerns is environmental degradation caused by unchecked agricultural expansion. Over the past two decades, the Chaco has lost approximately 13 million hectares of forest and land cover, endangering biodiversity and undermining the long-term viability of agrobusiness. The director stated, “The region’s forests are also at risk, as they are not economically profitable, yet they are crucial for environmental balance and ecological stability.”  

“The region’s forests are also at risk, as they are not economically profitable, yet they are crucial for environmental balance and ecological stability.” 

Director of a leading global think tank

The challenges are compounded by severe climate variability. The region oscillates between drought and flooding, creating a precarious environment for agriculture. A former senior official responsible for national development strategy remarked, “The major unresolved issue remains water management in a territory that alternates between extreme droughts and severe flooding.” 

In this context, the central Gran Chaco, where Mennonite communities have settled, stands out as the best positioned for climate-resilient agriculture and livestock operations. These communities, descendants of German-speaking settlers who arrived over a century ago, have built a self-reliant and technologically advanced model of agrobusiness. Notably, as the former senior official mentioned, they have “made significant innovations, applying Israeli technology to manage water more effectively.” 

The former official added that their meat processing plants and dairy operations are resilient enough to function for up to two years on stored water, offering a crucial buffer against climate volatility. With a per capita income “three times higher than the national average in Paraguay,” the Mennonites illustrate how strategic investment and climate adaptation can yield long-term success. 

These advantages are reinforced by the relatively healthier soils and well-maintained roads in the central Chaco - outcomes of both private investment and public infrastructure projects. “There has been significant state investment in road infrastructure, which has improved connectivity within the Gran Chaco and between the region and the rest of the country,” confided the former official. This infrastructure facilitates market access and reduces transport costs for agrobusinesses operating in these areas. 

However, a sharp contrast emerges in other parts of the Chaco. Areas inhabited primarily by indigenous communities and Paraguayan nationals continue to struggle with limited infrastructure and government support. Although “some of the local indigenous communities have established collaborative relationships with the Mennonite colonies,” overall “state presence in the region remains limited,” declared a senior programme partner at UNICEF in Paraguay.  

The disparity is most evident in water access. The UNICEF partner continued, “The problem of water supply is a serious issue for the region. Public investment to date has been insufficient” and “significant infrastructure is required for effective water harvesting.” Without adequate irrigation systems or reservoirs, most local farmers rely on erratic rainfall, which exposes them to devastating seasonal and long-term variability. 

“The problem of water supply is a serious issue for the region. Public investment to date has been insufficient.”

Senior programme partner at UNICEF, Paraguay

In the southern and peripheral zones, where both water access and soil health are declining, the risks are even more acute. These regions have attracted less investment and are more vulnerable to droughts, wildfires and erosion. Rain-fed agriculture with minimal technological input remains the norm, especially among smaller-scale indigenous producers.  

Moreover, the introduction of industrial agriculture is crowding out traditional livelihoods. The senior partner elaborated, “The introduction of crops such as soya and the use of chemical fertilisers have also threatened other economic activities, such as organic honey production by indigenous communities.” 

Adaptation strategies vary widely. While Mennonite communities implement advanced techniques like underground reservoirs, drought-resistant livestock breeds and efficient water harvesting, indigenous and smallholder operations often lack access to climate-smart tools due to limited financing and weak information networks. This inequality calls for more inclusive investment strategies and focused technical support to uplift less-resourced communities. 

Legal uncertainty adds another layer of difficulty. Despite increasing investor interest, the senior partner clarified, “only now is a comprehensive land registry for the Gran Chaco being formally established,” raising concerns about land security and tenure rights for both local residents and investors. 

Unlocking the Gran Chaco’s sustainable agrobusiness potential hinges on addressing critical infrastructure and governance gaps, with water access, reliable energy systems and improved connectivity as top priorities. Achieving this requires a coordinated strategy - governments must lead on regulation, land rights and public investment, while private actors drive local innovation. Public-private partnerships offer a pragmatic path forward to nurture progress and resilience. Still, achieving long-term sustainability will remain a delicate balancing act.