||The maize sector in Paraguay is going through a period of perplexing changes. Despite recent production gains, average maize yields remain far below those which could be achieved with relatively simple changes in management practices and wider use of currently available improved germplasm. Citing the high cost of inputs, low producer prices for maize, and an uncertain market, most farmers in Paraguay produce maize only for their own use, planting limited area and using few or no purchased inputs. This paper presents the results of a preliminary diagnostic study of the Paraguayan maize subsector carried out by researchers from the Departamento de Investigacón y Extensión Agropecuarla y Forestal (DIEAF) of Paraguay and CIMMYT. The broad objective of the study was to identify the major factors behind low maize productivity and thus facilitate the long range research planning of the DIEAF Maize Program. More specific objectives included: 1) to review recent developments In Paraguay's agricultural economy In general and the maize subsector in particular; 2) to assess the current and future demand for different types of maize and their production potential; 3) to Identify Inefficiencies or bottlenecks in the marketing system for maize which may be lowering economic incentives for producers; 4) to distinguish between technical constraints to maize production (which are best addressed through research) and economic and/or Institutional constraints (which are best addressed through policy reform); and 5) to explore the implications of the study's findings for the DIEAF Maize Program, and In particular to spell out the critical issues facing research policy makers. Data for the stUdy were collected In Aprll, 1989. Following a review of secondary data sources, a two-week reconnaissance survey was carried out In Paraguay's major maize production zones involving interviews with maize producers, assemblers, transporters, wholesalers, retailers, feed processors, and consumers. The informal reconnalssance survey was followed by a more formal survey of marketing agents (designed to generate information on maize marketing margins), as well as a survey of large-scale and small-scale maize producers (designed to verHy production practices used by commercial and subsistence farmers).