The eastern part of the Country of Paraguay, between the Paraguay and Paraná rivers, where most of the population lives, is a lowland, rising in the east and north to a plateau region. The region was once heavily forested, but forest land has been steadily depleted. The Paraná, south of the Iguaçu River (with its magnificent falls), separates Paraguay from Argentina. The Paraguay River also forms part of the border with Argentina, from its confluence with the Paraná north to the Pilcomayo River. The section west of the Paraguay River is a dry plain, part of the Chaco (see Gran Chaco ). Cattle are raised and quebracho is found in the woodlands of the Chaco Boreal. All the important cities are in the east. Besides Asunción, they are Villarrica , Concepción, and Encarnación.

About half of Paraguay's workers are engaged in agriculture and forestry; a much smaller percentage are employed in industry and mining, and many work outside the formal economy. The principal crops are cotton, sugarcane, soybeans, corn, wheat, tobacco, cassava, fruits, and vegetables; cattle and other livestock raising is also important. Orange groves furnish petitgrain, used in perfumes and flavorings. In addition to quebracho, hardwoods and cedars are commercially exploited. Meatpacking, sugar processing, textile and wood-products manufacturing, and the production of steel and consumer goods are the main industries. The country also has a large underground economy that encompasses smuggling, money laundering, and trafficking Andean cocaine.

Paraguay has minimal road and rail systems, and river transportation is the primary means of moving goods. Hydrovía, a proposed waterway to straighten and deepen the Paraná, was approved by Paraguay, Bolivia, Argentina, Brazil, and Uruguay in 1994, but environmental concerns have slowed implementation of the plan. The Itaipú Dam on the Paraná River, completed in 1991, is one of the world's largest, and the electricity it generates is economically vital to Paraguay. The Yacyretá hydroelectric project, also on the Paraná, was inaugurated in 1998.

The leading exports are soybeans, feed, cotton, meat, edible oils, electricity, wood, and leather. The leading imports are vehicles, consumer goods, tobacco, petroleum products, and electrical machinery. Paraguay is a member of Mercosur ; its main trading partners are Brazil, Uruguay, Argentina, and China. Customs duties furnish an important part of the country's revenues

Paraguay is governed under the 1992 constitution. The president, who is both head of state and head of government, is popularly elected to a five-year term and cannot be reelected. The legislature has two houses, the 45-seat Chamber of Senators and the 80-seat Chamber of Deputies. Members of both are popularly elected for five-year terms. The two main parties, both conservative, are the Colorado party, which has governed almost exclusively since 1947, and the Authentic Radical Liberal party. Administratively, the country is divided into 17 departments and the capital city.

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