Paraguay's social protection system is currently in development. The Constitution of the Republic of Paraguay defines a general framework making social protection comprehensive and mandatory and leaving its establishment and definition for subsequent legislation. The system managing old-age, disability, and survivors' benefits began in the mid-20th century with the creation in 1943 of the Social Security Institute (Instituto de Previsión Social, IPS), which is currently the main institution in the sector. The country's social security is composed of the social security system and the National Health System, which target workers in the formal economy since coverage depends on social security contributions.
Over the last few years, non-contributory benefits have been seen as a support tool in the process of overcoming poverty in households living in the most vulnerable socio-economic conditions. For this reason, various non-contributory programmes were promoted, including social pensions, programmes focused on indigenous villages and programmes of conditional transfers such as Tekoporã, Abrazo and Ñopytyvo. The Sâso Pyahu system was implemented in early 2012 in the context of the Public Policy for Social Development 2010-2020 Paraguay for All (Paraguay para todos y todas) with the purpose of increasing the efficiency of social protection policies and expanding coverage to improve the multidimensional factors responsible for poverty and extreme poverty. The initiative is composed of 11 flagship programmes centred on four main axes: quality of life, social inclusion, inclusive economic growth, and results-based management. Paraguay for All emphasizes the exercise and enjoyment of rights and the search for equality based on a model of inclusive development. However, despite the increase in coverage of the conditional transfer programmes, access to non-contributory pensions remains low in practice (8.6 per cent of the total population in 2009).
The range and efficiency of social protection in Paraguay are limited, primarily due to the fragmentation and spread of the different components and public programmes of the social security system. The IPS manages the largest part of the Social Security system in terms of risks and beneficiaries. The IPS includes approximately 50 per cent of the contributing workers. Other funds cover old-age and survivors’ benefits: the Fiscal Fund, which includes military and police personnel and public servants; the Municipal Fund, which consists of all the municipal workers of the country; the Railway Fund; the Banking Fund; the Parliament Fund; and the Itaipú Fund. The National Health System has private and public entities, including the Social Security Institute, that are responsible for providing health care to the population. However, overlapping functions and a lack of coordination between the different organizations have led to an unequal distribution of health care in the country's different regions. Currently, eight out of every ten citizens lack old-age protection and seven out of every ten workers do not have health insurance.
Paraguay’s current major challenge regarding social security is to create and implement an integrated social protection system that reaches all of the population and guarantees benefits in a permanent and sustainable manner.