WORLD TRADE  
ORGANIZATION  G/SCM/Q2/PRY/8 
12 May 2009 
 
 (09-2319) 
Committee on Subsidies and 
Countervailing Measures Original:   Spanish 
 
 
 
SUBSIDIES 
 
Replies to the Questions from the UNITED STATES1 Regarding  
the New and Full Notification of PARAGUAY2 
 
  The following communication, dated 6 May 2009, is being circulated at the request of the 
delegation of Paraguay.  
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Question 1
 
 
Law 60/90  
 
 In response to the United States' questions, Paraguay stated that Law 60/90 does not 
meet the standards for notification set out in the Subsidies Agreement.  However, publicly 
available information indicates that Law 60/90 meets the definition of a subsidy as provided under Article 1 of the Subsidies Agreement.  Specifically, Law 60/90 provides a financial 
contribution in the form of tax and duty exempt ions, which confer a benefit upon the recipients.  
Further, when approving investment project s under this programme, recommendations are 
geared toward several objectives, including "exp ort promotion and import substitution".  To 
the extent that the above-mentioned benefits are contingent upon export or upon the use of 
domestic over imported goods, this programme  would appear to be deemed specific under 
Article 2.3 of the Subsidies Agreement. 
 
 Please explain further why Law 60/90 do es not qualify as being subject to the 
notification requirements pursuant to Article 25 of  the Subsidies Agreement.  In addition, please 
explain how this programme is consistent with Article 3 of the Subsidies Agreement, given that 
one of the objectives, and presumably, one of the eligibility requirements, appears to be based 
on "export promotion and import substitution".  
Reply
 
  The answer to this question requires a brief background history of Law 60/90, going back to 
the promulgation in 1989 of Decree Law No. 19/89 wh ich coincided with the fall of the dictatorship, 
the aim being to create incentives for capital investment.   Until that time, there were provisions in force that imposed levies on Paraguayan goods 
exports. 
                                                     
 
1 G/SCM/Q2/PRY/7. 
2 G/SCM/N/155/PRY. G/SCM/Q2/PRY/8 
Page 2  
 
   
 New instruments were therefore sought to incorporate policies for boosting the depressed 
economy, and Decree Law No. 19/89 was promulgate d.  It was amended by Decree Law No. 27/89 
and became the Law of 31 March 1990 once approved by the National Congress, ultimately becoming 
the present Law No. 60/90. 
 
 The general purposes of Law No. 60/90 includ e "export promotion and import substitution", 
but in fact it establishes no specific mechanism that  involves discrimination or barriers to imports. 
  Later, in 1991, the "New Tax Regime" Law, No . 125, was promulgated which nullified all the 
earlier provisions imposing levies on goods exports. 
  This measure voided one of the objectives set in Law No. 60/90, which is why we take the 
view that the conditions set in Article 3 of the Subsidies Agreement are not met. 
 
 It should also be pointed out again that this legislation was examined in the two reviews of 
Paraguay's trade policy, in 1997 and 2005, and no objections were raised by other Members. 
 
Question 2
 
 
Decree No. 21.944 (the Auto Regime ) 
 
 In response to the United States' questions, Paraguay stated that its Auto Regime does 
not meet the standard for notification set ou t in the Subsidies Agreeme nt.  However, publicly 
available information indicates that Decree No. 21.944 meets the definition of a subsidy as 
provided under Article 1 of the Subsidies Agreemen t.  Specifically, this programme provides a 
financial contribution in the form of tax and dut y exemptions, which confer a benefit upon the 
recipients.  Further, this programme clearly appea rs to be specific to the automotive sector.  
The Decree also appears to conditi on eligibility for benefits on the basis of "export promotion 
and/or import substitution".  Decree No. 21.944 also specifies that beneficiary enterprises must "gradually and increasingly incorpor ate locally produced components ".  To the extent that the 
above-mentioned benefits are contingent upo n exports or upon the use of domestic over 
imported goods, this programme would appear to be a prohibited s ubsidy as provided under 
Article 3 of the Subsidies Agreement. 
 
 Please explain further why Paraguay's Auto Re gime does not qualify as being subject to 
the notification requirements pursuant to Article 25 of the Subsidies Agreement.  In addition, 
please explain how Decree No. 21.944 is consiste nt with Article 3 of the Subsidies Agreement, 
given that one of the requirements to receive benefits under this programme appears to be 
export promotion or import substitution. 
 
Reply
 
 
 Under Law No. 125/91, as amended by Law No. 2.421/2004, the Executive is authorized to 
require that one or more taxes be fixed and levied at  certain stages, or at a particular stage, of the 
economic cycle when, for practical reasons relati ng to marketing, tax collection needs to be 
simplified.  
 As regards the importation of motorcycles, th ere have been no variations since 2007.  The 
principal destination is Brazil, followed by Uruguay;   almost all of the production is consumed on the 
domestic market.  Apart from motorcycles, Paraguay has no automotive production.   The legislation is currently undergoi ng revision to bring it up to date.  G/SCM/Q2/PRY/8 
 Page 3 
 
 
   
 It should be noted that both laws were exam ined in the trade policy reviews of Paraguay and 
prompted no objections on the part of other Members.  They are at present being examined with a view to amendment.  
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