RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/245 
23 March 2011  
 
(11-1364) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
PARAGUAY 
 
  
 
This report, prepared for the third Trad e Policy Review of Paraguay, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification fro m Paraguay on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to 
Angelo Silvy (022 739 5249), Martha Lara de Sterlini (022 739 6033) and 
Katie Waters (022 739 5067). 
 
Document WT/TPR/G/245 contains the policy statement submitted by Paraguay. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Paraguay. Paraguay WT/TPR/S/245 
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CONTENTS 
 
  Page 
SUMMARY vii 
 (1) I NTRODUCTION  vii 
 (2) E CONOMIC ENVIRONMENT  vii 
 (3) T RADE AND INVESTMENT REGIME  viii 
 (4) T RADE POLICIES BY MEASURE  viii 
 (5) S ECTORAL POLICIES  x 
I. ECONOMIC ENVIRONMENT 1 
 (1) O VERVIEW  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  2 
 (i) Production and employment 2 
 (ii) Structure of the economy 4 
 (3) F ISCAL POLICY  6 
 (4) M ONETARY AND EXCHANGE -RATE POLICY  7 
 (5) B ALANCE OF PAYMENTS  8 
 (6) T RADE AND INVESTMENT FLOWS  10 
 (i) Composition of merchandise trade 10 
 (ii) Geographical distribution of merchandise trade 11  (iii) Trade in services 12 
 (iv) Foreign direct investment 12 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 14 
 (1) O
VERVIEW  14 
 (2) I NSTITUTIONAL AND POLICY FRAMEWORK  15 
 (3) I NVESTMENT REGIME  16 
 (4) P ARTICIPATION IN THE WTO 19 
 (5) P REFERENTIAL TRADE RELATIONS  20 
 (6) A ID FOR TRADE  25 
 (i) Overview 25 
 (ii) Trade-related technical assistance 25  (iii) Aid-for- Trade flows 26 
III. TRADE POLICIES BY MEASURE 29 
 (1) O
VERVIEW  29 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  31 
 (i) Procedures, registration and documentation 31 
 (ii) Customs valuation 35  (iii) Rules of origin 36 
 (iv) Tariffs 38 
 (v) Other charges affecting imports 44  (vi) Import prohibitions, restrictions and licensing 46 
   WT/TPR/S/245 Trade Policy Review 
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Page 
 (vii) Contingency measures 51 
 (viii) Technical regulations and standards 54 
 (ix) Sanitary and phytosanitary measures 60 
 (3) M EASURES DIRECTLY AFFECTING EXPORTS  67 
 (i) Procedures and documentation 67 
 (ii) Taxes, levies and other export charges 68 
 (iii) Export prohibitions, restrictions and licensing 68  (iv) Tax concessions, free zones and other fiscal incentives 69 
 (v) Export promotion, financing, insurance and guarantees 74 
 (4) O
THER MEASURES AFFECTING PRODUCTION AND TRADE  75 
 (i) Legal framework for business, including registration 75 
 (ii) Competition policy and price control 77  (iii) Incentives and other government support 79 
 (iv) State trading, State-owned enterprises and privatization 84 
 (v) Government procurement 84  (vi) Intellectual property rights 89 
IV. TRADE POLICIES BY SECTOR 99 
 (1) O
VERVIEW  99 
 (2) A GRICULTURE , LIVESTOCK AND FORESTRY  100 
 (i) General characteristics 100 
 (ii) Policy objectives for the sector 102  (iii) Trade measures and other policy instruments 104 
 (iv) Key subsectors 106 
 (3) M
ANUFACTURING SECTOR  108 
 (i) General characteristics 108 
 (ii) Trade measures and other policy instruments 111 
 (4) E NERGY SECTOR  111 
 (i) Electricity 112 
 (ii) Hydrocarbons 114 
 (5) S ERVICES  116 
 (i) General characteristics 116 
 (ii) Financial services 118  (iii) Telecommunications 125 
 (iv) Transport 129 
REFERENCES 139 
APPENDIX TABLES 143 Paraguay WT/TPR/S/245 
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TABLES 
 
  Page 
I. ECONOMIC ENVIRONMENT  
I.1 Key macroeconomic indicators, 2004-2010 3 
I.2 Structure of GDP and employment, 2004-2009 5 I.3 Balance of payments, 2004-2010 9 
I.4 Annual FDI balances by country of residence, as of the second quarter of 2010 12 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
II.1 Non-MERCOSUR countrie s granted pref erential trade access,  November 2010 23 
II.2 WTO technical assistance activities in which Paraguay participated, 2006-2010 26 
II.3 Aid-for-Trade flows by sector, 2006-2008 27 
II.4 Aid-for-Trade flows by donor, 2006-2008 27 
III. TRADE POLICIES BY MEASURE III.1 Registration requirement s for importers and imported products, December 2010 32 
III.2 Operations by channel:  2005 to 2010 (October) 34 
III.3 Summary of tariffs, 2010 39 III.4 Structure of MFN tariffs, 2004 and 2010 40 
III.5 Summary of preferential tariffs, 2010 43 
III.6 Import prohibitions, 2010 47 III.7 Import licensing and prior authorization, 2010 48 
III.8 Regulations in force on  mandatory accreditation, 2010 58 
III.9 Sanitary and phytosanita ry requirements for imports in  force as at December 2010 63 
III.10 SPS regulatory instru ments approved since 2004 65 
III.11 Amounts of contracts awarded by contracting procedure followed, 2004-2009 88 
III.12 Contracts awarded by contracting procedure followed, 2004-2009 89 III.13 International agreements ratified by Paraguay 90 
III.14 Overview of the protection of intellectual property rights in Paraguay, 2010 91 
IV. TRADE POLICIES BY SECTOR 
IV.1 Primary crop production, 2003-2010 101 
IV.2 Domestic support, 2004-2009 105 IV.3 Soya production, 2003-2009 107 
IV.4 Value added (VA) in manufacturing, 1997-2002 and 2004-2008 109 WT/TPR/S/245 Trade Policy Review 
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APPENDIX TABLES  
 
  Page 
I. ECONOMIC ENVIRONMENT 
AI.1 Merchandise exports (f.o.b.) by product, 2004-2010 145 
AI.2 Merchandise imports (c.i.f.) by product, 2004-2010 147 AI.3 Merchandise exports (f.o.b.) by trading partner, 2004-2010 149 
AI.4 Merchandise imports (c.i.f.) by trading partner, 2004-2010 150 
AI.5 FDI flows by economic activity, 2006-second quarter of 2010 151 
AI.6 FDI flows by place of residence of in vestor - 2006-second quarter of 2010 152 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES AII.1 Notifications to the WTO, January 2004 - December 2010 153 
III. TRADE POLICIES BY MEASURE 
AIII.1 List of exceptions to the CET, 2009 156 
AIII.2 Notifications under the Agreement on Te chnical Barriers to Trade, August 2010 157 
AIII.3 Selective consumption tax, 2010 158 
IV. TRADE POLICIES BY SECTOR AIV.1 Manufacturing sector exports, 2004-2009 159 
 Proportion of manufacturing exports from MERCOSUR 159 
AIV.2 Manufacturing sector imports, 2004-2009 160  Proportion of manufacturing imports from MERCOSUR 160 
 Paraguay WT/TPR/S/245 
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SUMMARY 
 
(1) INTRODUCTION  
1. Paraguay has a very open trade and 
investment regime.  Applied MFN tariffs are 
relatively low (8.5 per cent on average) and there is little recourse to non-tariff measures.  The aim of Paraguay's medium-term trade strategy is to boost the role of international 
trade as an engine for economic growth and to 
diversify its export base, which remains focused on a few agricultural products and on a small number of markets.  Paraguay is also seeking to enhance the business climate so as to attract larger flows of foreign investment 
and thus foster economic growth and 
employment. 
2. Since the previous Review 
(April 2005), Paraguay has continued to apply measures to facilitate trad e, with the result that 
customs procedures have been streamlined, 
mainly by setting up single windows for imports and exports.  In  parallel, Paraguay has 
made efforts to build its institutional capacity for foreign trade, for example, by establishing a body responsible for ensuring compliance 
with commitments to notify technical 
regulations.  In addition, Paraguay has adopted measures to improve enforcement of intellectual property rights, including reform of the Penal Code;  this area nevertheless 
remains one of concern for Paraguay's 
authorities and its trading partners. 
3. Paraguay's trade policy is strongly 
influenced by its membership of MERCOSUR, under which it has signed 
preferential agreements with the majority of 
Latin American countries, as well as with some countries outside the region. 
(2) E
CONOMIC ENVIRONMENT  
4. Paraguay's economy enjoyed sustained 
growth during most of the period under review 
(2004-2010), chiefly driven by dynamic 
performance in agricultural production.  GDP increased at an annual average rate of close to 5 per cent between 2004 and 2008, with a slight contraction, however, in 2009 following 
a severe drought and the impact of the world economic crisis.  In 2010, the economy experienced a notable recovery, sustained by 
the increase in global prices of raw materials 
and by the implementation of expansionary fiscal and monetary policies.  As a result of economic growth, per capita GDP doubled during the review period, although reducing 
poverty and inequality are still major 
challenges for the Government. 
5. Paraguay stabilized its public finances 
during the period under review following the implementation of fiscal reforms, which included improvements to the structure and 
administration of taxation.  The central 
Government posted a primary surplus throughout the period, which enabled it to increase public spending in order to deal with the economic crisis in 2009.  Further progress 
still has to be made in tax reform, however, 
and in broadening the tax base, inter alia , by 
introducing personal income tax and eliminating certain tax exemptions. 
6. There has been a gradual shift in 
monetary policy towards the setting of an 
inflation target, which was 5 per cent for 2010, 
with a variation of +/-2.5 per cent.  Paraguay has a floating exchange rate regime, even though the Central Bank does sometimes intervene in order to mitigate sharp 
fluctuations in the exchange rate.  During the 
review period, the real effective exchange rate rose by around 20 per cent;  this has helped reduce imported inflation, without any apparent adverse impact on exports.  Bank 
interest rates have fallen and private sector 
credit has shown a notable increase. 
7. Paraguay's foreign trade grew rapidly 
over the period 2004-2010, reaching 98 per cent of GDP, which refl ects the high degree of 
openness of the country's economy.  
Agricultural products remain the largest 
export, while imports consist essentially of manufactures.  A high percentage of goods imports are re-exported.  The traditional deficit in the trade balance is offset by the large 
amounts earned from royalties and other WT/TPR/S/245 Trade Policy Review 
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business services related to the sale of 
electricity.  Paraguay's leading trading partners are MERCOSUR, the European Union and China.  In recent years, MERCOSUR's role 
has decreased, while China has become the 
main source of imports. 
(3) T
RADE AND INVESTMENT REGIME  
8. Paraguay's trade regime is to a large 
extent framed by its participation in 
MERCOSUR.  The development objectives of 
the present Government, in which trade policy plays a leading role, especially as regards the promotion and diversifi cation of exports and 
export markets, can be found in the Economic and Social Strategic Plan (2008-2013).  These 
objectives are complemented by the proposals 
contained in the Social Development Policies (PSD 2020), whose strategic objective is to promote and develop the conditions to permit inclusive, sustained growth. 
9. As a member of MERCOSUR, 
Paraguay has signed framework agreements to formally initiate preferential trade negotiations with various countries outside the region, although in some cases these still have to be ratified.  Since 2005, a partial scope agreement 
between MERCOSUR and India and a free 
trade agreement with Israel have come into force.  Agreements between MERCOSUR and Egypt, on the one hand, and the Southern Africa Customs Union (SACU), on the other, 
have been signed but have not yet come into 
effect.  Paraguay has not ratified the MERCOSUR Protocol of Montevideo on Trade in Services. 
10. Paraguay is open to foreign 
investment and its legislation guarantees equal 
treatment for foreign and Paraguayan investors.  It also belongs to several international arbitration mechanisms for the settlement of investment-related disputes.  Attracting investment plays a key role in 
Paraguay's development strategy;  the 
Economic and Social Strategic Plan 2008-2013 mentions the need to improve the business environment in order to attract investment.  "REDIEX", a new agency for the promotion of investment and exports, was 
established in 2005 and involves closer coordination with the private sector. 
11. Paraguay has been an active 
participant in the Doha Development Agenda 
trade negotiations and since 2005 has co-sponsored proposals in the areas of trade facilitation, intellectual property rights, non-agricultural market access, and 
agriculture.  Paraguay h as maintained a solid 
record of notifications to the WTO over the review period, with only a few outstanding.  It has not been a party, either as a complainant or as a defendant, in any WTO dispute settlement procedure, although it has participated as a 
third party. 
(4) T
RADE POLICIES BY MEASURE  
12. Since the previous Review in 2005, 
Paraguay has continued to adopt measures to streamline and modernize its trade regime.  
These efforts have led to the simplification of 
customs procedures and trade facilitation.  After setting up a Single Window for Exports (VUE), in July 2010 Paraguay also introduced a Single Window for Imports (VUI), enabling electronic clearance of all 
overseas buying and selling operations.  
Imports are cleared through three channels:  green, orange or red.  Goods sent to the red channel undergo documentary checks, physical inspection and verification of customs 
value. 
13. During the period under review, 
Paraguay applied reference values to certain products, mainly textiles and made-up articles, for a limited period.  According to the 
authorities, the purpose of this measure is to 
prevent unfair trade practices such as false declarations of value and tax evasion.  Paraguay makes use of prior authorizations and import prohibitions for health, environmental, security, economic 
development, balance-of-payments or 
safeguards reasons, and to protect domestic industry from imports.  Since the previous Review, new requirements on registration and prior licensing for imports of clothing, meat Paraguay WT/TPR/S/245 
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products and poultry offal have been 
introduced. 
14. Paraguay applies MERCOSUR's 
Common External Tariff (CET) with 
exceptions concerning 23 per cent of all tariff 
lines, resulting in an average tariff lower than MERCOSUR's average CET.  During the period under review, tariff protection lessened slightly, with the arithmetic average of applied 
MFN rates in 2010 falling to 8.5 per cent 
compared to 8.9 per cent in 2004.  This reduction was mainly due to the lowering of tariffs on capital goods.  The average applied MFN tariff is 10.0 per cent for agricultural products (WTO definition) and 8.3 per cent for 
non-agricultural products.  All rates are 
ad valorem .  Paraguay did not make use of 
temporary or variable levies on imports during 
the review period.  All tariffs are bound at rates ranging from 10 to 35 per cent, giving 
Paraguay an average bound tariff of 32.4 per 
cent.  There is still a large difference between applied tariffs and bound tariffs and bridging 
this gap in the context of the current trade negotiations would yield benefits in terms of 
transparency and predictability.  Market access 
commitments on agricultural products are not 
subject to tariff quota-based limitations. 
15. In addition to tariffs, imports are 
subject to a valuation fee of 0.5 per cent of the transaction value, a consular fee for endorsing 
the documents, and duty equivalent to 7 per 
cent of the consular fee to finance the National Indigenous Institute.  Value added tax (VAT) 
is imposed on imported goods and services alike and applies at a general flat rate of 10 per 
cent, with a few exceptions.  Agricultural 
products in their natural state are exempt from VAT.  The selective consumption tax applies to a group of products, whether imported or domestically produced, essentially tobacco, alcoholic beverages, perfumes, petroleum 
fuels, etc., at rates which vary between 1 and 
38 per cent. 
16. One important step forward since the 
previous Review has been in relation to notification of technical regulations.  This has 
been made possible by creating the National Information and Notification System (SNIN), 
which covers technical regulations, standards and conformity assessment procedures.  Since November 2006, when Paraguay first notified 
a draft technical regulation, the Paraguayan 
authorities have notified the WTO of all the proposed technical regulations deemed to affect trade, even wher e these are identical to 
regional or international standards.  By 
November 2010, Paraguay had submitted 
32 notifications of draft technical regulations to the WTO.  The conformity of imports with these technical regulations is verified at the border. 
17. During the period under review, 
Paraguay greatly increased the number of its 
notifications of sanitary and phytosanitary measures, although in most cases the notifications concerned measures already adopted and not draft regulations or 
legislation.  In late 2010, the authorities were 
in the process of establishing an agency to centralize notifications on sanitary and phytosanitary measures and enable the notification of draft measures and the processing of comments and remarks. 
18. Paraguay has no special legislation on 
competition, even though certain laws contain relevant provisions, and, as at December 2010, the National Congress was reviewing a preliminary draft law on the subject.  At the 
regional level, Paraguay has signed 
MERCOSUR's Competition Protocol (PDC) and its implementing re gulations, which have 
been incorporated into Paraguay's domestic legislation.  Paraguay does not in general 
apply price controls on goods or services, with 
the exception of electricity rates for low-income households and a maximum selling price for certain types of diesel fuel. 
19. Paraguay provides a series of 
incentives, for the most part fiscal, for 
investment and production, for which both 
Paraguayans and forei gners are in general 
eligible.  Some benefits are contingent on the use of domestic capital goods or the involvement of Paraguayan consultants.  
Official credit programmes are also in place, WT/TPR/S/245 Trade Policy Review 
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some targeting specific sectors.  The 
automotive industry benefits from a special regime that requires an increasing use of national components.  Paraguay also has 
special regimes for expor ts, such as temporary 
admission, free zones, in-bond processing (maquila ), and the raw materials regime.  
Enterprises under the maquila  regime pay a 
flat rate tax of 1 per cent of the national value 
added or the invoicing, whichever is higher.  
Enterprises exclusively engaged in export and operating under the free zone regime pay a flat rate tax of 0.5 per cent on gross income from exports;  in addition, enterprises in free zones may sell finished goods and services in 
Paraguayan customs territory in an amount 
equivalent to a maximum of 10 per cent of the enterprise's gross income from sales, only paying the flat rate free-zone tax. 
20. Paraguay is not a signatory to the 
WTO Plurilateral Agreement on Government 
Procurement.  During the period under review, Paraguay continued to reform its regulatory and institutional framework for government procurement, commenced in 2003, in order to enhance the quality and efficiency of 
government procurement procedures.  
Nonetheless, it also used the government procurement system as an economic policy tool to promote domestic production and employment, mainly by giving price 
preferences for local goods and services. 
21. During the period under review, a 
number of changes to the legal regime governing intellectual property were introduced, for example, an amendment to the 
Patent Law revising the granting of 
compulsory licences, publication of patent applications and their substantive examination.  Paraguay has continued to make efforts to improve the enforcement of intellectual property rights, inter alia , by reforming the 
Penal Code in order to increase the penalties 
and by creating an intelligence unit to identify, prevent and prosecute piracy, counterfeiting and tax evasion.  Despite these endeavours, enforcement of rights remains a matter of 
concern for both Paraguay and its trading 
partners. (5) S
ECTORAL POLICIES  
22. Agriculture remains a key sector of 
Paraguay's economy, accounting for 19.3 per cent of GDP and 29.5 per cent of jobs in 2009.  
Exports of agricultural products represent 
some 90 per cent of goods exports and consist mainly of soya beans, their by-products, and livestock products.  Government domestic support in the agricultural sector is relatively 
low.  Domestic support is targeted at family 
farms and small-scale producers and essentially consists of technical assistance, research projects and distribution of inputs.  In March 2005, Paraguay ab olished export taxes 
on agricultural products. 
23. The manufacturing sector's role in the 
economy is fairly limited, with a 13 per cent share of GDP and 11 per cent of jobs in 2009.  There is a low level of value added and little diversification in this sector, although the 
export of some products has been relatively 
dynamic in recent years.  The major industries are involved in processing agricultural products or producin g consumer goods.  
Paraguay has a number of official programmes in support of the sector, including tax 
exemptions and investment credits, together 
with a programme for the automotive industry.  There is a draft law on industrial policy whose objective is to attract investment to the manufacturing sector. 
24. Paraguay has abundant hydroelectric 
resources and is a large exporter of electricity.  On an annual basis, the Itaipú binational hydroelectric power station, operated jointly with Brazil, is the largest energy producer in 
the world.  The State-owned company ANDE 
controls all segments of the domestic electricity market.  Substantial investment in the power transmission and distribution infrastructure is needed to meet growing demand and eliminate bottlenecks. 
25. Paraguay depends on imports to meet 
its hydrocarbon needs.  The State-owned company PETROPAR is the main importer of petroleum based fuels;  private firms may also import such products, provided that they have Paraguay WT/TPR/S/245 
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the necessary legal authorization.  The price at 
which PETROPAR sells certain types of diesel fuel to distributors is fixed by the Government, and this has had a negative impact on the 
company's financial situation because of the 
rise in international hydrocarbons prices in recent years.  There are fiscal incentives for producing biofuels, provided that domestic raw materials are used;  furthermore, diesel 
fuel must be mixed with biodiesel in the 
proportions determined by the authorities. 
26. Services are the largest sector in 
Paraguay's economy, accounting for 51.2 per cent of GDP and 53.1 per cent of jobs (2009).  Paraguay's commitments under the General 
Agreement on Trade in Services are limited to 
certain financial services and tourism.  Paraguay did not take part in the negotiations on financial and telecommunications services that followed the Uruguay Round. 
27. The banking system was reinforced 
during the period under review and maintains adequate solvency and capitalization ratios, while financial regulation and supervision have been improved.  Banking legislation makes no distinction between domestic and 
foreign capital, and the latter plays an 
important role in the sector.  The financial spread has lessened, even though it remains relatively wide.  Companies established in Paraguay or subsidiaries of foreign companies 
with separate capital may engage in insurance;  
subsidiaries of foreign companies may operate under the same conditions as domestically owned companies.  Cross-border insurance operations are allowed. 28. The State-owned company COPACO 
has a de facto monopoly on basic telephony.  The mobile telephony market is open to private investment and has gradually absorbed 
the unsatisfied demand for fixed telephony.  In 
March 2009, international access to the Internet using fibre optics - hitherto a COPACO monopoly - was liberalized.  Telecommunications services are provided by 
means of concessions, licences or 
authorizations.  Foreign companies must be domiciled in Paraguay or appoint a legal 
representative.  In late 2010, a new law on information and communications technology was being prepared, together with regulations 
on number portability and separate accounting. 
29. Being a landlocked country, Paraguay 
faces some of the highest transport costs in Latin America.  Over 70 per cent of the country's external trade goes by river, notably 
along the Paraguay-Paraná Waterway.  The 
law reserves river and maritime transport of imports and exports for Paraguayan-registered vessels;  this restriction does not, however, apply to vessels of countries that are parties to the River Transport Agreement for the 
Waterway.  The private sector may build and 
operate river ports that compete with public ports, while airports providing commercial services are operated by a State body, although it is planned to grant airport management 
concessions to the private sector in the near 
future.  Basically, land transport relies on the road network;  developing the railway network as part of an inter-oceanic linkage project is a Government priority.