<P> Economic growth in the post-World War II period occurred in the context of political stability characterized by authoritarian rule and patronage politics . Government economic policies deviated little from 1954 to the late 1980s, consistently favoring a strong private - enterprise economy with a large role for foreign investment . Unlike most Latin American economies, in Paraguay import tariffs were generally low, fiscal deficits manageable, and exchange rates not overvalued . These trends faltered in the 1980s as the government took a more active part in industry, deficits rose, and the national currency was generally overvalued and devalued numerous times . Throughout the post-World War II era, Paraguay had no personal income tax, and government revenues as a percentage of GDP were among the lowest in the world . </P> <P> Despite the sustained economic growth that marked the postwar period, the distribution of economic benefits was highly inequitable . Although GDP expanded rapidly in the 1970s, most economists estimated that income distribution worsened during the decade . Government spending on social services was particularly lacking . Paraguay's poverty was mostly a rural phenomenon, which increasingly involved competition for land in the eastern region near the Brazilian border, especially in the departments (administrative divisions) of Alto Paraná, Canendiyú, and Caaguazú . Nonetheless, land tenure was not generally the acute social problem it was in many developing countries . </P> <P> Although Paraguay faced significant obstacles to future economic development, it displayed extraordinary potential . Paraguay contained little oil and no precious metals or sea coasts, but the country was self - sufficient in many areas and was endowed with fertile land, dense forests, and swift rivers . The process of opening up the eastern border region to economic activity and continued agricultural expansion was expected to effect rapid changes in once - isolated Paraguay . Likewise, the development of a series of hydroelectric plants along the Río Paraná linked Paraguay to its neighbors and provided it access to cherished energy resources and badly needed export revenues . Finally, road construction united different departments of Paraguay and provided the country its first access to the Atlantic Ocean via Brazil . These processes of infrastructure development, hydroelectric expansion, agricultural colonization, and a cash crop explosion allowed Paraguay by the late 1980s to begin to tap its potential </P> <P> Until the Spanish established Asunción in 1537, economic activity in Paraguay was limited to the subsistence agriculture of the Guaraní Indians . The Spanish, however, found little of economic interest in their colony, which had no precious metals and no sea coasts . The typical feudal Spanish economic system did not dominate colonial Paraguay, although the encomienda system was established . Economic relations were distinguished by the reducciones (reductions or townships) that were established by Jesuit missionaries from the early seventeenth century until the 1760s . The incorporation of Indians into these Jesuit agricultural communes laid the foundation for an agriculture - based economy that survived in the late twentieth century . </P>

How do you think this affects economic activities in paraguay explain