The first half was a nervy encounter with both teams trying not to commit any mistakes and it took some good approach play from the Italians to break the deadlock. Sergio Zanetti combined well with Cleyton Baptistella to put his side ahead in the seventh minute.
Paraguay gradually got more into the game and after several attempts, they drew level when Jose Rotella fired a shot past Alexandre Feller. But parity lasted just 46 seconds when Patrick Nora's drive rebounded off the crossbar and onto the unfortunate Jose Luis Santander who was powerless to stop the ball bouncing into the net.
Paraguay's equaliser came just a minute and seven seconds in the second half when Fabio Alcaraz kept his cool and with the added momentum, the South Americans piled on the pressure and score again through Rene Villalba.
With the game won, they poured more salt into Italy's wounds when Rotella scored his second of the match. With the goal difference in the matches between Italy, Paraguay and Portugal, the Italians clinched second place to qualify for the next round, but Portugal miss out.