2021 Investment Climate Statements: Paraguay

Policies Towards Foreign Direct Investment

The Paraguayan government publicly encourages private foreign investment, but U.S. companies often struggle with practices that inhibit or slow their activities. Paraguay guarantees equal treatment of foreign investors and permits full repatriation of capital and profits. Paraguay has historically maintained the lowest tax burden in the Latin American region, with a 10 percent corporate tax rate and a 10 percent value added tax (VAT) on most goods and services. Despite these policies, U.S. companies continue to have difficulty with investments and contracts in Paraguay, including questionable public procurement adjudications, seemingly frivolous legal entanglements taking multiple years to resolve, non-payment and delayed payments from Paraguayan government customers, and opaque permitting processes that slow project execution.

The Ministry of Industry and Commerce (MIC) signed in February 2021 an MOU with the Ministry of Justice to strengthen the rule of law and provide additional legal security to foreign investments in the country. Within MIC, REDIEX provides useful information for foreign investors, including business opportunities in Paraguay, registration requirements, laws, rules, and procedures.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities may establish and own business enterprises. Foreign businesses are not legally required to be associated with Paraguayan nationals for investment purposes, though this is strongly recommended, on an unofficial basis, by national authorities.

There is no restriction on repatriation of capital and profits. Private entities may freely establish, acquire, and dispose of business interests.

Under the Investment Incentive Law (60/90) and the maquila program, the government has an approval mechanism for foreign investments that seeks to estimate the proposed investment’s economic impact in areas including employment, incorporation of new technologies, and economic diversification.

Other Investment Policy Reviews

The WTO conducted an Investment Policy Review in 2017. Please see following website: https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=240507,87161,40418,27051&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=False&HasSpanishRecord=False 

Business Facilitation

Paraguay has responded to complaints about its traditionally onerous business registration process — previously requiring new businesses to register with a host of government entities one-by-one — by creating a portal in 2007 that provides one-stop service. The Sistema Unificado de Apertura y Cierre de Empresas – SUACE ( www.suace.gov.py ) – is the government’s single platform for registering a local or foreign company.  The process takes about 35 days.

On January 8, 2020, President Abdo Benitez signed law 6480 to facilitate the creation of SMEs. A new registration process allows individuals to complete the required forms online and at no cost. The approval process takes between 24 and 72 hours. This new registration process has been operational since July 2020.

Outward Investment

There are no restrictions to Paraguayans investing abroad. The Paraguayan government does not incentivize or promote outward investment.

Paraguay has bilateral investment agreements or treaties with the following countries: Austria; Belgium; Bolivia; Chile; Costa Rica; Cuba, Czech Republic, El Salvador; France; Germany; Hungary; Italy, Korea; Luxembourg; the Netherlands; Peru; Portugal, Romania; South Africa; Spain; Switzerland; Taiwan; the United Kingdom; and Venezuela.

Paraguay is a founding member of the Mercosur common market, formed in 1991. Mercosur has investment protocols for internal and external investment. Mercosur’s full members are Argentina, Brazil, Paraguay, and Uruguay. Venezuela’s membership was suspended in 2016. Bolivia is an associate member, having signed an accession agreement in 2012 that has been ratified by all members except Brazil. Mercosur has investment agreements with Bolivia, Canada, Chile, Colombia, Ecuador, Egypt, India, Israel, Mexico, Palestine, Peru, and the Southern African Customs Union (SACU). Mercosur and the European Union reached a free trade agreement June 28, 2019, but the final text is pending ratification by Mercosur and EU member parliaments before entry into force. Mercosur also reached a free trade agreement August 23, 2019 with the European Free Trade Association, but this agreement still needs parliamentary approval by all parties involved.

The United States and Paraguay do not have a Bilateral Investment Treaty, a Free Trade Agreement, or a Bilateral Taxation Treaty. The two countries signed a Trade and Investment Framework Agreement (TIFA) in January 2017 that Paraguay ratified in December 2017 and formally entered into force in March 2021.

Transparency of the Regulatory System

Proposed Paraguayan laws and regulations, including those pertaining to investment, are usually available in draft form for public comment after introduction into senate and lower house committees. In most instances, there are public hearings where members of the general public or interested parties can provide comments.

Regulatory agencies’ supervisory functions over telecommunications, energy, potable water, and the environment are inefficient and opaque. Politically motivated changes in the leadership of regulating agencies negatively impact firms and investors. Although investors may appeal to the Comptroller General’s Office in the event of administrative irregularities, corruption has historically been common in this and other institutions, as time-consuming processes provide opportunities for front-line civil servants to seek bribes to accelerate the paperwork.

While regulatory processes are managed by governmental organizations, the Investment Incentive Law (60/90) establishes an Investment Council that includes the participation of two private sector representatives.

Public finances and debt obligations of government institutions, agencies, and state-owned enterprises (SOEs) are available online and mostly centralized by the Ministry of Finance.

International Regulatory Considerations

Paraguay is a founding member of the Mercosur common market, which was formed in 1991. As Mercosur’s purpose is to promote free trade and fluid movement of goods, people, and currency, each country member is expected to adjust their regulations based on multilateral treaties, protocols, and agreements.

Paraguay is a member of the WTO and notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.

Legal System and Judicial Independence

Paraguay has a Civil Law legal system based on the Napoleonic Code. A new Criminal Code went into effect in 1998, with a corresponding Code of Criminal Procedure following in 2000. A defendant has the right to a public and oral trial. A three-judge panel acts as a jury. Judges render decisions on the basis of (in order of precedence) the Constitution, international agreements, the codes, decree law, analogies with existing law, and general principles of the law.

Private entities may file appeals to government regulations they assess to be contrary to the constitution or Paraguayan law. The Supreme Court is responsible for answering these appeals.

The judiciary is a separate and independent branch of government, however there are frequent media reports of political interference with judicial decision making. Judicial corruption also remains a concern, including reports of judges investing in plaintiffs’ claims in return for a percentage of monetary payouts.

Paraguay has a specialized court for civil and commercial judicial matters.

Laws and Regulations on Foreign Direct Investment

The Investment Incentive Law (60/90) passed in 1990 permits full repatriation of capital and profits. No restrictions exist in Paraguay on the conversion or transfer of foreign currency, apart from bank reporting requirements for transactions in excess of USD 10,000. This law also grants investors a number of tax breaks, including exemptions from corporate income tax and value-added tax.

The 1991 Investment Law (117/91) guarantees equal treatment of foreign investors and the right to real property. It also regulates joint ventures (JVs), recognizing JVs established through formal legal contracts between interested parties. This law allows international arbitration for the resolution of disputes between foreign investors and the Government of Paraguay.

In December 2015, former President Cartes signed an Investment Guarantee Law (5542/15) to promote investment in capital-intensive industries. Implementing regulations were published in 2016. The law protects the remittance of capital and profits, provides assurances against administrative and judicial practices that might be considered discriminatory, and permits tax incentives for up to 20 years. There is no minimum investment amount, but projects must be authorized by a joint resolution by the Ministry of Finance and Ministry of Industry and Commerce.

In 2013 the Paraguayan Congress passed a law to promote public-private partnerships (PPP) in public infrastructure and allow for private sector entities to participate in the provision of basic services such as water and sanitation. The government signed implementing regulations for the PPP law in 2014. As a result, the Executive Branch can now enter into agreements directly with the private sector without the need for congressional approval. In 2015, the Government of Paraguay implemented its first contract under the new law. In 2016, it awarded its second PPP to a consortium of Spanish, Portuguese, and local companies to expand and maintain two of the country’s federal highways. Paraguay’s bid for an airport expansion PPP in Asuncion in 2016, was officially cancelled in October 2018 due to concerns over the contracting process. No other PPPs have been awarded since, although some are under consideration by the Ministry of Public Works. Large infrastructure projects are usually open to foreign investors.

The Paraguay government seeks increased investment in the maquila sector, and Paraguayan law grants investors a number of incentives. The maquila program entitles a company to foreign investment participation of up to 100 percent and to special tax and customs treatment. In addition to tax exemptions, inputs are allowed to enter Paraguay tax free, and up to 10 percent of production is allowed for local consumption after paying import taxes and duties. There are few restrictions on the type of product that can be produced under the maquila system and operations are not restricted geographically. Ordinarily, all maquila products are exported.

Paraguay took steps in 2019 to demonstrate increased transparency in its financial system with the aim of attracting additional foreign investment. In December 2019, President Abdo Benitez signed into law the last of a series of twelve anti-money laundering laws at the recommendation of the Financial Action Task Force against Money Laundering in Latin America (GAFILAT). The laws comply with international standards and facilitate the fight against money laundering, terrorist financing, and the proliferation of weapons of mass destruction. More information on the anti-money laundering laws and regulations can be found here: http://www.seprelad.gov.py/disposiciones-legales-i68 

Paraguay’s budget and information on debt obligations were widely and easily accessible to the general public, including online.  The published budget was adequately detailed and considered generally reliable.  Revised estimates were made public in end-of-year and in-year execution reports. Paraguay’s Comptroller’s Office selected sections of the government’s accounts for audit according to a risk assessment because it lacks sufficient resources to audit the entire executed budget annually.

REDIEX provides a website to facilitate access to relevant legislation, laws, and regulations for investors: www.bit.do/REDIEX20 

Competition and Anti-Trust Laws

Paraguay passed a Competition Law in 2013, which entered into force in April 2014. Law 4956/13 explicitly prohibits anti-competitive acts and created the National Competition Commission (CONACOM) as the government’s enforcement arm.

Expropriation and Compensation

Private property has historically been respected in Paraguay as a fundamental right. Expropriations must be sanctioned by a law authorizing the specific expropriation. There have been reports of expropriations of land without prompt and fair compensation.

Dispute Settlement

ICSID Convention and New York Convention

Paraguay is a member of the International Center for the Settlement of Investment Disputes (ICSID). Paraguay is a contracting state to the New York Convention. Under the 1958 New York Convention, Paraguay elaborated and enacted Law 1879/02 for arbitrage and mediation.

Investor-State Dispute Settlement

Law 117/91 guarantees national treatment for foreign investors. This law allows international arbitration for the resolution of disputes between foreign investors and the Government of Paraguay. Foreign decisions and awards are enforceable in Paraguay.

Local courts recognize and enforce foreign arbitral awards issued against the government. According to the International Centre for Settlement of Investment Disputes (ICSID), Paraguay has had three concluded investment disputes involving foreign investors. One registered in 1998 and two in 2007. ICSID resolved the first in the private company’s favor, and the other two in the Paraguayan government’s. There are no records of U.S. investors using the ICSID mechanism for an investment dispute in Paraguay.

Paraguay ranks 72 out of 190 for “Ease of Enforcing Contracts” in the World Bank’s 2020 Doing Business Report. World Bank data states the process averages 606 days and costs 30 percent of the claimed value.

There are currently three ongoing investor-state disputes involving U.S. companies. Two of them involve delayed government payments to U.S. firms and one involves delays in the process of acquiring environmental permits to initiate a large scale real estate development.

International Commercial Arbitration and Foreign Courts

Under Paraguayan Law 194/93, foreign companies must demonstrate just cause to terminate, modify, or not renew contracts with Paraguayan distributors. Severe penalties and high fines may result if a court determines that a foreign company ended the relationship with its distributor without first establishing that just-cause exists, which sometimes compels foreign companies to seek expensive out-of-court settlements first with the Paraguayan distributors. Nevertheless, cases are infrequent, and courts have upheld the rights of foreign companies to terminate representation agreements after finding the requisite showing of just cause.

Under two laws, Article 195 of the Civil Procedural Code and Law 1376/1988, a plaintiff pursuing a lawsuit may seek reimbursement for legal costs from the defendant calculated as a percentage (not to exceed 10 percent) of claimed damages. In larger suits, the amount of reimbursed legal costs often far exceeds the actual legal costs incurred.

Paraguay possesses an Arbitration and Mediation Center (CAMPS), which is a non-profit, private entity that promotes the application of alternative dispute resolution methods.

Under Paraguayan Law 2051/03, foreign companies undergoing contractual problems with any government entity can request arbitration from Paraguay’s national public procurement Agency (DNCP, in Spanish).

Bankruptcy Regulations

Paraguay has a bankruptcy law (154/63) under which a debtor may suspend payments to creditors during the evaluation period of the debtors’ restructuring proposal. If no agreement is reached, a trustee may liquidate the company’s assets. According to the World Bank’s 2020 Doing Business Report, Paraguay stands at 105 in the ranking of 190 economies on the ease of resolving insolvency. The report states resolving insolvency takes 3.9 years on average and costs nine percent of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale. The average recovery rate is 23 cents on the dollar. Bankruptcy is not criminalized in Paraguay.

Investment Incentives

Paraguay grants investors a number of tax breaks under Law 60/90, including exemptions from corporate income tax and value-added tax. Paraguay also has a temporary entry system, which allows duty free admission of capital goods such as machinery, tools, equipment, and vehicles to carry out public and private construction work. The government also allows temporary entry of equipment for scientific research, exhibitions, training or testing, competitive sports, and traveler or tourist items.

Foreign Trade Zones/Free Ports/Trade Facilitation

Paraguayan Law 523/95 (which entered into force in 2002) permits the establishment of free trade zones (FTZs) granting several tax exceptions, including payments of VAT and corporate taxes, to companies operating in the commercial, industry, and services sector. Companies established under this law, which export over 90 percent of their sales in monetary values, must only pay 0.5 percent of their income in sales. As a result of the COVID-19 pandemic, in December 2020, the Ministry of Finance issued a decree to expand the services covered under the FTZ Law, incorporating financial services and companies working in the biotechnology and pharmaceutical sector.

Paraguay has two FTZs in Ciudad del Este – one that operates largely as a manufacturing center and a second that focuses on warehouse storage. Paraguay is a landlocked country with no seaports but has numerous private and public inland river ports. About three-fourths of commercial goods are transported by barge on the Paraguay-Parana river system that connects Paraguay with Buenos Aires, Argentina, and Montevideo, Uruguay. Paraguay has agreements with Uruguay, Argentina, Brazil, and Chile on free trade ports and warehouses for the reception, storage, handling, and trans-shipment of merchandise.

Performance and Data Localization Requirements

Paraguay does not mandate local employment or have excessively onerous visa, residence, work permit or similar requirements inhibiting mobility of foreign investors and their employees. However, the bureaucratic process to comply with these requirements can be lengthy. Voting board members of any company incorporated in Paraguay must have legal residence, which takes a minimum of 90 days to establish, posing a potential obstacle to foreign investors.

Paraguay does not have a “forced localization” policy requiring foreign investors to use domestic content in goods or technology. There are no requirements for maintaining a certain amount of data storage within Paraguay or for foreign IT providers to turn over source code and/or provide access to surveillance. Paraguayan law requires internet service providers to retain IP address for six months for certain commercial transactions.

Under the argument of incentivizing domestic production during the COVID-19 pandemic, on September 10, 2020 the Paraguayan Congress overrode a presidential veto to pass a modification to Paraguay’s Public Contracting Law (4558/11), increasing the preference in government bids to locally produced goods in public procurements open to foreign suppliers from 20 to 40 percent. Foreign firms can bid on tenders deemed “international” and on “national” tenders through the foreign firm’s local agent or representative. Opponents question the constitutionality of the new legislation.

The government continues to make efforts to enhance transparency and accountability, including through the use of an internet-based government procurement system. The country’s National Public Procurement Directorate (DNCP, in Spanish) is generally well regarded, but does not have legal authority to impose sanctions on companies or public entities found to have engaged in procurement irregularities.

Paraguay is not a signatory to the World Trade Organization (WTO) Agreement on Government Procurement.

Real Property

The 1992 constitution guarantees the right of private property ownership. While it is common to use real property as security for loans, the lack of consistent property surveys and registries often makes it impossible to foreclose. The latest figures published by the National Rural and Land Development Institute (INDERT, in Spanish) indicate there is 47.5 percent more titled land in Paraguay than physically exists, while other private organizations suggest 70 percent of privately owned land has some sort of problem related to the property title and its registration process. Correct property title registration is a major problem, particularly in the interior of the country. In some cases, acquiring title documents for land can take two years or more. The World Bank’s 2020 Doing Business report ranks Paraguay 80 of 190 for ease of “registering property,” noting the process requires six procedures, averages 46 days, and costs 1.8 percent of the property value.

Paraguay has a “squatter’s rights” law by which ownership  of property can be gained by  possession  of it beyond the lapse of 20 years.

Congress has proposed bills in the past to improve regulation of properties and establish a new National Directorate of Public Registries with the intention of facilitating the adequate registration of land ownership and create a special Congressional Commission to correct underlying problems with property titles; however, the bills remain in the Congress. After the previous head of INDERT was removed from the position due to accusations of bribery in October 2020, the new leadership has made noticeable efforts to regularize property title registration in various regions of the interior of the country and has considerably increased the revenues collected by the institution.

Intellectual Property Rights

Paraguay has been on the U.S. Trade Representative’s (USTR) Special 301 Report Watch List since 2019, due in part to Paraguay’s unfulfilled commitments under a 2015-2020 Memorandum of Understanding (MOU) on intellectual property rights between the United States and Paraguay. The USTR and Paraguayan government will transition and update these commitments in an Intellectual Property Workplan that will be managed under the U.S.-Paraguay Trade and Investment Framework Agreement (TIFA) mechanism.

Ciudad del Este has been named in either the USTR Review of Notorious Markets for Counterfeiting and Piracy or the Special 301 Report for over 19 years. The border crossing at Ciudad del Este, and the city itself, reportedly serves as a hub for the distribution of counterfeit and pirated products in the Brazil-Argentina-Paraguay tri-border region and beyond. Informality and border porosity in the area remains a challenge.

Concerns remain about inadequate protection against unfair commercial use of proprietary test or other data generated to obtain marketing approval for agrochemical or pharmaceutical products and the shortcomings in Paraguay’s patent regime. Law 3283 from 2007 and Law 3519 from 2008, (1) require pharmaceutical products and agrochemical products to be registered first in Paraguay to be eligible for data protection; (2) allow regulatory agencies to use test data in support of similar agricultural chemical product applications filed by third parties; and (3) limit data protection to five years. Additionally, Law 2593/05 that modifies Paraguay’s patent law has no regulatory enforcement. Because of this, foreign pharmaceutical companies have seen their patented products openly replicated and marketed under other names by Paraguayan pharmaceutical companies.

Although law enforcement authorities track seizures of counterfeit goods independently, there is no consolidated report available online, and the statistics vary between government offices. The National Directorate of Intellectual Property (DINAPI, in Spanish) reported 245 seizures of counterfeit goods in 2020 with an estimated retail price of USD 3.3 million. This represented a $12.4 million decrease from 2019. In terms of law enforcement related to IPR, Judicial Branch contacts reported that Asuncion had 423 referrals, 59 investigations, 4 indictments, and 90 destructions; Ciudad del Este had 65 referrals, six investigations, three indictments, and one conviction. Officials cited the COVID-19 pandemic work and movement restrictions in force throughout 2020 as a primary cause of the decrease in enforcement actions.

Paraguay has ratified all of the Uruguay Round accords, including the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), and has ratified two World Intellectual Property Organization (WIPO) copyright treaties. The Paraguayan Congress ratified the TRIPS Agreement in July 2018. Paraguay signed and ratified September 17, 2020 the Treaty of Nice, which establishes a classification of goods and services for the purposes of registering trademarks and service marks, and the Locarno Agreement, which establishes a classification for industrial designs.

In December 2019, DINAPI officially announced the establishment of an Interagency Coordination Center (ICC), responsible for providing a unified government response to intellectual property rights violations. The ICC has convened five times since its inception.

In July 2020, a group of Paraguayan Lower House legislators presented a draft bill to establish a temporary suspension of royalty payments for patented, genetically modified soy seeds until the end of 2021, ostensibly to provide relief to farmers during the COVID-19 crisis.  The bill’s opponents argue this proposed legislation violates IPR guarantees in Paraguay’s Constitution, the 1630/2000 Patent Law on Inventions, international treaties such as TRIPS, UPOV, and trade agreements negotiated and concluded (MERCOSUR-EU and MERCOSUR-EFTA).  In October 2020, the Lower House voted to approve the draft bill, and sent it to the Senate where it was voted down and sent back to the Lower House on April 8, 2021.

For additional information about national laws and points of contact at local intellectual property (IP) offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Regional IP Attaché
U.S. Consulate General – Rio de Janeiro
+ 55 (21) 3823-2499

Deputy Political and Economic Counselor
U.S. Embassy Asuncion
+ 595 (21) 213-715

National Intellectual Property Directorate:  https://www.dinapi.gov.py/ 

Paraguayan-American Chamber of Commerce:  http://www.amcham.com.py/ 

Local Lawyers: https://py.usembassy.gov/wp-content/uploads/sites/274/attorneys.pdf

Capital Markets and Portfolio Investment

Credit is available but expensive. As of January 2021, banks charged on average 25 percent interest on consumer loans (up to 34 percent), with the vast majority favoring repayment horizons of one year. Loans for up to 10 years are available at higher interest rates. High collateral requirements are generally imposed. Private banks, in general, avoid mortgage loans. Because of the difficulty in obtaining bank loans, Paraguay has seen growth in alternative and informal lending mechanisms, such as “payday” lenders. These entities can charge up to 85 percent interest on short-term loans according to banking contacts. The high cost of capital makes the stock market an attractive, although underdeveloped option. Paraguay has a relatively small capital market that began in 1993. As of February 2021, the Asuncion Stock exchange consisted of 104 companies. Many family-owned enterprises fear losing control, dampening enthusiasm for public offerings. Paraguay passed a law in 2017 abolishing anonymously held businesses, requiring all holders of “bearer shares” to convert them. Foreign banks and branches are allowed to establish operations in country, as such Paraguay currently has three foreign bank branches and four majority foreign-owned banks.

The Paraguayan government issued Paraguay’s first sovereign bonds in 2013 for USD 500 million to accelerate development in the country. Since then, Paraguay has issued bonds each year. During 2020, Paraguay issued a total of USD 1,450 million (USD 1 billion under its National Emergency Law due to the COVID-19 pandemic) and recently in 2021 for USD 826 million. The debt component of the 2021 bond raised USD 500 million of new money at the lowest cost ever for a Paraguayan sovereign bond (2.74 percent). The transaction’s historically low interest rate, oversubscription, and its extension of Paraguay’s maturity profile reflect increased investor confidence in Paraguay. Proceeds are expected to finance key infrastructure development programs designed to promote economic and social development and job creation.

Commercial banks also issue debt to fund long-term investment projects.

Paraguay became an official member of the IMF in December 1945 and its Central Bank respects IMF Article VIII related to the avoidance of restrictions on current payments.

Money and Banking System

Paraguay’s banking system includes 17 banks with an approximate total USD 24.5 billion in assets and USD 18 billion in deposits. The banking system is generally sound but remains overly liquid. Long-term financing for capital investment projects is scarce. Most lending facilities are short-term. Banks and finance companies are regulated by the Banking Superintendent, which is housed within, and is under the direction of, the Central Bank of Paraguay.

The Paraguayan capital markets are essentially focused on debt issuances. As the listing of stock is limited, with the exception of preferred shares, Paraguay does not have clear rules regarding hostile takeovers and shareholder activism.

Paraguay has a high percentage of unbanked citizens. Six out of ten adults do not have bank accounts. Many Paraguayans use alternative methods to save and transfer money. In recent years, the use of e-wallets has grown considerably to fill this void. According to the Central Bank of Paraguay, the total transactions increased by 51.2 percent, from USD 374 million in January-September 2019 to USD 565 million in January-September 2020. The number of quarterly transactions also increased considerably from 4.9 million in April-June 2019 to 8.5 million in July-September 2020. E-wallet providers noted this increase was the result of the COVID-19 subsidies transferred to the e-wallet of beneficiaries outside of the formal banking sector. This growth made the Central Bank publish regulations on e-wallets in February 2020 to expand their “know your customer” (KYC) and other requirements to match those of traditional bank operations.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment (e.g. remittances of investment capital, earnings, loan or lease payments, royalties). Funds associated with any form of investment can be freely converted into any world currency. Paraguay has a flexible exchange rate system making the national currency rate fluctuate according to the foreign-exchange market mechanisms.

Remittance Policies

There are currently no plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances. There are no time limitations on remittances. Paraguay is a member of the GAFILAT, a Financial Action Task Force (FATF)-style regional body. GAFILAT initiated a review of Paraguay’s work and measures taken against money laundering in December 2019. The final assessment was postponed for the third time due to the COVID-19 pandemic, and is currently scheduled for August 2021.

Sovereign Wealth Funds

Paraguay does not have a sovereign wealth fund. However, in December 2020, the Ministry of Finance presented to Congress the draft law for the Strengthening of Fiscal Governance that will reform Paraguay´s current Fiscal Responsibility Law and create Paraguay´s first wealth fund to strengthen the country´s macroeconomic stability in years of poor economic development and/or emergency situations.

Paraguay has seven major state-owned enterprises (SOEs), active in the petroleum distribution, cement, electricity (distribution and generation), water, aviation, river navigation, and cellular telecommunication sectors. Paraguay has another two minor SOEs, one dedicated to the production of alcoholic beverages through raw sugar cane and another, essentially inactive, focused on railway services. In general, SOEs are monopolies with no private sector participation. Most operate independently but maintain an administrative link with the Ministry of Public Works & Communications. SOEs have audited accounts, and the results are published online. Public information and audited accounts from 2018 indicate SOEs employ over 17,000 people and have assets for $4.2 billion. Reported net incomes from January to October 2019 of all SOEs are approximately $114 million.

SOEs’ corporate governances are weak. SOEs operate with politically appointed advisors and executives and are often overstaffed and an outlet for patronage, resulting in poor administration and services. Some SOEs burden the country’s fiscal position, running deficits most years. SOEs are not required to have an independent audit. The Itaipu and Yacyreta bi-national hydroelectric dams, which are considered semi-autonomous entities administered by joint bilateral government commissions (since they are on shared international borders), have a board of directors.

Link to the list of Paraguayan SOEs: https://www.economia.gov.py/index.php/dependencias/direccion-general-de-empresas-publicas/direccion-general-de-empresas-publicas 

Privatization Program

Paraguay does not have a privatization program.

Responsible Business Conduct (RBC) is growing with the support of Paraguay’s largest firms. Additionally, the private sector is taking measures to institutionalize ethical business conduct under initiatives such as the Pacto Etico y Cumplimiento (PEC). An initiative sponsored by the U.S. Department of Commerce and USAID, PEC was established by over 100 local, U.S., and international companies that committed to creating a code of ethics and undergoing a rigorous auditing process to reach certification. In 2021, PEC offered the country’s first-ever corporate ethics certification course, in partnership with a local university, which certified 35 public and private sector professionals.. The Paraguayan government does not have any formal programs or policies to encourage the PEC or RBC, but has shown interest in the organization’s work.

The DNCP issued in March 2020 a resolution to include RBC policies into the standard requirements of public procurements.

Paraguay is neither a signatory of The Montreux Document on Private Military and Security Companies nor a member of International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

Despite the government’s significant advancement in efforts to eliminate the worst forms of child labor, it continued to occur in retail; sugar, brick, and limestone production; domestic service, and small-scale agricultural sectors. Children also worked in manufacturing, restaurants, and other service industries. Boys were often victims of forced labor in domestic service, crime, and in some cases as horse jockeys.

Additional Resources

Department of State

Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);

Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/);

Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;

North Korea Sanctions & Enforcement Actions Advisory ( https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf ).

Department of Labor

Findings on the Worst forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  );

List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods );

Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab ) and;

Comply Chain ( https://www.dol.gov/ilab/complychain/ ).

Paraguayan law provides criminal penalties for official corruption; however, impunity impedes effective implementation. Historically, officials in all branches and at all levels of government have engaged in corrupt practices. Judicial insecurity and corruption mar Paraguay’s investment climate. Many investors find it difficult to enforce contracts and are frustrated by lengthy bureaucratic procedures, limited transparency and accountability, and impunity. A recent trend is for private companies to insist on arbitration for dispute resolution and bypass the judicial system completely.

The Paraguayan government has taken several steps in recent years to increase transparency and accountability, including the creation of an internet-based government procurement system, the disclosure of government payroll information, the appointment of nonpartisan officials to key posts, and increased civil society input and oversight. Notwithstanding, corruption and impunity continue to affect the investment climate.

In December 2020 President Abdo Benitez signed a decree approving a National Integrity, Transparency, and Anti-Corruption Plan (NITAP) that was developed with USAID´s technical assistance and has been reviewed by key stakeholders, including the private sector, NGOs, and academia. The NITAP is Paraguay’s five-year (2021-2025) road map to foster integrity and transparency, and fight corruption and impunity. The document includes more than 70 actions and commitments that involve all levels of the three branches of government, as well as the private sector, academia and NGOs, among other key stakeholders. USAID is supporting several actions of the NITAP. Although the DNCP has a Good Governance Code that provides internal controls, ethic principles and addresses conflict-of-interest in government procurements, it remains one of the areas where corruption in most pervasive.  DNCP issued a resolution in January 2021 creating a committee that would work on identifying and eliminating discriminatory conditions and requirements that would limit participants and free competition in government procurement.

The constitution requires all public employees, including elected officials and employees of independent government entities, to disclose their income and assets at least 15 days after taking office and again within 15 days after finishing their term or assignment, but at no point in between, which is problematic for congressional representatives that are re-elected numerous times. Public employees are required to include information on the assets and income of spouses and dependent children. Officials are not required to file periodically when changes occur in their holdings.

UN Anticorruption Convention, OECD Convention on Combating Bribery:

Paraguay signed and ratified the UN Anti-corruption Convention in 2005.

Resources to Report Corruption:

General Auditors Office
Bruselas 1880, Asuncion, Paraguay
+ 595 21 620 0260
atencion@contraloria.gov.py 

Public Ministry
Nuestra Señora de la Asunción c/ Haedo, Asuncion, Paraguay
+ 595 21 454 611
comunicaciones@ministeriopublico.gov.py 

Anti-Corruption Secretariat
General Santos 698 c/ Siria, Asunción
+ 595 21 220 002/3
info@senac.gov.py 

Seeds for Democracy
Roma 1055 casi Colón, Asuncion, Paraguay
+ 595 21 420 323
semillas@semillas.org.py 

Paraguay experienced its worst political violence since the March 2017 storming of the Congress, as protesters gathered daily for more than two weeks in March 2021 to call for the resignations of President Abdo Benitez and Vice President Velazquez for their inadequate efforts to address the COVID-19 pandemic, and to repudiate the corruption within their administration. Clashes between police and protesters on the first night of protests resulted in 20 wounded (eight protesters, 12 police) and protesters set fire to the ruling ANR party headquarters March 17. While Abdo Benitez survived the resulting impeachment motion (the second of his term), his administration emerged weakened from the political crisis as it tries to manage a deteriorating COVID-19 situation at the time of this report.

Paraguay has been spared a large number of kidnappings that occur in neighboring Latin American countries, but a few high profile cases have occurred in recent years, most of them attributed to suspected members of the organized criminal group Paraguayan People’s Army (EPP). In September 2020, the EPP kidnapped former Vice President Oscar Denis and his employee Adelio Mendoza near Denis’ property in Concepcion department. The Paraguayan government has responded to the EPP threat with combined military and police operations, but its failure to recover hostages – including Denis, whose whereabouts are still unknown at the time of this report – from such a small group has seriously damaged its credibility. Land invasions, marches, and organized protests occur, mostly by rural and indigenous communities making demands on the government, but these events have rarely turned violent.

With an average annual population growth rate of 1.5 percent during the past decade and 63.9 percent of the population below the age of 35 as of 2020, job creation to meet the large and growing labor force is one of the most pressing issues for the government. However, the weak education system limits the supply of well-educated workers and is an obstacle to growth. Current levels of unemployment are at 7.2 percent for year 2020 (up two percent from 2019). The full impact of COVID-19 lockdowns and quarantine periods, which began in March 2020 and continue in some form at the time of this report, is not yet known. A rise in unemployment caused by pandemic restrictions forced the government to create new social welfare programs and bolster existing ones. Economies in cities like Ciudad del Este and Encarnacion that rely on cross-border trade have been especially impacted by international border closures. The government has passed multiple bills to provide economic assistance to workers in those communities.

Informal employment remains high in Paraguay. According to the Paraguayan National Administrative Department of Statistics, informal employment represented 64.4 percent of the total working population in 2020 and studies published by the World Bank suggested the rate reached 71 percent for 2019.

Paraguay’s labor code makes it very difficult to lay off a formally registered, full-time employee who has completed ten consecutive years of employment. Firms often opt for periodic renewals of “temporary” work contracts instead of long-term contracts.

Paraguayan law provides for the right of workers to form and join independent unions (with the exception of the armed forces and the police), bargain collectively, and conduct legal strikes. The law prohibits binding arbitration and retribution against union organizers and strikers. While the law prohibits anti-union discrimination and sets financial penalties, employers are not required by law to reinstate workers fired for union activity, even in cases where labor courts fine firms for anti-union discrimination.

The minimum age for formal, full-time employment is 18, including for domestic workers. Adolescents between the ages of 14 and 17 may work if they have a written authorization from their parents, attend school, do not work more than four hours a day, and do not work more than a maximum of 24 hours per week. Adolescents between the ages of 16 and 18 who do not attend school may work up to six hours a day, with a weekly ceiling of 36 hours.

For more background on labor issues in Paraguay, please refer to the Department of Labor’s Findings on the Worst Forms of Child Labor at:  www.dol.gov/ilab/reports/child-labor/findings/ . and the latest Department of State’s Country Reports on Human Rights Practices at:  https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/.

The United States and Paraguay signed a 1992 investment guaranty agreement, allowing the DFC (former Overseas Private Investment Corporation) to conduct full operations in Paraguay. DFC has financed telecommunications, forestry, and various renewable energy projects. DFC has also partnered with Citibank to support loans for small and medium-sized enterprises (SMEs) and micro finance loans. DFC last visited Paraguay in September 2019.

Paraguay is a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

Significant discrepancies can be noted between the local and the USG statistical sources in terms of U.S. FDI in Paraguay for 2019. UNCTAD total inbound of FDI as a percentage of Paraguay’s GDP differs less than three percent when compared to Paraguay’s local statistics. However, if compared to other international statistics, such as the World Bank and the IMF, the relation between total inbound stocks of FDI as a percentage of Paraguay’s GDP is consistent with local statistics. *Host country statistical data source: Central Bank of Paraguay

*Host country statistical data source: Central Bank of Paraguay

The information obtained through the IMF’s Coordinated Direct Investment Survey is consistent with the information provided by the Central Bank of Paraguay.

Table 4: Sources of Portfolio Investment
Data not available.

Javier Pérez
Economic Specialist
U.S. Embassy in Asuncion +595 21 248 2179
+595 21 248 2179
PEREZJ1@STATE.GOV