WORLD  TRADE  
ORGANIZATION   
WT/TPR/S/245/Rev.1 
16 May 2011 
 (11-2483) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
PARAGUAY 
 
Revision 
 
 
 
 
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. 
 
 
 
 Paraguay WT/TPR/S/245/Rev.1 
 Page iii 
 
 
  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  17 
 (4) P ARTICIPATION IN THE WTO 19 
 (5) P REFERENTIAL TRADE RELATIONS  21 
 (6) A ID FOR TRADE  25 
 (i) Overview 25 
 (ii) Trade-related technical assistance 26 
 (iii) Aid-for- Trade flows 27 
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 45 
 (vi) Import prohibitions, restrictions and licensing 46 WT/TPR/S/245/Rev.1 Trade Policy Review 
Page iv 
  
     
Page 
 (vii) Contingency measures 51 
 (viii) Technical regulations and standards 54 
 (ix) Sanitary and phytosanitary measures 60 
 (3) M EASURES DIRECTLY AFFECTING EXPORTS  68 
 (i) Procedures and documentation 68 
 (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  76 
 (i) Legal framework for business, including registration 76 
 (ii) Competition policy and price control 78  (iii) Incentives and other government support 79 
 (iv) State trading, State-owned enterprises and privatization 84 
 (v) Government procurement 85  (vi) Intellectual property rights 90 
IV. TRADE POLICIES BY SECTOR 100 
 (1) O
VERVIEW  100 
 (2) A GRICULTURE , LIVESTOCK AND FORESTRY  101 
 (i) General characteristics 101  (ii) Policy objectives for the sector 103 
 (iii) Trade measures and other policy instruments 105 
 (iv) Key subsectors 107 
 (3) M
ANUFACTURING SECTOR  109 
 (i) General characteristics 109 
 (ii) Trade measures and other policy instruments 112 
 (4) E NERGY SECTOR  112 
 (i) Electricity 113 
 (ii) Hydrocarbons 115 
 (5) S ERVICES  118 
 (i) General characteristics 118 
 (ii) Financial services 119  (iii) Telecommunications 127 
 (iv) Transport 131 
REFERENCES 141 
APPENDIX TABLES 145 Paraguay WT/TPR/S/245/Rev.1 
 Page v 
 
 
  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 phytosanitary  requirements for imports in force as at December 2010 63 
III.10 SPS regulatory instrume nts approved since 2004 65 
III.11 Amounts of contracts awarded by contracting procedure followed, 2004-2009 89 III.12 Contracts awarded by contracting procedure followed, 2004-2009 90 
III.13 International agreements ratified by Paraguay 91 
III.14 Overview of the protection of intellectual property rights in Paraguay, 2010 92 
IV. TRADE POLICIES BY SECTOR 
IV.1 Primary crop production, 2003-2010 102 
IV.2 Domestic support, 2004-2009 106 
IV.3 Soya production, 2003-2009 108 
IV.4 Value added (VA) in manufacturing, 1997-2002 and 2004-2008 110 WT/TPR/S/245/Rev.1 Trade Policy Review 
Page vi 
  
  APPENDIX TABLES  
 
  Page 
I. ECONOMIC ENVIRONMENT 
AI.1 Merchandise exports (f.o.b.) by product, 2004-2010 147 
AI.2 Merchandise imports (c.i.f.) by product, 2004-2010 149 
AI.3 Merchandise exports (f.o.b.) by trading partner, 2004-2010 151 
AI.4 Merchandise imports (c.i.f.) by trading partner, 2004-2010 152 AI.5 FDI flows by economic activity, 2006-second quarter of 2010 153 
AI.6 FDI flows by place of residence of in vestor - 2006-second quarter of  2010 154 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
AII.1 Notifications to the WTO, January 2004 - December 2010 155 
III. TRADE POLICIES BY MEASURE AIII.1 List of exceptions to the CET, 2009 158 
AIII.2 Notifications under the Agreement on Technical Barriers to Trade, August 2010 159 
AIII.3 Selective consumption tax, 2010 160 
IV. TRADE POLICIES BY SECTOR 
AIV.1 Manufacturing sector exports, 2004-2009 161 
 Proportion of manufacturing exports from MERCOSUR 161 AIV.2 Manufacturing sector imports, 2004-2009 162 
 Proportion of manufacturing imports from MERCOSUR 162 
 Paraguay WT/TPR/S/245/Rev.1 
 Page vii 
 
 
  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 WT/TPR/S/245/Rev.1 Trade Policy Review 
Page viii 
  
  in the trade balance is offset by the large 
amounts earned from royalties and other 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 Paraguay WT/TPR/S/245/Rev.1 
 Page ix 
 
 
  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 
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 bou nd 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 WT/TPR/S/245/Rev.1 Trade Policy Review 
Page x 
  
  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, 
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 Paraguay WT/TPR/S/245/Rev.1 
 Page xi 
 
 
  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 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.