Massive capital investments in hydroelectric projects along Paraguay's river borders with Brazil and Argentina in the 1970s and 1980s were the most salient characteristic of the country's energy sector and the economy at large. Although not a traditionally significant part of the national economy, the energy sector became an important contributor to the country's balance of payments as Paraguay prepared to become the world's largest exporter of electricity in the 1990s. The rapid growth in energy investment in the 1970s rippled throughout the nation's economy, stimulating the explosive growth of the eastern border region. The construction industry derived the greatest benefits from the hydropower projects, but the manufacturing, agricultural, and transportation sectors also gained from the sudden growth in the east. Paraguay was expected to surpass the United States in the mid-1990s as the world's leader in per capita installed electricity.

Commercial energy represented only one-third of total energy consumption, mostly imported petroleum for the transportation sector. Paraguay was 100 percent dependent on foreign oil. Oil exploration had taken place sporadically since the 1940s, but no significant petroleum deposits had been found by 1988. Paraguay, however, was the most unexplored country in South America in terms of petroleum. Paraguay was increasingly experimenting with renewable alternatives to fossil fuels, such as sugar-based ethanol, an octane enhancer (see Renewable Energy Resources , this ch.). Mining accounted for only 0.4 percent of GDP in 1986.

Data as of December 1988