RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/146 
31 March 2005  
 
(05-1286) 
Trade Policy Review Body  
   
 
 
 
TRADE POLICY REVIEW 
 
PARAGUAY 
 
Report by the Secretariat 
 
   
This report, prepared for the Trade Policy Review of Paraguay, has been drawn 
up by the WTO Secretariat on its own responsibility.  The Secretariat has, as 
required by the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from th e Government of Paraguay on its trade 
policies and practices. 
 
Any technical questions arising from this  report may be addressed to Mr Diego 
Iribarren (Tel:  (022) 739 6392), Ms U lla Kask (Tel:  (022) 739 5627) or 
Mr Raymundo Valdés (Tel:  (022) 739 5346). 
 
Document WT/TPR/G/146 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/146 
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CONTENTS 
 
  Page 
SUMMARY OBSERVATIONS vii 
 (1) I NTRODUCTION  vii 
 (2) E CONOMIC ENVIRONMENT  vii 
 (3) T RADE AND INVESTMENT POLICY FRAMEWORK  vii 
 (4) M ARKET ACCESS IN GOODS  viii 
 (5) O THER MEASURES AFFECTING TRADE  ix 
 (6) S ECTORAL POLICIES  x 
I. ECONOMIC ENVIRONMENT 1 
 (1) O VERVIEW  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  1 
 (i) Structure of the economy 1  (ii) Output and employment 2 
 (iii) Fiscal Policy 4 
 (iv) Monetary and exchange rate policy 6  (v) Balance of payments 8 
 (3) T
RADE AND INVESTMENT FLOWS  11 
 (i) Composition of trade 11 
 (ii) Geographical distribution of trade 11 
 (iii) Foreign direct investment 12 
 (4) O UTLOOK  13 
II. TRADE AND INVESTMENT REGIME 14 
 (1) O VERVIEW  14 
 (2) T RADE POLICY FORMULATION AND IMPLEMENTATION  15 
 (i) Legal and institutional framework 15 
 (ii) Trade policy objectives and formulation 16 
 (3) F OREIGN INVESTMENT REGIME  18 
 (4) I NTERNATIONAL RELATIONS  21 
 (i) World Trade Organization 21  (ii) Preferential trade agreements 24 
 (5) T
RADE -RELATED TECHNICAL ASSISTANCE  30 
  WT/TPR/S/146 Trade Policy Review 
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  Page 
III. TRADE POLICIES BY MEASURE 32 
 (1) OVERVIEW  32 
 (2) MEASURES DIRECTLY AFFECTING IMPORTS  33 
 (i) Procedures, registration and documentation 33 
 (ii) Customs valuation 36 
 (iii) Rules of origin 37   (iv) Tariffs 38 
 (v) Other charges affecting imports 47 
 (vi) Import prohibitions, restrictions and licensing 49  (vii) Contingency measures 51 
 (viii) Standards and other technical  requirements (including SPS) 56 
(3) 
MEASURES DIRECTLY AFFECTING EXPORTS  61 
 (i) Procedures and documentation 61 
 (ii) Export taxes, charges and levies 62 
 (iii) Export prohibitions, restrictions and licensing 63  (iv) Tax concessions, free zones and other fiscal benefits 64 
 (v) Export promotion, finance, insurance and guarantees 68 
(4) O
THER MEASURES AFFECTING PRODUCTION AND TRADE  69 
 (i) Legal framework for business activity, including registration 69 
 (ii) Competition policy and price controls 72  (iii) Incentives and other government supports 73 
 (iv) State trading, public corporations and privatization 75 
 (v) Government procurement 76 
 (vi) Intellectual property rights 80 
IV. TRADE POLICIES BY SECTOR 89 
(1) OVERVIEW  89 
(2) AGRICULTURE , LIVESTOCK AND FORESTRY  90 
 (i) Features 90 
 (ii) Policy objectives in the sector 93  (iii) Trade measures and other policy instruments 95 
 (iv) Key subsectors 97 
(3) 
MANUFACTURING SECTOR  102 
(4) ENERGY SECTOR  105 
 (i) Hydrocarbons and other fuels 106 
 (ii) Electricity 108 
(5) SERVICES  110 
 (i) Overview 110 
 (ii) Telecommunications 112 
 (iii) Financial services 117 
 (iv) River transport 123  (v) Air transport 126 
 (vi) Land transport 128 
 (vii) Tourism 129 
 
APPENDIX TABLES 137 
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  Page 
 
CHARTS 
 
III. TRADE POLICIES BY MEASURE 
 
III.1 Frequency distribution of MFN tariff rates, 2004 41 
III.2 Tariff escalation by ISIC 2-digit industry, 2004 42 
 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT  
 I.1 Structure of GDP and employment, 1997-2004 2 
I.2 Leading economic indicators, 1997-2004 3 
I.3 Financial accounts of the Central Government, 1997-2004 5 I.4 Leading monetary indicators, 1997-2004 7 
I.5 Balance of payments, 1997-2003 9 
I.6 Foreign direct investment stock, 1998-2003 12  
II. TRADE AND INVESTMENT REGIME  
 II.1 Approved projects (Law No. 60/90) 20 
 
III. TRADE POLICIES BY MEASURE   
III.1 Registration requirements for importers and imported products 34 
III.2 Summary analysis of Paraguay's MFN tariff, 2004 39 
III.3 Paraguay's MFN tariff structure, 1997 and 2004 40 
III.4 Import licensing 50 
III.5 Import prohibitions 50 
III.6 Sanitary and phytosanitary requirements for imports 59 
III.7 BNF export financing, 2001-2004 69 III.8 International conventions ratified by Paraguay 80 
III.9 Overview of the protection of intellectual property rights in Paraguay, 2005 81 
 IV. TRADE POLICIES BY SECTOR 
 
IV.1 Trends in land use by subsector, 1988/99 to 2002/03 91 IV.2 Production of commodities, 1993-2003 92 
IV.3 Value added in manufactures, 1991-2002 102 
IV.4 Summary of specific commi tments under the GATS 111 
IV.5 Selected telecommunication indicators, 1997-2003 113 WT/TPR/S/146 Trade Policy Review 
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  Page 
 
APPENDIX TABLES  
 
I. ECONOMIC ENVIRONMENT  
 
AI.1 Merchandise exports by product group, 1998-2003 139 AI.2 Merchandise imports by product group, 1998-2003 141 
AI.3 Merchandise exports by trading partner, 1998-2003 143 
AI.4 Merchandise imports by trading partner, 1998-2003 145  
II. TRADE AND INVESTMENT REGIME  
 AII.1 Summary of Paraguay's notifications to the WTO, October 2004 147 
 
IV. TRADE POLICIES BY SECTOR  
AIV.1 Agricultural exports by product, 1993-2003 150 
AIV.2 Agricultural exports by destination, 1993-2003 151 
AIV.3 Main agricultural imports, 1993-2003 152 
AIV.4 MFN tariffs on agricultural products 153 AIV.5 Tariffs on agricultural products from Paraguay:  USA (2002) 154 
AIV.6 Cotton production and exports 155 
AIV.7 Soya production and exports, 1993-2003 156 AIV.8 Sugar production and exports, 1993-2003 157 
AIV.9 Maize (corn) production and exports, 1993-2003 158 
AIV.10 Production and exports of other crops, 1993-2003 159 AIV.11 Production and exports of animal products 160 
AIV.12 Exports of wood products, 1993-2003 161 
AIV.13 Manufacturing sector exports, 1991-2002 162 AIV.14 Manufacturing sector imports, 1991-2002 163 
AIV.15 Manufacturing sector tariffs 164 
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SUMMARY OBSERVATIONS 
(1) INTRODUCTION 
1. Reflecting in part the importance of 
trade to its economy, Paraguay has made 
significant efforts to streamline and modernize 
its trade regime since its first Review in 1997.  Applied MFN tariffs have been reduced to an average of 8.9 per cent.  Although in a couple of instances export restrictions and local 
content requirements hav e been used, other 
trade measures appear to create no significant distortions to trade or investment.  Nonetheless, Paraguay's economic performance has remained modest, reflecting both the impact of exogenous shocks and 
internal problems.  Further steps thus appear 
to be required to accelerate and ensure the sustainability of growth. 
2. Paraguay considers regional 
integration agreements as complementary to 
multilateral and its own liberalization 
initiatives.  Paraguay's membership in the Southern Common Market (MERCOSUR) has had a significant impact on its economy, opening markets for Paraguayan goods but placing domestic producers under increased 
competitive pressure.  In this context, 
agriculture has consolidated its position as a leading sector, while manufacturing has experienced mixed results  despite the support 
provided by industrial policy measures. 
3. The State still plays an important role 
in some activities, and th e cost of key services, 
such as transportation and telecommunications, is relatively high.  Privatization was attempted as a means to 
address this and other problems but efforts 
were halted in 2002.  Nevertheless, attracting new investment to improve efficiency remains crucial.  This would be aided by enhancing the stability of the trade and investment regime which, in turn, could be achieved by 
expanding Paraguay's multilateral 
commitments, particularly under the GATS. (2) ECONOMIC ENVIRONMENT 
4. Between 1997 and 2002, Paraguay's 
real Gross Domestic Product (GDP) decreased.  Although this trend was reversed 
in 2003, driven essentially by exports of 
agricultural products, between 1997 and 2004 real GDP per capita still declined.  The fiscal situation has improved markedly since 2003 as a result of several reforms, notably to the 
pension system and to the administration of 
public funds.  Gross foreign debt as a proportion of GDP increased during 1997-03, reaching 47.8 per cent in 2003.  
5. Monetary policy has sought to 
maintain a stable domestic price level, 
including through interventions in the foreign 
exchange market.  The appreciation of the currency has contributed to slow the general growth of domestic prices.  However, real interest rates remained high and represent an 
obstacle to growth   
6. International trade is important for 
Paraguay, the value of imports and exports being approximately equal to GDP.  Paraguay's main ex ports are primary 
products, especially agricultural and food 
products, whilst most of its imports are 
manufactured goods.  The trade balance was negative throughout the period under review whilst the current account became positive in 2002 due in part to a reduction in the trade 
deficit.  MERCOSUR plays a vital role in 
Paraguay's trade, both as a source of imports and as an export market.  Unregistered trade to evade taxes is significant.   
(3) TRADE AND INVESTMENT 
POLICY FRAMEWORK 
7. During the review period, there have 
been no major changes to Paraguay's fundamental legal framework although various new specific statutes have been adopted.  However, various events impinge on 
the functioning of the Executive and the WT/TPR/S/146 Trade Policy Review 
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Judiciary, which highlights the importance of 
ongoing efforts to improve governance in order to ensure the stability of the trade and investment environment.   
8. Paraguay's trade policy aims to 
consolidate and increase its participation in international trade, and thus enhance economic and social development.  Paraguay became a GATT contracting party in 1994, 
and is an original member of the WTO.  It 
participates actively in the WTO, and has made numerous proposals in the context of the Doha Development Agenda.  Its main areas of concern include trade in agricultural products, and special and differential 
treatment for landlocked developing countries 
with small and vulnerable economies.  Paraguay has submitted a relatively large number of notifications to the WTO, although some are still pending.  It has also made 
relatively active use of the WTO dispute 
settlement mechanism, as a third party, mostly 
in cases concerning agricultural products. 
9. Paraguay is a founding member of 
MERCOSUR, which it views as an instrument to overcome structural deficiencies.  Within 
MERCOSUR, Paraguay has sought the 
adoption of measures to lessen asymmetries in the region.  The MERCOSUR integration process has had a considerable impact on Paraguayan trade, and the final form the 
customs union takes should have a significant 
bearing on Paraguay's economic development.  Paraguay also grants preferences to the MERCOSUR associate members. 
10. Paraguay participates in the Latin-
American Integration Association (LAIA), and 
has signed partial-scope agreements with all its members.  In addition, Paraguay has concluded economic complementarity agreements with Colombia, Ecuador, Mexico, Peru and Venezuela.  As part of MERCOSUR, 
Paraguay is negotiating preferential 
arrangements with a number of other trading partners.  Paraguayan exports receive GSP preferences in various markets. 11. Paraguay's foreign investment regime 
is essentially open.  There are no restrictions on private investment, foreign or national, other than in certain ac tivities reserved for the 
State.  Paraguay seeks to enhance its 
investment environment through international arrangements, and has concluded numerous bilateral agreements on investment promotion and protection, and on double taxation.  
Nevertheless, Paraguay has made limited use 
of commitments under the GATS agreements to consolidate and improve the predictability of its investment regime. 
(4) MARKET ACCESS IN GOODS 
12. Since its previous Review, Paraguay 
has taken steps to facilitate trade, including 
the adoption of the WTO definition of transaction value, the abolition of preshipment inspection, and the establishment of a single export registry.  In 2005, a new Customs Code 
entered into force.  Step s have  also been taken 
to address control problems at customs.  However, product-specific registries are still 
used for imports and, although steps are being taken to address this, export procedures appear cumbersome and time-consuming. 
13. Tariffs are the main instrument of 
border protection and an important source of fiscal revenue (around 20 per cent of annual tax collection).  All tariffs are ad valorem.  The simple average applied MFN tariff had 
decreased to 8.9 per cent in 2004 from 9.6 per 
cent in 1997;  however, the average was higher in 1999 and 2000, when applied tariffs were temporarily increased.  The average applied MFN tariff is 9.9 per cent for 
agricultural products (WTO definition) and 
8.8 per cent for non-agricultural products.  Paraguay applies MERCOSUR's Common External Tariff (CET) with exceptions concerning 24 per cent of its tariff lines.  In line with Paraguay's stated preference for 
generally low import duties, as long as such 
exceptions are in force Paraguay's average applied tariff should remain below the CET mean. Paraguay WT/TPR/S/146 
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14. Paraguay has bound its whole tariff 
schedule, thus increasing the predictability of its trade regime.  However, the gap between applied and bound tariffs  remains relatively 
wide as the average bound tariff is 32.6 per 
cent.  A number of tariffs agreed in MERCOSUR are above Paraguay's bound rates but the authorities noted that in these cases the bound rates are applied. 
15. In addition to tariffs, certain other 
duties and charges are applied exclusively on imports.  All imports are subject to a "valuation fee" of 0.5 per cent on the c.i.f. value of imports.  In addition, a tax of 7 per cent is levied on the consular fees to finance the National 
Indigenous Institute (INDI ).  Consular fees are 
collected for document registration.  A fee of 1 per cent (or above) is paid to the Directorate of Civil Aeronautics, and of between 0.75 per cent and 3 per cent to the National Shipping 
and Ports Administration on imports handled 
by these two agencies 
16. Between November 1998 and the end 
of 1999, Paraguay imposed minimum specific import duties (DIEM) on certain products to "counteract trade distortions affecting the 
domestic economy".  Between July 2001 and 
end 2003, Paraguay maintained, with modifications, a tem porary import measure 
(METI) in the form of a 10 per cent duty on the c.i.f. value of certain imports to "counteract  
distorting effects on the domestic economy and 
maintain the compe titiveness of domestic 
products". 
17. For the most part imports and 
domestically produced goods receive the same 
treatment as regards domestic taxes.  However, 
during the period under review, Paraguay increased by up to 50 per cent the taxable value of certain imported products subject to excise taxes (beer, cigarettes and lead-free petrol).  On the other hand, some products sold 
mainly to tourists are subject to a reduced tax 
base. 
18. Prior authorization and prohibitions 
are used for health, en vironmental or security 
reasons.  Import restrictions and prohibitions can also be imposed for economic 
development, balance-of-payments or safeguard purposes, as well as to protect domestic production from imports. 
19. Paraguay has notified to the WTO two 
anti-dumping measures, but no safeguard or 
countervailing measures during the period under review. 
20. Since its previous Review, Paraguay 
has notified the WTO one SPS measure but no 
technical regulations. 
(5) OTHER MEASURES AFFECTING 
TRADE 
21. Fiscal incentives to exports are 
granted under different regimes, such as 
temporary admission, free trade zones, and in-
bond processing (maquila).  Neither the free zone regime nor the maquila regime have been notified to the WTO as providing export subsidies. 
22. Export taxes levied on bovine leather 
and soya beans to encourage local processing were  phased out on 1 March 2005.  Exports of bovine leather are subject to prior authorization to guarantee supplies for the domestic industry;  in 2003, the same 
requirement was introduced for exports of 
certain metals.  The export of unprocessed and semi-processed wood is prohibited. 
23. Paraguay offers incentives to 
investment and production, most of them 
fiscal, which in some instances complement 
fiscal credit targeted to  specific sectors.  Some 
of these incentives are subject to the use of nationally produced capital goods or the use of Paraguayan consultants.  The motor vehicle 
industry has its own special regime; amongst 
other things, it requires increasing use of domestic components.  Paraguay has informed the WTO that it does not provide subsidies within the scope of the SCM Agreement, and it has made no TRIMs notification. 
24. Paraguay has no competition law per 
se although several pieces of legislation WT/TPR/S/146 Trade Policy Review 
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provide general guidelines.  A draft law has 
been under consideration in Congress since 2003.  State-owned companies are mostly involved in the provision of services, with 
some operating under monopoly conditions.  
The fragile financial position of some companies led the Government to draw up privatization plans but the process was indefinitely halted by Congress in 2002 in 
response to lack of public trust. 
25. Paraguay is not a signatory to the 
Plurilateral Agreement on Government Procurement.  Paraguay introduced a new procurement law in 2003 with the aim of enhancing transparency and predictability.  
International bidding is used where there is 
deemed to be no national supplier, where international treaties so  demand, or for "price convenience".  Also, participation by foreign companies may be subject to their home 
countries providing reciprocal treatment to 
Paraguayan companies. 
26. Paraguay has adopted several new 
laws and regulations to enhance the protection of intellectual property rights.  Paraguay's intellectual property legislation was reviewed 
by the TRIPS Council in 2000.  
Notwithstanding the efforts made to improve enforcement, this issue remains a source of concern to both Paraguay and its trading partners. 
(6) SECTORAL POLICIES 
27. During the period under review, 
agriculture consolidat ed its position as a 
leading sector in the Paraguayan economy.  Agricultural exports have increased and 
averaged around 84 per cent of total 
merchandise exports between 1997 and 2003;  such exports are concentrated in a small number of products, particularly soya bean and soy products.  The Government seeks to support the sector through public finance 
programmes, which appear  modest in scope, 
and has imposed export taxes on a few products. 28. The manufacturing sector is relatively 
small, the main industries being food processing, textiles and clothing, tobacco and beverages.  Overall, value added in m anu-
facturing has tended to fall, in part because 
the sector seems to have exploited the opportunities arising from the formation of MERCOSUR only to a limited extent.  Paraguay maintains various programmes that 
provide public assistance to manufacturing, 
including a scheme specifically for the automotive industry. 
29. A State oil company has a de facto 
monopoly on the importation of crude petroleum.  In part to support the domestic 
sugar industry, petrol of up to 95 octane must 
contain ethanol;  importers  of petrol must mix 
this product with ethanol in Paraguay. 
30. Paraguay has abundant potential to 
generate hydroelectric power;  the world's 
largest hydroelectric plant is located at the 
border between Paraguay and Brazil, and has enabled Paraguay to become one of the world's largest exporters of electricity.  Electricity costs in Paraguay appear to be relatively low by regional standards though not by world 
standards.  The domestic electricity market is 
dominated by a State company.  The restructuring of the electricity sector has been under consideration since 1995. 
31. Paraguay's GATS commitments are 
modest, confined to certain activities in 
financial services and tourism.  Paraguay did not participate in the post-Uruguay Round negotiations on telecommunications or on financial services. 
32. The banking sector appears to be 
highly concentrated, and restrictions in the availability of credit and high interest rates appear to be hindering growth in other sectors.  During the period under review, the banking sector experienced a crisis from which 
it seems to have recovered.  At the beginning 
of 2005, Congress was considering a draft law to regulate the operation of public banks. Paraguay WT/TPR/S/146 
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33. The development of fixed telephony has 
lagged and mobile teleph ony has met much of 
the demand for services.  The State-owned operator has a de facto monopoly on fixed 
telephony;  in 2000, the Government began 
privatization of this operator but the process was stopped partly owing to lack of public trust and concerns about the constitutionality of the bidding process.  The authorities are reviewing 
their policy objectives for the sector. 
34. Paraguay's international trade faces 
transportation costs that are amongst the highest in the Western Hemisphere, partly 
because Paraguay is  landlocked.  Maritime 
and river cargo transport is reserved for Paraguayan-registered vessels, although this 
restriction may be ease d for transport to and 
from LAIA members and has been eliminated for river transport in the case of countries that are signatories to the Hydrovia treaty.  The private sector may construct and operate 
river ports in order to provide commercial 
services, but airports that provide similar services must be administered by a State entity.