Investment Climate Statements for 2016 - Paraguay

Executive Summary

Paraguay has a small but rapidly growing open economy with a strong macroeconomic position and the potential for continued growth over the next decade. Major drivers of economic growth in Paraguay are the agriculture, retail, and construction sectors. The Government of Paraguay (GOP) encourages private foreign investment. Paraguayan law grants investors tax breaks, permits full repatriation of capital and profits, supports maquila operations, and guarantees national treatment for foreign investors. Standard & Poor’s, Fitch, and Moody’s all upgraded Paraguay’s credit ratings over the past three years.

Paraguay scores at the mid-range or lower in most competitiveness indicators, judicial insecurity hinders the investment climate, and trademark infringement and counterfeiting are a major concern. The Government of Paraguay has taken measures in recent years to improve the investment climate, including the passage of laws addressing competition, public sector payroll disclosures, and access to information. The Cartes Administration also has escalated intellectual property enforcement.

Paraguay's export and investment promotion bureau, REDIEX, prepares comprehensive information about business opportunities in Paraguay.

Table 1



Index or Rank

Website Address

TI Corruption Perceptions index


130 of 168

World Bank’s Doing Business Report “Ease of Doing Business”


100 of 189

Global Innovation Index


88 of 141

U.S. FDI in partner country ($M USD, stock positions)



World Bank GNI per capita


USD 4400

1. Openness To, and Restrictions Upon, Foreign Investment

Attitude toward Foreign Direct Investment

The GOP encourages private foreign investment. 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 region, with a 10% corporate tax rate and a 10% Value-added Tax (VAT) on most goods and services.

Paraguay's export and investment promotion bureau, REDIEX, provides useful information for

foreign investors, including business opportunities in Paraguay, registration requirements, and

laws, rules, and procedures.

Other Investment Policy Reviews

Not applicable.

Laws/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, 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, President Cartes signed a new Investment Guarantee Law (5542/15) to promote investment in capital-intensive industries. Implementing regulations will be 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.

Business Registration

The business registration process was modified in 2006 with U.S. assistance. The GOP instituted a coordinated system among all the offices involved known as the SUAE ( or Unified System for Opening of Companies, reducing the number of steps and the time to open a business to 7 procedures, 35 days and lowering the cost to 39.9% of income per capita, according to the World Bank. This is an improvement; however, some aspects of opening a business are still lengthy and costly, such as building health inspections and environmental licenses.

Industrial Promotion

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 contracts under the new law, with more expected in 2016. Large infrastructure projects are usually open to foreign investors.

The Government of Paraguay seeks increased investment in the assembly/distribution (maquila) sector and Paraguayan law grants investors a number of incentives. In addition to tax exemptions, inputs are allowed to enter Paraguay tax free, and up to 10% 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.

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.

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

Privatization Program

Not applicable.

Screening of FDI

Not applicable.

Competition Law

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.

2. Conversion and Transfer Policies

Foreign Exchange

No restrictions exist in Paraguay on the conversion or transfer of foreign currency. Law 60/90 permits the repatriation of capital and profits. There are no controls on foreign exchange transactions, apart from bank reporting requirements for transactions in excess of USD 10,000.

Remittance Policies

Paraguay is a member of the Financial Action Task Force against Money Laundering in South America (GAFISUD), a Financial Action Task Force (FATF)-style regional body.

3. 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 some cases in recent years of expropriations of land without prompt and fair compensation. In recent years groups of “landless” citizens have occupied several farms in order to press for agrarian land reform.

4. Dispute Settlement

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

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.


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 2016 Doing Business Report, Paraguay stands at 102 in the ranking of 189 economies on the ease of resolving insolvency. The report states resolving insolvency takes 3.9 years on average and costs 9.0% 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 19.5 cents on the dollar.

Investment Disputes

Under Paraguayan Law 194/93, foreign companies must demonstrate just cause to terminate, modify, or decide not to 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 Paraguayan distributors to seek expensive out-of-court settlements first. 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.

International Arbitration

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.

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.

Duration of Dispute Resolution – Local Courts

Paraguay ranks 75 out of 189 for “Ease of Enforcing Contracts” in the World Bank’s 2016 Doing Business Report. World Bank data states the process averages 591 days and costs 30% of the claimed value.

5. Performance Requirements and Investment Incentives


Paraguay’s Public Contracting Law (4558/11) gives preference in government bids to locally produced goods in public procurements open to foreign suppliers, even if the domestic good is up to 20% more expensive than the imported good. Foreign firms can bid on tenders deemed “international” and on “national” tenders through the foreign firm’s local agents or representative. The government is making efforts to enhance transparency and accountability, including through the creation of an internet-based government procurement system. Paraguay is not a signatory to the WTO Agreement on Government Procurement.

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.

Research and Development

Not applicable.

Performance 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.

Data Storage

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.

6. Protection of Property Rights

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. In some cases, acquiring title documents for land can take two years or more. The World Bank’s 2016 Business Report ranks Paraguay 78 of 189 for ease of “registering property,” noting the process requires 6 procedures, averages 46 days, and costs 1.9% of the property value.

Intellectual Property Rights

Paraguay was removed from the U.S. Trade Representative’s (USTR) 2015 Special 301 Report Watch List pursuant to an Out-of-Cycle Review. The United States and Paraguay signed a Memorandum of Understanding on IPR in June 2015, under which Paraguay committed to take specific steps to improve its IPR protection and enforcement environment. Additionally, the MOU solidifies bilateral cooperation by which the United States supports Paraguay’s efforts to strengthen the legal protection and enforcement of IPR. Since coming into office in 2013, the Cartes Administration, primarily through National Directorate of Intellectual Property (DINAPI) and partner law enforcement agencies, has escalated enforcement efforts in Paraguay.

Ciudad del Este has been named in either the USTR Notorious Market List or the Special 301 Report for over 15 years. The border crossing at Ciudad del Este and the city itself reportedly serve as a hub for the distribution of counterfeit and pirated products in the Brazil-Argentina-Paraguay tri-border region and beyond. The Cartes Administration seeks to transform Ciudad del Este into a legitimate marketplace and is executing its commitments under the IPR MOU to address this issue.

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.

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. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at

Resources for Rights Holders

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:

Paraguayan-American Chamber of Commerce:

Local Lawyers:

7. 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 Chamber of Deputies committees. In most instances, there are public hearings where members of the general public or interested parties can provide comments.

Historically, 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. Corruption has historically been common in these institutions as time consuming processes provide opportunities for front-line civil servants to seek bribes to accelerate the paperwork. The Cartes Administration, which entered into office in 2013, voiced its commitment to combating corruption and has taken positive steps to promote transparency.

8. Efficient Capital Markets and Portfolio Investment

Credit is available but expensive. High collateral requirements are generally imposed. The high cost of capital makes the stock market an attractive, although underdeveloped option. Paraguay has a relatively small capital market that began less than 20 years ago. As of December 2015, the Asuncion Stock exchange consisted of 97 companies, totaling USD 465 million in transactions. Many family-owned enterprises fear losing control, dampening enthusiasm for public offerings. Paraguayan law requires owners of stocks to be registered, effectively prohibiting bearer shares.

The Government of Paraguay issued Paraguay’s first sovereign bonds in 2013 for USD 500 million to accelerate development in the country. In 2014, Paraguay issued USD 1 billion worth of 30-year bonds. Proceeds are to finance key infrastructure development programs designed to promote economic and social development and job creation. Standard & Poor’s, Fitch, and Moody’s all upgraded Paraguay’s credit ratings in the last two years. Commercial banks also issue debt to fund long-term investment projects.

Money and Banking System, Hostile Takeovers

Paraguay’s banking system includes 17 banks with a total USD 19 billion in assets and USD 16 billion in deposits. Non-performing loans in the banking sector totaled just 2.5% of total loans in 2015. 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.

9. Competition from State-Owned Enterprises

Paraguay’s State Owned Enterprises (SOEs) are active in the petroleum distribution, cement, electricity (distribution and generation), water, and land-line and cellular telecommunication sectors. In general, SOEs are monopolies with no private sector participation. Most operate independently but maintain an administrative link with line ministries, namely the Ministry of Public Works & Communications. SOEs have audited accounts and the results are published online.

SOEs’ corporate governances are weak. Only the Itaipú and Yacyretá bi-national hydroelectric dams have a board of directors. Other SOEs operate with politically appointed advisors and executives. Only the two bi-national dams are required to have an independent audit. The SOEs are often overstaffed and are an outlet for patronage, resulting in poor administration and services. Some SOEs burden the country’s fiscal position, running deficits most years.

OECD Guidelines on Corporate Governance of SOEs

Not applicable.

Sovereign Wealth Funds

Paraguay does not have a sovereign wealth fund.

10. Responsible Business Conduct

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 Comercial (Business Ethics Pact). An initiative sponsored by the U.S. Department of Commerce, the Pacto Etico Comercial includes 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. The Government of Paraguay does not have any formal programs or policies to encourage RBC.

11. Political Violence

Paraguay has not traditionally been affected by political violence. While Paraguay has been spared the large number of kidnappings that occur in neighboring Latin American countries, a few high profile cases have occurred in recent years, most of them attributed to purported members of the leftist Paraguayan People’s Army (EPP). The GOP has responded to the EPP threat with combined military and police operations. Land invasions, marches, and organized protests occur, mostly by rural and indigenous communities making demands on the government, but these events rarely turn violent.

12. Corruption

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 in the judicial system mar Paraguay’s investment climate. Many investors find it difficult to enforce adequately contracts and are frustrated by lengthy bureaucratic procedures, limited transparency and accountability, and impunity.

The Government of Paraguay has taken several steps in recent years to increase transparency and accountability, including the passage of an Access to Information Law, the creation of a transparent, internet-based government procurement system, the disclosure of government payroll information, the appointment of respected apolitical officials to key posts; and increased civil society input and oversight. In 2013, the National Procurement Agency, the Civil Service Secretariat, the Auditor General, the Anticorruption Secretariat, and the Solicitor General signed an MOU to strengthen coordination among key players in the fight against corruption and collaborate on a National Anticorruption Plan. Notwithstanding, corruption and impunity continue to affect the investment climate.

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 or being appointed and again within 15 days after finishing their term or assignment. Starting in 2014, 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.

Paraguay signed and ratified the United Nations Anticorruption Convention in 2005.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Paraguay signed and ratified the United Nations Anticorruption Convention in 2005.

Resources to Report Corruption

General Auditors Office
Bruselas 1880, Asuncion, Paraguay
+ 595 21 620 0260

Public Ministry
Nuestra Señora de la Asunción c/ Haedo, Asuncion, Paraguay
+ 595 21 454 611

Anti-Corruption Secretariat
El Paraguayo Independiente esquina Río Ypané, Asunción, Paraguay
+ 595 21 450-001/2

Seeds for Democracy
Roma 1055 casi Colón, Asuncion, Paraguay
+ 595 21 420 323

13. Bilateral Investment Agreements

Paraguay has bilateral investment agreements or treaties with the following countries: Austria; Belgium; 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, Uruguay, and Venezuela. 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 Canada, Egypt, India, Israel, Mexico, Palestine, Peru, and the Southern African Customs Union (SACU).

Bilateral Taxation Treaties

The United States and Paraguay do not have a Bilateral Investment Treaty, a Free Trade Agreement, or a Bilateral Taxation Treaty.

14. OPIC and Other Investment Insurance Programs

The United States and Paraguay signed a 1992 investment guaranty agreement, allowing OPIC to conduct full operations in Paraguay. OPIC has financed telecommunications, forestry, and various renewable energy projects. OPIC has also partnered with Citibank to support loans for small and medium sized enterprises (SMEs) and micro finance loans.

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

15. Labor

With a population growth rate above 3% per annum and 70% of the population below the age of 35, job creation to meet the large and growing labor force is one of the most pressing issues for the Government of Paraguay. However, the weak education system limits the supply of well-educated workers and is an obstacle to growth.

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 the financial penalty, 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. In October 2015, the executive branch approved legislation increasing the minimum age for employment of domestic workers from 14 to 18 years. 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 to 18 who do not attend school may work up to six hours a day, with a weekly ceiling of 36 hours. The law also permits “light work” for children between the ages of 12 and 14. The government has not formally defined what constitutes permitted light work for children between ages 12 and 14.

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 and the Department of State’s Country Reports on Human Rights Practices for 2015 at

16. Foreign Trade Zones/Free Ports/Trade Facilitation

Paraguayan Law 523/95 (which entered into force in 2002) permits the establishment of Free Trade Zones. Paraguay has two Free Trade Zones in Ciudad del Este. 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.

17. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy


Host Country Statistical source*

USG or international statistical source

USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other

Economic Data






Host Country Gross Domestic Product (GDP) ($M USD)





Foreign Direct Investment

Host Country Statistical source*

USG or international statistical source

USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)





Host country’s FDI in the United States ($M USD, stock positions)





Information not available.

Total inbound stock of FDI as % host GDP





Information not available.

* Host country statistical data source:

Table 3: Sources and Destination of FDI

IMF Coordinated Direct Investment Survey (CDIS) statistics are for 2014. Outward Direct Investment data is not available.

Direct Investment from/in Counterpart Economy Data

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment

Outward Direct Investment


Total Inward



Total Outward



United States






























"0" reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

IMF’s Coordinated Portfolio Investment Survey (CPIS) data is not available for Paraguay.

18. Contact for More Information

Natalie van der Horst
Deputy Political and Economic Counselor
U.S. Embassy Asuncion
+ 595 21 213 715