To reduce the nation's costly foreign-exchange expenditures on imported oil, the Paraguayan government in the 1980s experimented with a variety of nontraditional renewable energy resources. The most important of these experiments was a national plan for the use of ethanol, an octane enhancer and partial substitute for gasoline. The National Ethanol Plan mirrored efforts in Brazil to use sugarbased ethanol in vehicles, where most of Paraguay's petroleum was consumed. Ethanol policy was spearheaded by the National Commission on Fuel Alcohols and implemented by the government's Paraguay Ethanol Agency. In the 1980s, the policy was the subject of a national debate that examined the government's large role in the industry as a price fixer and promoter and weighed the industry's general inefficiency against its foreign-exchange savings.

Paraguay began producing ethanol in 1980. In the late 1980s, there were at least six fuel alcohol plants, and roughly ten more were planned into the 1990s. Most plants were located in canegrowing areas and used sugar or molasses to produce anhydrous alcohol, generally utilizing Brazilian technology. Hydrated ethanol, a complete gasoline substitute, also was produced for more than 7,000 specially made cars from Brazil. Ethanol production in the late 1980s exceeded 20 million liters. Analysts estimated that alcohol production substituted for 130,000 barrels of imported oil a year.

The government also experimented with other nontraditional energy resources. These included methanol, solar energy, wind energy, wood gasification, mini-hydroelectric plants, and gas generated from organic material.

Data as of December 1988