RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/TPR/G/146 
31 March 2005 
 
 (05-1272) 
Trade Policy Review Body Original:  English 
  
 
  
 
TRADE POLICY REVIEW 
 
PARAGUAY 
 
Report by Paraguay 
 
 
 
 
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statement by Paraguay is attached. 
 
 
Note: This report is subject to restricted circul ation and press embargo until the end of the meeting 
of the Trade Policy Review Body on Paraguay. Paraguay WT/TPR/G/146 
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CONTENTS 
  
Page 
I.
 INTRODUCTION ................................................................................................................... ...4 
II. MAIN ECONOMIC REFORMS................................................................................................4  
III. THE ECONOMIC AND TRADE ENVIRONMENT ................................................................5  
IV. CURRENT ECONOMIC  OUTLOOK .......................................................................................6  
V. DEVELOPMENT OF TRADE NEGOTIATIONS ....................................................................7  
VI. INSTITUTIONAL AND POLICY FRAMEWORK ................................................................10  
VII. DIRECTIONS OF FUTURE POLICY.....................................................................................13  
 
  WT/TPR/G/146 Trade Policy Review 
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I. INTRODUCTION 
1. Paraguay's economic situation improved signifi cantly following years of economic stagnation 
and periodic crises.  The Government elected in 2003 embarked on an ambitious economic reform programme, focusing on strategies aimed at:  restoring the sustainability of fiscal accounts, settling 
arrears in external and internal public debt paym ents, improving the efficiency of the public sector, 
strengthening the financial system, maintaining consistent macroeconomic policies with low and 
stable long-term inflation, improving governance, a nd tackling corruption head on.  In order to guide 
and to unify its stabilization efforts and reforms, the new Government of Paraguay concluded a stand-
by agreement with the International Monetary F und (IMF) in 2003 for 2004, which was extended to 
September 2005. 
2. Looking back, it can be said that the Paraguaya n economy is beginning to emerge from a long 
period of weak growth during whic h macroeconomic administration combined with various structural 
problems prevented the economy from developing more  successfully and increased its vulnerability to 
negative external shocks. 
3. The environment for economic reform improve d, and the economy was stabilized in 2004.  
This was reflected in the performance of the gro ss domestic product (GDP), which grew by 2.9 per 
cent in 2004, and the substantial decrease in the level of inflation, which fell to a mere 2.8 per cent.  
International reserves reached a historical record, the fiscal accounts produced a surplus, and there 
were no domestic or external debt arrears with lo cal or international creditors.  Thanks to the 
substantial increase in tax revenue and the tax surp lus, it was possible to reduce external indebtedness 
by 5 per cent in 2004, and thus to re-establish fi nancial relations with the country's creditors, to 
stabilize the economy, and to lay the foundations for more sustainable economic growth. 
4. The political environment was conducive to im proved economic performance.  On the one 
hand, the Executive had been able to improve th e country's governance and restore a minimum of 
credibility to government actions.  The firm leader ship of the Executive on the anti-corruption front, 
its steady support for the Economic Cabinet, and a renewed vision of Paraguay's role in the 
international community were key factors in achie ving these results.  At the same time, the main 
political parties represented in the National Congress backed the economic reform proposals tabled by 
the Executive with a view to drawing up a progra mme aimed at medium- and long-term growth and 
sustainable development. 
5. The international economic climate also cont ributed to these results.  For example, the 
economies of the member countries of the Southe rn Common Market (MERCOSUR) grew by more 
than 5 per cent in 2004, the prices of the c ountry's export commodities were reasonable, and 
international interest rates remain ed low.  The world financial situation was conducive to the flow of 
capital to the region making it possible, among other factors, to accumulate international reserves. 
II. MAIN ECONOMIC REFORMS 
6. The current Government has undertaken a major re form of the country's main economic laws.  
In that context, it has promulgated the following legislation to date: 
• Law No. 2.421 (Administrative Reorganization and Fiscal Adjustment) of 
25 June 2004; 
 
• Law No. 2.422 (Customs Code) of 5 July 2004; 
 Paraguay WT/TPR/G/146 
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• Law No. 2.051 (Government Procurement) of 21 January 2003; 
 
• Law No. 2.345 (Fiscal Budget) of 24 December 2003. 
 7. The National Congress is currently studying propo sals by the Executive for the reform of the 
public banking system and the reform of the banking law.  The four laws already promulgated aim to 
restore the sustainability of fiscal accounts, while the two proposals currently in Congress aim to 
strengthen the financial system. 
8. In keeping with a policy of enhancing the competitiveness of Paraguay's productive sector, a 
number of important decisions have been taken with a view to opening up trade in goods from sectors 
that are crucial to the development of the count ry's productive activity.  On the one hand, tariff 
protection of capital goods and information tec hnology and telecommunications goods, to mention 
only the most important cases, was considerably re duced.  At the same time, in the meat production 
sector, which has recently recorded the highest grow th rate among the country's exports, Paraguay has 
acquired the international status of country free of foot-and-mouth disease with vaccination, enabling 
it to recover important traditional markets and to acquire others. 
9. Different steps have also been taken to improve the efficiency and transp arency of the public 
sector.  These have included independent audits of State enterprises, better dissemination of 
statements of condition of government agencies and enterprises, and demands for a plan to study the 
feasibility of private sector participation in their capitalization. 
10. Government efforts to enhance the efficiency and transparency of public sector management 
and to reform the priority economic sectors are beginning to produce results which, in turn, will 
contribute to the sustainability of long-term growth. 
III. THE ECONOMIC AND TRADE ENVIRONMENT 
11. The Government has introduced a number of economic adjustment measures which have 
brought stability and provided a cushion against ne gative external shocks.  Initially, these measures 
focused on reversing the deterioration of the public sect or's financial situation.  As a result, the fiscal 
situation improved considerably, and according to  preliminary figures, the central government 
collected more than it spent in 2004, achieving a su rplus of approximately 1.7 per cent of GDP, while 
public enterprises, helped by the ex change rate stability, improved their performance.  This would 
mean that the consolidated public sector had achie ved a surplus of 2.7 per cent of GDP, reflecting a 
significant growth in revenue thanks to the impr oved administrative management of the main tax 
collection agencies, the review of controlled prices and rates, and the moderate growth in current 
expenditure. 
12. Public indebtedness is at a prudential and sust ainable level:  no arrears are owed to either 
international or local creditors.  The substantial a rrears in both the internal and external medium- and 
long-term public debt that remained at the be ginning of the 2003 administration have been fully 
settled.  In the case of the external debt, the arrears in payment went from US$97.4 million to zero, 
while overdue and unpaid local debt service went from US$30 million to zero. 
13. As regards monetary policy, demand for local cu rrency increased, and is expected to continue 
to do so, enabling the Central Bank to pursue a mone tary policy that can stimulate economic recovery 
without feeding inflation.  The interest rate of  the debt instruments used by the Central Bank to 
influence the quantity of money was substantially reduced, from an annual weighted average of 16 per 
cent in 2003 to the current 7 per cent.  Interest ra tes on the local currency lo ans market were also WT/TPR/G/146 Trade Policy Review 
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reduced.  At the same time, the international r eserve targets set in connection with the standby 
agreement with the IMF were fully achieved, and in ternational reserves reached a historical peak at 
close to 20 per cent of GDP.  Paraguay's monetary policy has enabled economic growth in 2004 to take place against a backdrop of price stability.  In flation was down to 2.8 per cent at the end of the 
year as compared to 14.6 per cent in 2002 and 9.3 per cent in 2003. 
14. Paraguay's foreign trade reached its peak in 1997,  both in terms of exports and imports, before 
entering a downward trend in 1998 to reach its lowest  levels in 2002.  This trend, particularly in 
imports, is partly explained by the decline in domes tic demand as a result of the financial crisis during 
those years, which limited domestic credit.  At the same time, exports decreased between 1999 and 
2002 owing, inter alia , to the decline in the competitiveness of domestic supply as a result of the 
devaluation of the Brazilian and Ar gentine currencies and to the regi on's financial problems.  Starting 
in 2003, exports and imports recovered significantly , with growth rates in 2004 of 31 per cent and 
42 per cent respectively in comparison to 2003.  As a result of this growth, the openness ratio
1 reached 
its historical peak of 63.1 per cent, as compared to 44.2 per cent in 1997. 
15. Total exports, including re-exports, reached US $2,872,000,000, close to the 1998 level prior 
to the devaluation of the Brazilian Real.  Mean while, imports reached US$3,245,000,000.  The trade 
account imbalance is structural, and is compensat ed by a positive flow in the services account of 
US$230,000,000, thanks chiefly to royalties from It aipú and Yacyretá.  Paraguayan exports are 
concentrated in the high productivity sectors in wh ich the country has a competitive advantage, such 
as the soya and beef complexes.  In 2004, the most dynamic export growth component was meat – 
which rose from US$61,000,000 in 2003 to US$161,000,000 – followed by soya flour, soya bean 
seed, and cotton fibre, which rose by 67 per cen t, 11.4 per cent, and 87 per cent respectively. 
16. The exchange rate remained stable throughout  2004, with a slight nominal depreciation 
against the US dollar of 3.6 per cent.  This contrast ed significantly with most of the countries in the 
region,  where the appreciation of the local curre ncy against the dollar followed the appreciation of 
the Euro.  The real effective exchange rate depreci ated substantially – by about 16 per cent – in 2004 
as a result of the appreciation of the Brazilian Real against the US dollar. 
17. The financial system improved:  deposits rec overed from the sharp decline of 2002 in the 
wake of a banking crisis linked to the regional crisis, and have pursued their recovery ever since.  
Local currency credits, unlike foreig n currency credits, are beginning to show signs of recovery.  
Total deposits in the private banking system have grown by 12.4 per cent over the past year, while 
credits have grown by 16 per cent.  This has pr oduced, as a side effect, an incipient process of 
secondary money creation by the sector which is begi nning to alter the conditions that have prevailed 
since the end of 2002, when deposits in the banking  system began to exceed credit levels, resulting in 
practice in a decrease in liquidity on the market. 
IV. CURRENT ECONOMIC OUTLOOK 
18. Paraguay's economic outlook has improved consider ably.  In a short period of time, the 
current government has implemented prudent fiscal and monetary policies that have succeeded in 
stabilizing the economy.  As mentioned, there has been a significant improvement in public finances, 
and relations with local and international creditors  have been normalized.  And with inflation under 
control, the country's external competitiveness has improved. 
19. With the current structural reform process now under way, Paraguay's medium-term 
economic outlook is better than it was.  The regional economic environm ent has improved, and 
                                                      
1 Define as the ratio of imports and exports to GDP, expressed as a percentage. Paraguay WT/TPR/G/146 
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conditions are now favourable for Paraguay's main trading partners.  Performance is nevertheless 
expected to pursue its recovery, and GDP  growth to become more sustainable. 
20. The favourable evolution of GDP in the medium  term will depend largely on the maintenance 
of prudent fiscal and monetary policies such as t hose already introduced, together with strong public 
policies, and further structural reform.  It w ill also be essential for th e country to boost its 
entrepreneurial and labour productivity. 
21. The Paraguayan Government considers that its contribution should include the privatization 
or capitalization of public enterprises, reform of the social security systems, a systematic and systemic 
combat against corruption and informal activities, and the implementation and follow-up of education 
and health programmes which, in their turn, should help to improve the human capital, to incorporate 
more advanced technology in coope ration with the private sector, and to foster investment in basic 
infrastructure for economic activities.  The government is convinced that this will require a prolonged 
and continuous effort on its part. 
V. DEVELOPMENT OF TRADE NEGOTIATIONS 
22. Paraguay's participation in the various intern ational trade negotiation forums is geared 
towards securing and expanding markets for its e xportable supply, attracting investment, and 
participating actively in cooperation and techni cal assistance programmes aimed at achieving 
effective and equitable integration in international trade. 
World Trade Organization (WTO)  
 23. The Paraguayan Government has increasingly turned  its attention to WTO issues over the past 
few years, in particular since the launching of the mu ltilateral trade negotiations in Doha.  It considers 
the strengthening of multilaterialism to be crucia l to its economic growth  and development goals. 
24. Consequently, Paraguay has adopted a more active role in the WTO's decision-making 
process by submitting proposals in the areas covered by the Doha Development Agenda, both individually and as part of MERCOSUR, the G-20,  the Cairns Group, and the Colorado Group, or 
together with other developing countri es with small and vulnerable economies. 
25. The Government of Paraguay has stressed its firm commitment to the Doha mandate.  Its 
main concerns in the current round of negotiations  are agriculture, trade facilitation, special and 
differential treatment for developing countries, as well as development issues and the programme for 
small economies mentioned in paragr aph 35 of the Doha Declaration. 
26. The WTO reform of trade in agricultural products , whose objective is to establish an equitable 
and market-oriented system of agricultural trade, is  fundamental for Paraguay.  As already mentioned, 
Paraguay's main exports rely on its agricultural potential.  Its economy is highly dependent on 
agricultural production, which provides sustenance to  much of its population.  The elimination of 
trade-distorting measures in this sector would provi de all countries, in particular the developing 
countries, with fair and equitable rules that w ould favour their participation in world trade. 
27. Since the WTO General Council Decision of Ju ly 2004, Paraguay has been participating 
actively in the Sub-Committee on Cotton, an agricultu ral sector that is of vital importance to the 
country's social and economic development. 
28. At the same time, special and differential tr eatment for the small and vulnerable economies 
and progress in the negotiations on trade facilitation ar e also crucial to Paraguay's foreign policy, and WT/TPR/G/146 Trade Policy Review 
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are raised in all of the international negotiations  to which Paraguay is a party.  Because of its 
geographical situation, Paraguay has high transport costs for the import and export of goods, and these 
costs are detrimental to the competitiveness of its domestic production.  Improved customs and port 
procedures at home and in the transit countries a nd a more efficient transport infrastructure are 
essential to overcoming this obstacle.  Paraguay wo uld like to see progress in the negotiations in both 
groups to which it has submitted proposals, both individually and jointly. 
29. As regards the dispute settlement mechanism, Paraguay has participated as a third party in 
many disputes, relating chiefly to trade in agricultu ral products, and special and differential treatment.  
It also hopes that the reforms to be made to the multilateral framework will succeed in producing a 
flexible and efficient instrument, above all one that is accessible to the developing countries. 
30. Although Paraguay tends to focus its attenti on on the above-mentioned areas, it is equally 
ambitious when it comes to any of the current ne gotiations under the WTO or other forums that seek 
to promote genuine openness, the deepening of trade relations, and trade competition. 
MERCOSUR 
 31. MERCOSUR  continues to be the main destinati on of Paraguay's exports and the main origin 
of its imports.  Indeed, this has been true ever si nce the elimination of tariffs within the zone which 
gave rise to the expanded market about halfway through the 1990's.  Between 1997 and 2004, exports 
to MERCOSUR accounted for 54 per cent on averag e of the total, while imports from MERCOSUR 
accounted for 55 per cent of the total.  Starting in 2001, there were signs that Paraguay's export 
markets were beginning to diversify, particularly  with sales to Asia, Africa, and the Middle East. 
32. Although Paraguay has attracted relatively little  in the way of foreign investment in 
comparison to its MERCOSUR partners, the government  considers that global integration is the right 
way to make the most of the adva ntages associated with larger mark ets, and it is convinced that it 
must continue along the path of econom ic, political, and cultural integration. 
33. Paraguay's tariff policy has consisted in appl ying low and uniform customs duties.  The 
weighted average import duty applied to goods orig inating outside the MERCOSUR zone decreased 
from 5.9 per cent in 1995 to 4.1 per cent in 2003, in keeping with Paraguay's historical policy of 
openness to the international comm unity of nations.  The special agreements concluded in the 
framework of MERCOSUR, which permit the ma intenance of tariffs exempted from the 
MERCOSUR Common External Tariff, have been  a fundamental part of this policy. 
 Paraguay WT/TPR/G/146 
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Note: APPI:  Weighted average tariff for imports from with in the zone;  APPE:  Weighted average tariff for imports 
 from outside the zone;  APP:  Weight ed average tariff for total imports. 
 
Source : Ministry of Finance. 
 
34. With respect to common trade policy, starting in December 2003 Paraguay made important 
gains at the MERCOSUR level.  The treatment of asymmetries in MERCOSUR enabled Paraguay to 
consolidate a set of measures aimed at balancing its  participation in the integration project.  These 
gains include the following decisions of the MERCOSUR Common Market Council:  Dec. 
CMC No. 27/03 on structural funds to enhance the competitiveness of the smaller partners and least-
developed regions;  Dec. CMC No. 28/03 on differ ential treatment in external negotiations for 
Paraguay as a smaller economy and land-locked country;  Dec. CMC No. 29/03 on MERCOSUR 
rules of origin; Dec. CMC No. 31/03 on the Co mmon External Tariff;  Dec. CMC No. 32/03 on 
special import regimes;  Dec. CMC No. 33/03 on  information technology and telecommunications 
goods;  and Dec. CMC No. 34/03 on capital goods. 
35. The MERCOSUR integration project is the most  important component of Paraguay's trade 
policy strategy.  It is therefore essential that the project should be strengthened and deepened through 
an approach that fosters effectiv e access to the regional market, free from tariff and non-tariff barriers, 
and that would guarantee the free circulation of goods and services. 
36. Also worth mentioning is the reform of the MERCOSUR dispute settlement system through 
the Protocol of Olivos, which provides for the creati on of a permanent review tribunal.  This tribunal 
has been set up in Asunción. 
37. Paraguay has what is already a long tradition of op enness to international trade.  For the past 
few years, its trade negotiation strategy with othe r countries and blocs has passed via MERCOSUR.  
In that framework, it has concluded agreements  of various degrees of complementarity and 
cooperation with the European Union, the countries of  the region, South Africa, and India, to name 
but a few.  It is also negotiating the Free Trade Ar ea of the Americas (FTAA).  The basic approach of 
these strategies has been to promote a freer envi ronment for international trade and investment. 
38. Applying the "four plus one" format, MERCOSU R is involved in vari ous negotiations with 
other countries of the region and outside the hemis phere.  In all of these negotiations, Paraguay is 
seeking access to markets through special and differentia l treatment in view of its status as a relatively 
less economically developed and land-locked c ountry.  MERCOSUR has undertaken to negotiate Paraguay
     Weighted Average Tariff (%)
0.0 3.0 6.0 9.0 12.0 15.0 18.0 
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 
APPI APPE APP  WT/TPR/G/146 Trade Policy Review 
Page 10 
 
 
jointly trade agreements with third countries or grou ps of countries outside the zone which involve the 
granting of trade preferences.   
MERCOSUR and regional agreements  
 39. As a MERCOSUR member, Paraguay co ncluded Economic Complementarity 
Agreement No. 35 with Chile, and Economic Comple mentarity Agreement No. 36 with Bolivia, for 
the creation of a free trade zone between them.  In December 2003, MERCOSUR signed with Peru, 
Colombia, Ecuador and Venezuela Economic Comple mentarity Agreements Nos. 58 and 59, which 
target the establishment of a free trade zone within  an average of 15 years.  Paraguay is also taking 
part in the efforts to create the FTAA. 
MERCOSUR and extra-regional agreements  
 
40. Paraguay is currently participating, with th e other MERCOSUR members, in drawing up an 
inter-regional association agreement with the Europ ean Union with a view to establishing a political, 
economic and cooperation association, based on the EU-MERCOSUR Interregional Framework 
Cooperation Agreement. 
41. Together with the other countries of MERCO SUR, Paraguay concluded framework trade 
agreements with:  India (June  2003), South Africa (December 2004)
2, Egypt (July 2004), and 
Morocco (November 2004).  It also signed agreem ents on fixed preferences with India and the 
Southern African Customs Union (SACU) (Decembe r 2004), and is negotiating similar agreements 
with Egypt and Morocco. 
VI. INSTITUTIONAL AND POLICY FRAMEWORK 
Trade defence  
 
42. Paraguay's legislation regulating anti-dumpi ng measures and on subsidies and countervailing 
measures comprises the WTO Agreement on Implementa tion of Article VI of the GATT 1994 and the 
WTO Agreement on Subsidies and Countervailing Meas ures, incorporated into domestic legislation 
by Law No. 444/94.  Decree No. 15.286/96 designates the Ministry of Industry and Trade and the Ministry of Finance as the agencies responsible for their application, and establishes relevant 
administrative procedures. 
Intellectual property  
 
43. Paraguay's constitution, which has been in for ce since 1992, explicitly guarantees intellectual 
property rights.  Article 110 of the Constitution stipulates that every author, inventor, producer or trader shall enjoy exclusive ownership of his work, invention, mark or trade name in accordance with 
the law.  Paraguay is a member of the World Intellectual Property Organization (WIPO) and has 
ratified a number of international conventi ons on intellectual property rights (IPRs). 
44. The new Law on Patents introduced the possib ility of granting patents to sectors that had 
previously received no protection at all, such as pharmaceutical products.  Law No. 1.630 of 2000 
provided for pharmaceutical patent protection as from 1 January 2003, but this date was later put back 
to 1 January 2005 by Law No. 2.047 of 19 Decemb er 2002 in accordance with Article 65 of the 
Agreement on Trade-Related Aspects of Inte llectual Property Rights (TRIPS).  Up until 
                                                     
 
2 Subsequently joined by the other members of the Southern African Customs Union (SACU), namely 
Botswana, Lesotho, Namibia and Swaziland. Paraguay WT/TPR/G/146 
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1 January 2005, it was possible to file a patent a pplication (Article 91 of the Law on Patents) under 
the "mailbox" procedure provided for in Article 70 of  the TRIPS Agreement.  It was also possible to 
obtain exclusive marketing rights under Article 94 of the Law on Patents.  The dates of such 
applications are valid for future priority-related claims. 
45. Considerable efforts have been made to improve  enforcement of IPRs.  Since its last trade 
policy review in 1997, the Government of Paraguay has stepped up its searches and seizures in cases 
of violation of these rights within its territory.  In connection with the review of its IPR legislation in 
the TRIPS Council in November 2000, Paraguay provide d statistics testifying to its IPR enforcement 
efforts during the period 1998-2000. 
Defence of competition and the consumer  
 
46. While the Paraguayan Constituti on of 1992 guarantees free market competition in Paraguay 
and prohibits the establishment of monopolies, no specific competition law has yet been adopted to serve as a detailed legal framework for dealing with  monopolistic practices.  However, the Traders' 
Law contains a few general guidelines concerning mark et competition.  The authorities noted that the 
lack of specific regulations governing competition do es not mean that the provisions of the National 
Constitution do not apply;  indeed, the Constitution itsel f stipulates that the lack of a regulatory law 
may not be invoked to deny constitutional rights or gu arantees.  In 2003, a draft law on the defence of 
competition was submitted by the Executive to the National Congress for consideration, and it is 
currently under review.  This draft sets forth wh at is considered to be permissible competitive 
conduct, including the possible capture of markets on the basis of superior efficiency alone.  
Paraguayan-owned companies domiciled outside of Para guay will be subject to the provisions of the 
draft law to the extent that their activities have an impact on domestic economic activity.  The draft 
law also allows the conclusion between companies of agreements that result in an improvement in the 
standard of living of poor areas, better quality of  services, and increased exports, provided they are 
not detrimental to market competition. 
47. Law No. 1.334 on Defence of the Consumer a nd User was enacted in 1998.  Ministry of 
Industry and Trade (MIC) Resolution No. 394 of 31 December 1997 provided for the creation of the 
General Directorate of Consumer Protection, which is answerable to the Under-Secretariat of State for Trade of the MIC, to deal with claims and co mplaints and provide information and guidance to 
citizens in the area of protection of consumers' and users' rights.  The MIC also administers the 
Enhanced Consumer Protection Programme, which reinforces the Integrated National Consumer 
Protection System (SNIPC) set up by Decree No. 20. 572 of 10 March 2003, with a view to providing, 
at the national level, information, guidance, conc iliation, mediation, arbitration, investigation, 
inspection and dispute settlement services for consumers under Law No. 1.334/98.  The SNIPC 
includes the MIC as the authority in charge of impl ementing, at the national level, Law No. 1.334/98, 
while the municipalities are responsible at the local level. 
Customs regime  
 
48. Improvements to the structure of the customs system have made it possible to progress 
considerably in the area of cu stoms procedures by introducing cross-check systems (computerized) 
with the transit countries, given that Paraguay is a land-locked country.  In addition, the integrated 
control areas have been completed, and trade flows have been directed towards border crossings that 
are equipped for the legal entry of goods into th e country.  A satellite system is currently under 
construction for the control of river and land transit of goods.  External trade control procedures have 
been rendered more effective thanks  to the rehabilitation of private ports and the upgrading of national 
ports. WT/TPR/G/146 Trade Policy Review 
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49. The National Customs Directorate is the ins titution responsible for administering import 
procedures.  These procedures are set forth in th e Customs Code (Law No. 2.422 of 5 July 2004) 
which entered into force on 11 January 2005, re placing the previous code (Law No. 1.173/85)3.  The 
National Customs Directorate controls imported produc ts through the use of different channels.  The 
new Customs Code incorporates the channel sy stem and defines the channels explicitly. 
50. Decree No. 13.721, notified to the WTO in 2004,  establishes supplementary regulations to 
Laws Nos. 260/93 and 444/94, by which the WTO Agreement on Customs Valuation was ratified and 
declared to be the applicable st andard for establishing the customs value of imports.  Moreover, the 
new Customs Code (Law No. 2.422) introduces a speci al reference, in Article 261, to international 
agreements and the regulations thereto, which are to taken into account when examining the Value 
Declaration. 
51. Export procedures are set forth in the Customs Code (Law No. 2.422), which stipulates that 
all exporters be registered in the National Expor ter Documentation Register (RNE) regulated by 
Decree 4.672/05.  Exporters that have registered their companies through th e computerized system 
SOFIA are exempted from this requirement, and th eir registration remains valid until April 2005.  
From April onwards, registration in the RNE will be mandatory. 
Government procurement  
 
52. Law No. 2.051 of 21 January 2003 (Law on Gove rnment Procurement – LCP), regulated by 
Decree No. 21.909 of 11 August 2003, establishe s the statutory provisions governing all public 
procurement in Paraguay.  Implementation of th e Law on Government Procurement, and essentially 
of the procurement portal, altered the way in whic h procurement takes place in Paraguay.  The main 
changes involve the establishment of a single legal framework for all agencies, giving greater security 
to suppliers and facilitating their pa rticipation.  Standard tender docum ents also contribute to that 
objective.  Access to information not only on procurement, but in other areas as well, has made it easier to exercise control:  in this case, control of what the government plan s to purchase, what it 
actually does purchase, how much it pays and from whom the purchase is made.  A reduction in the 
time needed to pay the supplier has also encourag ed participation by enterprises in the tendering 
procedures, essentially helping the small enterprises .  Greater participation clearly means greater 
competition, and hence lower procurement costs for the State.  Depending on the domain, costs have decreased by 20 to 30 per cent.  While in some areas,  such as fuels, costs have increased owing to the 
market situation, in others, for example medicame nts, they have decreased by almost 40 per cent.  
Another important element is the simplicity of citizen control, which is in fact beneficial to the State 
as a whole.  The transparency of procedures e nhances the country's credibility, not only with 
taxpayers and suppliers, but also with  international financial institutions. 
Agriculture – Creation of new entities for animal health and plant health  
 
53. The Paraguayan government is currently intr oducing changes in the organization and 
operational structure of the Ministry of Agriculture and Livestock (MAG), the main public body in the agricultural sector, in order to improve the effici ency with which it fulfils its basic roles and so 
that it can respond to the current and fu ture realities of the agricultural sector. 
54. As a part of this process, two new entities were  recently created with legal personality under 
public law, independent and with their own res ources:  the National Animal Quality and Health 
                                                     
 
3 Law No. 1.173/85, of 17 December 1985. Paraguay WT/TPR/G/146 
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Service (SENACSA) and the National Plant and Seed  Quality and Health Service (SENAVE), which 
replace operational units that existed within the structure of the MAG. 
55. The National Animal Quality and Health Se rvice was created on 28 July 2004 by Law 
No. 2.426, which unifies the official veterinary servi ces, bringing together in one single entity all that 
concerns animal health, quality, and safety of food of animal origin, and international trade in animals 
and animal products, making it possible to supervise and control every phase of the production chain. 
56. SENAVE was created by Law No. 2.459 of 4 Oc tober 2004.  Its main  function will be to 
implement national policy in the area of plant health and quality, seed production, and the protection of new plant varieties and plant products derived from biotechnology. 
VII. DIRECTIONS OF FUTURE POLICY 
57. The Government of Paraguay believes firmly in  free international trade, and relies on the 
multilateral trade rules and their capacity to provi de an ideal framework for the generation and 
development of productive activities.  It will theref ore continue to seek further economic integration 
in MERCOSUR and to participate actively in the nego tiations under the WTO, in particular as regards 
the Doha mandate, the Development Round, and th e so-called "July Package", with a view to 
establishing concrete and credible arrangements to ensure that the developing and least-developed 
countries are able to participate in international trade and investment on an equitable basis. 
58. The Government of Paraguay attaches great importa nce to agriculture and to the three pillars 
of the multilateral agricultural negotiations (market access, export subsidies, and domestic support) in 
achieving true liberalization and reform of the ag ricultural market, and to special and differential 
treatment for the land-locked developing countries with small and vulnerable economies.  Progress in 
opening up the agricultural sector to truly comp etitive conditions is crucial to the success of the 
Development Round.  Paraguay is working closely with its counterparts from the G20 countries and 
the Cairns Group, and with all interested parti es, to ensure that the Round produces balanced and 
mutually compatible results in all sectors.  It  would be an advantage for all WTO Members to 
complete the work on the negotiating modalities prior to the next ministerial meeting in Hong Kong. 
59. Paraguay's agricultural economy is one of the most open in Latin America, although it is 
small and relies on an export production model fo cussed on a few agricultural products.  State 
intervention in agricultural policy is confined to a few instruments:  reference prices are occasionally 
established for certain products, but have no gr eat budgetary impact.  There are no guaranteed 
minimum prices requiring government procurement, nor are there any price bands.  Indeed, Paraguay 
does not even have any "exchanges" devoted to th e marketing of agricultural products.  The only 
specific cases of State intervention in the form of permitted domestic support - i.e. "green box" - in the 
area of general services and food security and aid programmes, apart from certain sporadic 
development measures, are geared towards assisting small producers in emergency situations arising 
from adverse climatic and economic conditions. 
60. As regards the manufacturing sector, the Paraguaya n Government will continue its efforts to 
improve the business climate and ensure conditions  conducive to production, and to strengthen the 
export agro-industry and technology-based industries.   These will be developed chiefly in order to 
promote the development of small a nd medium industries so that they can contribute to strengthening 
the Paraguayan industrial fabric and generate permanent jobs. 
61. In the energy sector, a complete evaluation was also made of the State oil company and the 
system of regulation of the petroleum-based fuels sector, and a draft law was produced with a view to 
completely redefining the sector.  The reform pl anned by the Government would open up the industry WT/TPR/G/146 Trade Policy Review 
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to competition, create a regulatory body for the sect or, and eliminate the price subsidies hitherto 
applied.  As regards electricity, Congress is currently examining a draft law which calls for 
independent production, including cogenera tion or self-generation of electricity. 
62. As regards the financial system, 2004 was a peri od of consolidation and gradual recovery of 
the private banking system, which saw its solvency level improve, its profits increase, and its portfolio 
risk profile improve.  This improvement in the ri sk and solvency indicators was chiefly due to:  
(a) portfolio rehabilitation together with greater rigour on the part of the banks in their credit analysis;  
(b) an increase in the level of reserves.  Thanks to this policy, the portfolio deterioration indicator for 
private sector banks decreased from 15 per cent in December 2003 to 6 per cent in December 2004.  
Increased solidity, coupled with improved risk indicators and high liquidity, should ensure that the 
credit recovery process that began at the end of 2004  will last.  At the same time, the greater solidity 
of the banking system provides a guarantee that the financial sector will be able to face adverse 
economic cycles in the future. 
63. In the second five-year period, GDP grew on averag e by 0.7 per cent annually, a rate which is 
somewhat disappointing in comparison to the first years of the 1990s.  However, its growth was 
impeded by the deterioration in the terms of trade, the lack of reforms aimed at altering the structure 
and productivity of the economy, and the severe fina ncial crises that emerged as of the middle of 
1995.  One lesson that Paraguay learned from this expe rience is that financial markets must be very 
well regulated in order to function well throughout  the entire economic cycle.  Economic growth can 
hardly be expected to be sustainable in the long term unless it can rely on solid financial systems.  
Another lesson is that sustainable growth can only take place if the economy develops broad 
productivity patterns, which presupposes the incorpor ation of state-of-the-art technologies in a 
number of economic sectors.  De pendency on one or two key sector s is a serious threat to the 
sustainability of economic growth. 
64. Historically, Paraguay has been a country of m oderate inflation.  Indeed, it was a haven of 
stability in the inflationary context of Latin Amer ica in the 1970s and 1980s .  While a number of 
countries in the region changed their currencies severa l times in response to the situation, Paraguay, in 
contrast, has maintained the Guaraní as its nati onal currency since 1947.  More recently, however, the 
countries in the region have focussed their efforts on ensuring greater macroeconomic stability, a key 
factor in the sustainability of long-term growth. 
65. Paraguay's economy being very open, greater re gional stability produces lower inflation rates 
at home.  Also crucial in 2003 were the low internat ional interest rates and the appreciation of the US 
dollar, which generated conditions th at were conducive to a change in local savings portfolios and to 
an increase in the share of domestic currency savings .  The positive side of the disinflation that took 
place from 2003 onwards is that it was achieved with a looser monetary policy characterized by lower domestic interest rates, a policy which, in its turn, led to a recovery of private sector credit, which had 
declined sharply since 2002 in the wake of the region al financial crisis.  The fact that the fiscal sector 
had been stabilized and was generating a surplus in  2003 was undoubtedly also an important internal 
factor. 
66. In the case of Paraguay, the unemployment ra te is essentially determined by factors 
extraneous to the economic cycle, so that monetary policy has no decisive influence on that variable.  
Employment is essentially determined by factors linked to the structure of the economy, in particular 
its level of development and productivity, as well as f actors relating to poverty and social exclusion, 
health hazards, technical production capacity, and leve ls of education.  Thus, it would appear that 
monetary policy in developing countries tends to ha ve a more neutral impact on employment levels, 
in contrast to what takes place in the more industrialized markets and countries. Paraguay WT/TPR/G/146 
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67. The commitment by the monetary authorities to achieve low and stable inflation in the 
medium and long term is consistent with less vola tility in the employment rate and more sustainable 
growth.  The Government's target is to keep the a nnual inflation rate within the 3 to 5 per cent range, 
because it considers this to be the best way of en suring that long-term growth is as sustainable as 
possible. 
68. With the exception of a few isolated periods, Paraguay's fiscal policy has not resulted in any 
major imbalances.  Since the ad option of the current charter of the Central Bank in 1995, the 
Government can no longer finance itself by issuin g currency, and as a result, monetary policy is 
highly independent.  This independence is often more practical th an legal in nature, and the Central 
Bank of Paraguay has what can already be described  as an organizational tradition of independence in 
its leading decisions.  This obviously does not mean that there is no need for monetary policy to be coordinated with Government policy.  Indeed, this  coordination is a key to long-term macroeconomic 
stability. 
69. In our view, the main challenge facing Paragua y's economy over the next decades will be to 
boost its productivity, both in th e sectors in which the country has advantages and in the sectors where 
it currently has none.  Without this broad growth in productivity, the economy cannot achieve 
sustained growth.  This is a fundamental challe nge for enterprises, for the private sector, and for 
scientists.  Indeed, it is difficult to imagine what  the economic growth of companies following the 
industrial revolution would have been without the incorporation of science and technology in 
productive activities.  It is essential that the Para guayan economy prepare to compete in a more 
globalized environment.  The globalization of the economy will progress during the coming decades. 
70. At the same time, the challenge of governan ce and good public policy will remain for some 
time to come.  We must step up our efforts to rest ore the credibility of State institutions and enhance 
their efficiency.  An efficient State goes hand in hand with the smooth functioning of markets and of 
the economy. WT/TPR/G/146 Trade Policy Review 
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ANNEX 1 
 
Statistical Appendix 
 
Selected economic indicators  
(Annual percenta ge variation)  
 1998 1999 2000 2001 2002 2003 2004a 
Real sector and prices        
GDP growth -0.4 0.5 -0.4 2.7 -2.3 2.6 2.9 
Annual inflation (average) 11.6 6.8 9.0 7.3 10.5 14.2 4.3 
Annual inflation (end of period) 14.6 5.4 8.6 8.4 14.6 9.3 2.8 
Guaraní/US$ variation (end of period, per cent) 20.3 13.7 5.9 32.7 51.7 -15.8 3.5 
External sector (US$ millions)        
Exports  3,544 2,307 2,322 1,883 1,852 2,211 2,872 
Imports 3,941 2,750 2,864 2,500 2,134 2,483 3,245 
Trade account -396 -443 -541 -618 -283 -271 -372 
Current account -160 -165 -163 -266 94 132 52 
Capital and fina ncial account 325 527 196 168 102 263 -35 
Balance of international reserves (US$ millions) 875 988 772 723 641 983 1,168 
Public sector (as percentage of GDP)        
Central government balance -0.9 -3.6 -4.3 -1.1 -3.0 -0.5 1.7 
Consolidated public sector balance 0.3 -2.9 -3.7 0.1 -3.1 0.0 2.7 
Medium- and long-term external public debt 
(US$ millions) 1,599 2,112 2,234 2,162 2,283 2,478 2,358 
Monetary sector        
Monetary base 8.5 7.6 -1.5 5.7 -1.5 57.8 17.3 
M1 7.4 9.4 17.8 9.0 1.0 38.9 24.2 
M2 -2.8 10.9 3.2 6.4 -3.8 29.8 24.0 
Interest rate of treasury  bills (weighted average) 24.8 19.6 10.3 19.9 25.6 15.5 6.6 
Financial sector        
Credits granted by the financial system -2.8 10.6 3.2 13.2 0.2 -25.2 16.0 
Deposits in the financial system  8.3 19.8 6.1 22.3 -1.7 9.1 12.4 
Lending rate in Guaraníes 49.5 45.3 42.8 44.9 50.5 50.0 33.5 
Borrowing rate in Guaraníes 6.8 8.7 9.7 9.3 12.3 10.2 2.7 
a The figures for 2004 are preliminary. 
Source : Central Bank of Paraguay.  Ministry of Finance.  
 
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