This study provides a preliminary description and diagnosis of the Paraguayan cotton production-distribution system. The general objective of the study is to identify opportunities which will allow the cotton production-distribution system to continue being a productive force contributing to the welfare of the small farmer and to national economic development. A conceptual framework is developed that relates the working of the cotton economy and its market participants to government institutions and macroeconomic forces that have a significant bearing upon its organization and performance. Selected aspects of cotton performance are evaluated in terms of their contribution to agriculture and national development goals. Main recommendations for future research are formulated in the areas of technical assistance to farmers, assemblers and ginners; market information programs; cotton lint processing; and programs to give small farmers more access to economic opportunities.