WT/TPR/S/146 Trade Policy Review 
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II. TRADE AND INVESTMENT REGIME 
(1) OVERVIEW  
1. Since the previous review of its trade polic y in 1997, Paraguay has recorded no significant 
changes in its basic legal framework, although it has adopted a vast number of specific regulations.  
The period under review was marked by different events which affected the country's Executive and 
Judiciary, highlighting the importance, for the stab ility of trade and the investment environment, of 
Paraguay's efforts to improve governance. 
2. The continuing objective of Paraguay's trade po licy is to ensure and increase the country's 
participation in international trade and so foster  economic and social development.  Trade policy 
seeks to promote the development of competitive sectors through low and uniform tariff protection 
consistent with other economic policy instrument s and in accordance with Paraguay's international 
commitments.  Trade negotiation policy is focused on opening up adjacent and extra-regional markets 
under a strategy geared towards expanding and dive rsifying international trade.  Paraguay views 
regional integration agreements as a complement to its own market-opening measures and to the 
opening up of multilateral markets. 
3. Paraguay became a GATT Contracting Party in 19 94 and is a founding member of the WTO.  
It takes an active part in the WTO process and has put forward numerous proposals in the framework 
of the Doha Development Agenda (DDA), either i ndividually or jointly with other Members.  
Paraguay's main areas of concern are agriculture a nd special and differential treatment for landlocked 
developing countries with sm all and vulnerable economies. 
4. Since the previous review, Paraguay has submitte d a relatively large number of notifications 
to the WTO, some of which are still pending.  Paraguay has made fairly active use of the WTO 
dispute settlement mechanism, although not as a co mplainant or a defendant.  Since 1997, Paraguay 
has participated as a third party in 14 dispute settle ment cases concerning 10 different matters, most of 
them involving agricultural products. 
5. Paraguay is a founding member of MERCOSUR,  which it sees as an instrument to overcome 
structural deficiencies.  Within this group, Paraguay has sought the adoption of measures to lessen 
asymmetries in the region.  The regional integrati on process has greatly contributed to Paraguay's 
trade development (see Chapters I and IV), and th e form the customs union finally takes should have 
a significant impact on the development of the country's economy.  Paraguay also grants preferences, inter alia  to MERCOSUR's associate members. 
6. Paraguay participates in the Latin American In tegration Association (LAIA), and has signed 
partial-scope agreements with all of its member s.  Within LAIA, Paragua y has concluded economic 
complementarity agreements with Colombia, Ecuador , Mexico, Peru and Venezuela.  As part of 
MERCOSUR, Paraguay is negotiating preferential a rrangements with a number of trading partners 
within and outside the Western Hemisphere.  Paragu ayan exports receive GSP preferences in various 
markets.  Paraguay has also benefited from a variety of technical assistance activities organized within 
the framework of the WTO and other forums. 
7. Paraguay's foreign investment regime is relativ ely open, without any restrictions on domestic 
or foreign private investment other than in certain  sectors reserved for the State.  Paraguay seeks to 
enhance its investment environment through inte rnational arrangements, and has entered into 
numerous bilateral agreements on investment pr omotion and protection and on double taxation.  
However, it has made limited use of commitmen ts under the WTO General Agreement on Trade in 
Services to consolidate and improve the predictab ility of its investment regime (see Chapter IV). Paraguay WT/TPR/S/146 
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(2) TRADE POLICY FORMULATION AND IMPLEMENTATION  
(i) Legal and institutional framework 
8. Paraguay is a unitary republic, with a constitu tional separation of executive, legislative and 
judicial powers.  Legislative power is vested in  a bicameral Congress, composed of a 45-member 
Senate and an 80-member Chamber of Deputies.  Se nators and deputies are elected simultaneously by 
universal suffrage for a five-year term, in elec tions coinciding with the presidential elections. 
9. The Congress is empowered to debate, approve, am end, and repeal laws.  Draft laws may be 
introduced by members of the Congress, congr essional committees or the Executive (i.e., the 
President as the head of the Government), upon p opular initiative or on the request of the Supreme 
Court.1  The introduction of draft laws relating to the national budget, codes, international treaties, 
fiscal matters, the organization of State powers and those deriving from popular initiative cannot originate with congressional committees.  Draft la ws become law after passing both chambers and on 
receiving the approval of the Executive.  The Executi ve may return a draft law to Congress on simple 
objection;  if the draft is again passed by Congress, the President has to approve and publish the law. 
10. At the head of the judicial system is the Supreme Court of Justice, whose Constitutional 
Chamber has the power to declare legislation uncon stitutional.  The nine members of the Supreme 
Court are nominated by the Council of Magistrates a nd appointed by the Senate with the approval of 
the Executive.  Sweeping changes were made in th e composition of the Supreme Court in 2003, so as 
to strengthen the Paraguayan people's confidence in the judicial system. 
11. Under the Constitution of 1992, governors of departments and depart mental councils are 
elected directly for a five-year term, in elections coinciding with the presidential and congressional 
elections.
2  Mayors and municipal councils are also elected every five years. 
12. Executive power is in the hands of the President , who is elected by universal suffrage for a 
non-renewable five-year term.  In the event of absence  or inability to act, the President is replaced by 
the Vice-President.  The Executive negotiates and si gns international treaties, which are ratified by 
Congress.  The latest presidential election was held in April 2003 and the current President took office 
in August of that year.  The Ex ecutive was affected by various in cidents in the period between the 
previous review of Paraguay's trade policy and th e coming into office of the present administration. 
13. The President appoints the Council of Ministers, which deliberates on matters of public 
interest, acting as an advisory body to the Preside nt, and reviews legislative proposals.  The Economic 
Cabinet is responsible for advising on a nd coordinating government economic policy;3  its task is to 
coordinate and decide any matter of a social, economi c or financial nature that may be assigned to it 
or submitted for its consideration by the Preside nt of the Republic.  Specifically, the Economic 
Cabinet coordinates and decides on matters su ch as global and sectoral economic development 
programmes;  the criteria for establishing the nationa l budget;  fiscal, tax and tariff policies and public 
utility tariffs;  public debt policy;  the National Monetary Programme;  and the bases for rationalizing 
the public sector. 
14. The Ministry of Finance is in charge of fi scal policy, while the Central Bank of Paraguay 
handles monetary policy.  The Ministry of Indust ry and Trade (MIC) is responsible for defining, 
                                                      
1 Articles 203 to 217 of the Constitution. 
2 Article 161 of the Constitution. 
3 Decree No. 89 of 2004. WT/TPR/S/146 Trade Policy Review 
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coordinating, implementing and m onitoring trade policy affecting goods and services, and industrial 
policy. 
15. The Ministry of Integration, formerly in ch arge of trade integration issues, has been 
dismantled since the 1997 trade policy review.  The Ministry's assets and human resources were 
transferred to the Ministry of External Relations, the Ministry of Industry and Trade and other central 
government bodies.4 
16. Partly government-owned institutions are i nvolved in the framing and implementation of 
Paraguay's trade policy.  These include PROPARA GUAY, whose task is to promote exports and 
investment for the production of goods and services,  and the Development Council of the Ministry of 
Industry and Trade,5 an advisory body comprising representatives of the private sector, whose 
function is to foster equitable and sustainable development. 
17. Paraguay's representation in the MERCOSUR integra tion forums, whether at internal level or 
in en bloc negotiations with third markets, is  structured, as far as the decision-making process is 
concerned, through the National Section of the Counc il of the Common Market (Ministerial body) and 
the National Section of the Common Market Group (V ice-ministerial body).  Both are comprised of 
full representatives and alternates from the Ministries of External Relations, Finance, Industry and 
Trade, and Agriculture and Livestoc k, and the Central Bank of Paraguay.6  The Ministry of External 
Relations is the official spokesperson for decisions  adopted in the Council of the Common Market and 
the National Section of the Common Market Group. 
18. Paraguay also participates in the MERCOSUR framework through national advisory bodies.  
These include the National Trade and Integrati on Council (CONACIN), which comprises various 
entities representing Paraguay's public and private sect ors and meets periodically for information and 
deliberation purposes before and after every major MERCOSUR meeting.  There are also the national 
sections of MERCOSUR's advisory bodies, namely the MERCOSUR Joint Parliamentary Commission, which is an organ representing the parliaments of the four States Parties, and the Economic and Social Advisory Forum (FCES), made up of representatives of the trade union, 
cooperative, academic and business sectors, which offi cially represents civil society in MERCOSUR. 
(ii) Trade policy objectives and formulation 
(a) General objectives 
19. According to the authorities, the aim of Paragua y's trade policy and participation in various 
international trade negotiation forums is to continue  to ensure and increase the country's participation 
in international trade and so foster economic and social development.  The objectives are to secure 
and expand markets for the country's export supply, to attract foreign direct investment for productive 
sectors, and to reap the benefits of cooperati on and technical assistance programmes in order to 
achieve effective and equitable integra tion into international trade flows. 
                                                     
 
4 Law No. 1389/99. 
5 Established by Resolution No. 394 of June 2004. 
6 Decree No. 1885 of 11 January 1994. Paraguay WT/TPR/S/146 
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20. Paraguay's trade policy seeks to promote the development of competitive sectors through low 
and uniform tariff protection consistent with ot her economic policy instruments and in accordance 
with Paraguay's international commitments.  Howe ver, tariff policy is framed jointly by the 
MERCOSUR members, which explains the rise in Paraguay's MFN tariff during the review period 
(see Chapter III(2)(iv)).  Trade negotiation policy is focused on opening up of adjacent and extra-
regional markets under a strategy geared towards e xpanding and diversifying international trade. 
21. Paraguay views regional integra tion agreements as a compleme nt to its own market-opening 
measures and to the opening up of multilateral markets.  The authorities regard Paraguay's 
participation in MERCOSUR as an important strategy fo r national trade policy.  They reported that, in 
MERCOSUR, Paraguay had promoted the adoption of  more liberal trade orientations and the 
definition of a Common External Tari ff (CET) consistent with such or ientations.  They explained that 
these orientations were reflected in Paraguay's polic y on customs tariffs applied (as an exception) at 
rates below MERCOSUR's agreed tariff leve ls, for example in the automotive sector. 
(b) Specific and sectoral objectives 
22. Although import substitution policies have played a limited role in the past, Paraguay now 
provides specific incentives for a number of sector s through the disperse structure of MERCOSUR's 
CET and national regimes that are not harmonized at  regional level, such as the Automotive Regime 
(see Chapters III and IV).  The country's trade and industrial policies seek to increase productivity and 
value added;  to raise the volum e of exports and diversify export supply;  to develop agro-industry 
under a stable macroeconomic policy;  to generate  a proactive sectoral policy promoting strategic 
alliances;  to open foreign markets;  to capture fore ign investment;  and to simplify export formalities.  
Policies in support of agricultural and forest pr oduction have been introduced with a view to 
expanding agro-industry, strengthe ning tourism and developing sma ll and medium-sized enterprises. 
23. The Government and the private sector are wo rking together on a National Export Plan, the 
objectives of which are to develop export supply that meets international standards;  to increase value 
added and diversify export supply;  and to iden tify market access opportunities, while encouraging 
domestic and international investment.  The Nati onal Export Plan is based on the concept of 
production chains and the streamlin ing of export formalities through a single export window facility. 
24. Concerning MERCOSUR's Common External Tariff, there is considerable tariff dispersion 
under the agreed common trade policy, as well as tari ff escalation leading to sector-specific incentives 
and providing higher effective protection for produ cts at a higher level of processing and negative 
effective protection for certain other items.  Because the customs union has yet to be finalized, 
convergence to the CET has not been completed (see below). 
(c) Trade laws and regulations 
25. The provisions of international agreements ratif ied and published in the Official Gazette are 
implemented directly, superseding existing domes tic legislation, and cannot be amended by 
subsequent domestic laws (that do not ratify other international ag reements).  MERCOSUR decisions, 
directives and resolutions require legislative approva l in spheres which are constitutionally within the 
sole purview of the Legislature, or where they am end existing legislation.  In cases where the subject-
matter lies within the comp etence of the Executive, no legislative approval is required, but the texts 
must be published in the Official Bulletin of MERCOSUR, adopted by decree in Paraguay, and 
implemented after publication in the Official Gazette of Paraguay. 
26. Subsequent international agreements take  precedence over any existing international 
agreement.  The WTO Agreements ratified in 19 94 (see below) thus prevail over the Treaty of WT/TPR/S/146 Trade Policy Review 
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Asunción, which established MERCOSUR in 1991, and all prior MERCOSUR rules.  The WTO 
Agreements also prevail over MERCOSUR rul es subsequently adopte d by Executive decree. 
27. Paraguay has no basic trade law per se.  As detailed in Chapters III and IV, a number of trade- 
and investment-related laws, decrees and resolutions ha ve been enacted since 1997.7  S o m e  o f  t h e  
reforms seek to incorporate MERCOSUR provisions in domestic legislation. 
(3) FOREIGN INVESTMENT REGIME  
28. Paraguay's current investment policy aims to channel investments into human and physical 
capital (especially road and port infrastructure and re lated services), in order to support the country's 
new sustainable development model, which emph asizes agricultural and agro-industrial production, 
export growth, diversification, increased value added and promotion of a number of productive 
regions.  Paraguay hopes to attract more foreign a nd domestic investment by strengthening confidence 
in and the credibility of the Government, mainly by improving governance and the financial system, 
and by imposing fiscal and monetary discipline.8 
29. The principal laws governing foreign investme nt in Paraguay are Law No. 117/91, providing 
equal treatment for foreign and domestic investment s;  Law No. 60/90, regulating fiscal incentives for 
domestic and foreign investment;  and Law No. 2. 421/04, amending Law No. 60/90, on administrative 
restructuring and fiscal adjustment.  Chapte r III(4)(iii) details the incentives granted under 
Law No. 60/90 and Law No. 2.421/04. 
                                                      
7 In particular the following laws:  Law No. 2.422/04 (Customs Code);  Law No. 1.863/02 (Agrarian 
Law);  Law No. 2.459/04 (National Plant and Seed Quality and Health Service);  Law No. 2.051/03 (Government Procurement);  Law No. 2.421/04 (Admin istrative Restructuring and Fiscal Adjustment);  
Law No. 1.064/97 (Export Maquila Industry);  Law No. 2.153/02 (Free importation of used vehicles, agricultural machinery and construction machinery);  Law No. 2.153/03 (Free importation of used vehicles, agricultural machinery and construction machinery);  Law No. 1.028/1997 (General Science and Technology Law);  Law No. 1.696/01 (Micro-, small and medium-sized enterprises);  Law No. 2.018/02 (Free importation of used vehicles, agricultural machinery and constructio n machinery);  Law No. 1.058/97 (Agreement on the 
promotion and reciprocal protection of investments);  Law No. 2.330/03 (Strategic investment and trade plan between Paraguay and Chinese Taipei);  Law No. 1. 722/01 (Agreement on the Pr omotion and Reciprocal 
Protection of Investments, signed between the Republic of Paraguay and the Portuguese Republic);  Law No. 1.294/98 (Marks);  Law No. 1.630/00 (Patents);  Decree No. 19.225/02 (Economic development incentives regime);  Law No. 1.128/97 (International Land Transport);  Law No. 1.844/01 (Consular Fees);  Law No. 1.143/97 and Law No. 1.291/98 (MERCOSUR Protocol on the Protection of Competition);  
Law No. 1.295/98 (Leasing, Rental or Financial and Commercial Leasing);  Law No. 1.036/97 (Establishment and Regulation of Securitization Companie s);  Law No. 1.037/97 (Privatization of Aceros del Paraguay 
Sociedad Anónima - ACEPAR  (Paraguayan Steel, Inc.));  Law No. 1.114/97 (Agreement on subregional airline 
services);  Law No. 1.161/97 (Regulation of the National Electricity Administration);  Law No. 1.186/97 and Law No. 1.947/02 (Special and Transitional Regime for the Stabilization of the National Financial System);  Law No. 1.388/98 (Establishment of the National Secretariat for Tourism);  Law No. 1.590/00 and Law No. 1.818/01 (National Transport System and Establishment of the National Transport Directorate). 
8 Government Programme 2003-2008, av ailable at:  http://www.presidencia.gov. 
py/programadegobierno.doc. Paraguay WT/TPR/S/146 
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30. Paraguay's foreign investment regime is relativ ely open.  There are no restrictions on foreign 
investment and private investment in general, other than in sectors reserved for the State (see below).  
Full repatriation of capital and prof its and national treatment for foreign investors are guaranteed by 
Law No. 117/91, except as provided by other laws.9  The right of private ownership is guaranteed 
under the Constitution.  Expropriation is authorized solely  for reasons deemed to be of public or social 
interest and is subject to indemnification, with  the exception of non-productive landholdings targeted 
by agrarian reform, which are governed by the special provisions of Law No. 1.863/02.10 
31. Private-sector participation is restricted in  areas reserved for the State, such as some 
specialized telecommunications services.11  Government measures aimed at opening up private 
investment opportunities through privatization we re suspended in 2002, for "such time as may be 
necessary to restore transparency and the confidence of the population" (Chapter III(4)(iv)), while 
State entities were being reorganized and transformed.12  Domestic and foreign-owned firms are 
subject to the same registration requirements (Chapter III(4)(i)). 
32. There are no prohibitions on Paraguayan investment  outflows or restrictions on conversion or 
transfer of foreign currency.  Law No. 60/90 allows  the repatriation of capita l and profits and provides 
guarantees against inconvertibility.  Remittances abroad  were subject to a 5 per cent tax at the end of 
2004.13  The tax is due to increase to 15 per cent under Law No. 2.421/04.14 
33. The body responsible for investment promoti on is PROPARAGUAY (General Directorate for 
Export and Investment Promotion), created in 1991 under the Ministry of External Relations.15  
As regards investment promotion, PROPARAGUAY is in charge inter alia  of promoting capital 
integration in Paraguay;  providing information on comparative advantages, guarantees and incentives 
for foreign investment;  supplying legal info rmation on procedures and formalities for business 
establishment;  assisting investors with procedures and formalities;  and promoting the internationalization of Paraguayan enterprises. 
34. The Investment Council is an advisory body (with private-sector representation) of the 
Ministry of Industry and Trade and the Ministry of Finance established by Law No. 60/90.  The 
Council is in charge of assessing investment projec ts;  maintaining a registry of applications for 
incentives and authorizing the grantin g thereof;  and advising, reporting and deciding on matters in 
this sphere.  In 2004, the Counc il approved projects for a value of G579.2 thousand million (around 
US$97 million), of which 33 per cent involve d foreign investments (Table II.1). 
                                                     
 
9 Law No. 117/91 of 7 January 1992. 
10 Article 109 of the Constitution and Law No. 1.863/02,  establishing the Agrarian Law, of January 2002. 
11 Law No. 642/95 and Decree No. 14.135/96 on telecommunications. 
12 Law No. 1932, suspending the application of Law No. 1.615/02, on the general reorganization and 
transformation of decentralized public entities and the modernization of central government entities. 
13 Law No. 125/91. 
14 Law No. 2.421/04. 
15 Decree No. 11.068 of 1 October 1991, establishing PROPARAGUAY and its functions;  and 
Decrees Nos. 1.789 of 28 January 1999 and 2.951 of 12 May 1999, modifying its functions, organization and institutional dependence. WT/TPR/S/146 Trade Policy Review 
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Table II.1 
Approved projects (Law No. 60/90) 
Year Number of enterprises Labour Value of investment  
(G thousand million) Foreign investment  
(G thousand million)  
1997 434 11,230 1,159.1 359.6 
1998 299 7,791 1,522.6 698.1 
1999 252 7,272 1,475.2 507.3 
2000 181 8,432 776.2 339.3 
2001 140 3,702 1,433.5 834.2 
2002 128 3,120 949.1 472.8 
2003 103 2,923 1,365.4 631.2 
2004 80 1,672 579.2 191.4 
Source : Ministry of Industry and Trade, Investment Council. 
35. Paraguay has continued to improve the lega l framework governing foreign investment 
guarantees through bilateral, regional and multilateral agreements.  It has signed numerous bilateral 
investment promotion and protection or investment -related agreements with  its trading partners, 
including agreements with the following countries (year of entry into force in parentheses):  
Argentina (1969), Austria (1999), Belgo-Luxem bourg Economic Union (2004), Bolivia (2003), 
Brazil (1957), Chile (1997), Chinese Taipei (2001), Co sta Rica (pending ratification), Cuba (2002), 
Czech Republic (2000), Ecuador (1995), El Sa lvador (1998), France (1980), Germany (1998), 
Hungary (1995), Italy (pending ratification), Korea (1993), Netherlands (1994), Peru (1994), 
Portugal (2001), Romania (1995), South Africa (1974), Spain (1996), Switzerland (1992), 
United Kingdom (1992 and 1997), United Stat es (1993), Uruguay (1976), and Venezuela 
(pending ratification).16  
36. Paraguay also has double taxation agreements with the following countries (year of entry into 
force in parentheses):  Belgium (1987), Germ any (1985) and Uruguay (1993) concerning air 
transport;  and Argentina (2000) and Chile (1995) concerning international air, river and road 
transport.17  Agreements with Brazil (on income tax) and Uruguay are pending ratification. 
37. Paraguayan legislation allows international arb itration for the resolution of disputes between 
foreign investors and the Government.  All the inv estment agreements entere d into by Paraguay give 
investors the choice between recourse to the domestic courts and international arbitration.  Investors 
that opt for the latter may choose between the Inte rnational Centre for Settlement of Investment 
Disputes (ICSID) and ad hoc courts of arbitra tion established under the Arbitration Rules of the 
United Nations Commission on International Trade Law (UNCITRAL).  Paraguay is also party to the 
Inter-American Convention on International Commercia l Arbitration, the Inter-American Convention 
on Extraterritorial Validity of Foreign Judgmen ts and Arbitral Awards, and the World Bank's 
Multilateral Agency for Investment Guarantees (MI GA).  Since the previous review of its trade 
policy, Paraguay has ratified the Convention on the Recognition and Enforcement of Foreign Arbitral 
Awards (ratified on 7 October 1997). 
                                                      
16 Ministry of External Relations, List of bilate ral investment treaties signed by Paraguay, available 
on-line at:  http://www.mre.gov.py/ 
17 Ministry of External Relations, List of bilateral double taxation treaties signed by Paraguay, available 
on-line at:  http://www.mre.gov.py/ Paraguay WT/TPR/S/146 
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38. MERCOSUR has common rules on investment from member and non-member countries;  
these rules are not yet in force, however, pending ratification by some member countries.18  Disputes 
with MERCOSUR partners are resolved under the m echanism described in section (4)(ii)(a) below.  
Paraguay's free trade agreements (as part of ME RCOSUR) with Bolivia (in force since 1997) and 
Chile (in force since 1996) also contain provisions concerning investments. 
(4) INTERNATIONAL RELATIONS  
(i) World Trade Organization 
39. Paraguay became a GATT Contracting Party on 6 January 1994, ratified the Marrakesh 
Agreement on 10 November 199419 and became a founding member of the WTO on 1 January 1995.  
It grants at least MFN treatment to all its trading partners.  Paraguay is not a party or an observer to 
the plurilateral agreements on Trade in Civil Ai rcraft and on Governme nt Procurement or the 
Information Technology Agreement (ITA).  It  has undertaken commitments under the General 
Agreement on Trade in Services (GATS) only on fi nancial services and tourism (Chapter IV(5)). 
40. Paraguay has made significant headway with r espect to notifications since the previous 
review of its trade policy, having submitted a fa irly large number notifications to the WTO 
(Table AII.1).  However, some notifications were  still pending as at October 2004, for instance annual 
notifications concerning State trading enterprises (under the Understanding on  the Interpretation of 
Article XVII of the GATT 1994), domestic support (u nder the Agreement on Agriculture), and import 
licensing procedures. 
41. Paraguay made fairly active use of the WTO di spute settlement mechanism during the period 
under review.  Although it has not appeared as a complainant or a defendant, since 1997 Paraguay has 
participated as a third party in 14 dispute set tlement cases involving 10 different matters.  
A breakdown of cases by sector shows that Paraguay' s involvement mostly relates to questions of 
market access for agricultu ral products, such as cotton20, preserved peaches21, wheat, wheat flour and 
edible vegetable oils22, poultry23, processed orange and grapefruit products24, sugar25, and biotech 
                                                      
18 These rules are set forth in MERCOSUR Decision No. 11/93 (for example the Colonia Protocol on 
the Promotion and Reciprocal Protection of Investments within MERCOSUR (investments between member 
countries, not ratified by Paraguay);  and MERCOSUR Decision No. 11/94 (for example the Protocol on the 
Promotion and Protection of Investments Made by Countries That Are Not Parties to MERCOSUR), ratified by Paraguay in 1995 through Law No. 593/95. 
19 Law No. 444/94 ratifying the Final Act of the GATT Uruguay Round. 
20 Argentina – Transitional Safeguard Measures on Certain Imports of Woven Fabrics of Cotton and 
Cotton Mixtures Originating in Brazil (DS190), and Un ited States – Subsidies on Upland Cotton (DS267). 
21 Argentina – Definitive Safeguard Measure on  Imports of Preserved Peaches (DS238). 
22 Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products 
(DS207). 
23 Argentina – Definitive Anti-Dumping Duties on P oultry from Brazil;  for further details, see WTO 
document WT/DS241/R of 22 April 2003. 
24 United States – Equalizing Excise Tax Imposed by Florida on Processed Orange and Grapefruit 
Products;  for further details, see WTO documents WT/DS250/1, 26 March 2002, WT/DS250/2, 19 August 2002, and WT/DS250/3, 2 June 2004. 
25 European Communities – Export Subsidies on Sugar (DS265, DS266 and DS283). WT/TPR/S/146 Trade Policy Review 
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products26.  As a major cotton exporter, Paraguay has a direct  interest in the cotton issue.  It has also 
participated in two non-agricultural cases, concerning footwear27 and the "drug arrangements"28. 
42. Paraguay takes an active part in the WTO process and has put forward a number of proposals 
in the areas covered by the Doha Development Age nda, either individually or as part of MERCOSUR, 
the G-20 or the Cairns group, or together with othe r small and vulnerable economies.  It is firmly 
committed to the Doha Ministerial mandate.29  In the current round of negotiations, agriculture and 
special and differential treatment for small a nd vulnerable landlocked de veloping countries are 
Paraguay's main areas of concern. 
43. Paraguay has indicated in a number of committee meetings that it sees the development of 
agriculture as instrumental in improving standard s of living in the developing countries and LDCs.30  
In September 2003, Paraguay, together with ot her G-20 members, submitted a framework proposal 
for the negotiations on agriculture.31  In a statement to the Commi ttee on Agriculture in July 2003, 
Paraguay said that it remained determined to achieve  the long-term objective of establishing a fair and 
market-oriented agricultural trading system and that in order to achieve that goal, trade imbalances 
and distortions should be remedied in the short-te rm.  As a landlocked developing country in which 
agricultural goods account for almost 80 per cent of  total exports, Paraguay believes that due account 
should be taken of the concerns of developing countri es.  As part of the Cairns group, Paraguay has 
suggested a formula to cover tariff peaks and tariff escalation.  It has also requested the prompt elimination of various types of subsidy and domes tic support that distort trade and production.  
Concerning the Special Safeguard, Paraguay is in fav our of its elimination fo r the developed countries 
and supports a new special safeguard mechanism fo r the developing countries, such as the proposed 
Compensatory Special Safeguard.
32  In Paraguay's view, food security and the need to protect the 
environment are the only non-trade concerns that should be covered in the current negotiations. 
44. Regarding preferential schemes, Paraguay believes that tariff preferences for the developing 
countries should be in keeping with paragraph 3 of  the Enabling Clause.  Special and differential 
treatment granted to some developing countries shoul d not prove detrimental to others – or it should 
at least be ensured that other options, such as compensation, are available.  Paraguay has also 
requested the opening up of opportunities to create c onditions conducive to the participation of small 
and vulnerable countries in internationa l trade.  It is of the view th at the developed countries and other 
Members that so wish should grant duty-free and quota-free market access on an autonomous basis 
for all products of interest from developing countr ies that are insufficiently integrated in the 
multilateral system and ha ve few export products.33 
45. In preparation for the Cancún Ministeria l Conference, Paraguay submitted a joint 
communication to the Trade Negotiations Committ ee, summarizing a number of key steps to be 
taken.34  These included the resolving of implemen tation-related issues and concerns and the 
strengthening of special and differential treatment  for the developing countries;  the inclusion of 
                                                      
26 European Communities – Measures Affecting the Approval and Marketing of Biotech Products 
(DS291, DS292 and DS293). 
27 Argentina – Safeguard Measures on Imports of Footwear (DS121). 
28 European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries 
(DS246). 
29 WTO document TN/C/M/13, 12 August 2004. 
30 WTO document TN/C/M/13, 12 August 2004. 
31 WTO document WT/MIN(03)/W/6, 4 September 2003. 
32 WTO document TN/AG/R/10, 9 September 2003. 
33 WTO document TN/AG/R/10, 9 September 2003. 
34 WTO document TN/C/W/13, 6 June 2003. Paraguay WT/TPR/S/146 
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agricultural negotiation modalities of interest to the developing countries;  and less than full 
reciprocity in non-agricultural market access negotiations.  A communication containing similar proposals with regard to the fra mework for the negotiation of ta riff reductions on non-agricultural 
products was submitted by the MERCOSUR countries.
35  Paraguay also supported the initiative by 
Benin, Burkina Faso, Chad and Mali seek ing the elimination of cotton subsidies,36 as cotton is one of 
the main sources of employment and income in Paraguay's rural sector, especially on small-size 
farms.37 
46. Paraguay has made proposals on State trading en terprises (jointly with MERCOSUR, Bolivia, 
Chile and Colombia), and on export credits (with MERCOSUR, Bolivia, Chile, Costa Rica, 
Guatemala, India and Malaysia).38  It has also presented a joint proposal to the Negotiating Group on 
Rules on anti-dumping actions in the area of textiles and clothing.39 
47. Concerning services, Paraguay and other MERCOSUR countries have submitted a proposal 
to liberalize trade in services in sectors and modes of supply of export interest to the developing 
countries.40  The proposal identifies the use of economi c needs tests as one of the most important 
barriers to international trade in services, and suggests that developed WTO Members eliminate these 
tests in sectors and modes of supply of export interest to the developing countries.  In a joint 
communication, Paraguay has proposed that autono mous liberalization in services by the developing 
countries be taken into account in the Doha  Development Agenda (DDA) negotiations.41  I n  a  
communication concerning tourism services, Paraguay and other MERCOSUR countries have suggested that specific commitments be made without limitations in four subsectors, i.e., hotels and 
restaurants, travel agencies and tour operators  services, tourist guides services, and "other".
42 
48. In April 2003, Paraguay circulated its initia l offer on services in the context of the DDA 
negotiations.43 
49. Paraguay has also made a proposal for the negotia tions on improvement and clarifications of 
the Dispute Settlement Understanding, aimed at strengthening the rules designed to expedite 
procedures for the settlement of trade disputes and at promoting measures for the prompt and 
amicable resolution of disputes, in order to reduce the cost involved in dispute settlement 
procedures.44 
50. Jointly with other Members, Paraguay has presented a work programme on small and 
vulnerable economies and has co-sponsored proposal s to address certain specific concerns and 
problems affecting the trade of small economies.45  These papers express concern about issues such as 
the erosion of preferences;  the additional burden for the developing countries of according reciprocal 
treatment in return for preferential treatment a nd making contributions that are not commensurate 
with their individual development, financial and trad e needs;  the application of certain rules;  the 
                                                      
35 WTO document TN/MA/W/23, 15 January 2003. 
36 WTO documents WT/MIN(03)/W/2, 15 August 2003 and WT/MIN(03)/W/2/Add.1, 
3 September 2003. 
37 WTO document TN/C/M/10, 10 November 2003. 
38 WTO documents G/AG/NG/W/104/Corr.1, 23 January 2001 and AG/NG/W/139, 20 March 2001. 
39 WTO document TN/RL/W/48/Rev.1, 5 February 2003. 
40 WTO document S/CSS/W/139, 20 March 2002. 
41 WTO document S/CSS/W/130, 30 November 2001. 
42 WTO document S/CSS/W/125, 29 November 2001. 
43 WTO document TN/S/O/PRY, 11 April 2003. 
44 WTO document TN/DS/W/16, 25 September 2002. 
45 WTO documents WT/COMTD/SE/W/1, 18 April 2002, WT/COMTD/SE/W/3, 28 June 2002, and 
WT/COMTD/44, 9 December 2002. WT/TPR/S/146 Trade Policy Review 
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implementation of sanitary and phytosanitary measures;  the lack of appropriate flexibility with 
respect to notifications;  and use of the dispute settlement system. 
(ii) Preferential trade agreements 
(a) Southern Common Market (MERCOSUR) 
51. Together with Argentina, Brazil and Ur uguay, Paraguay is a founding member of 
MERCOSUR, which was established in March 1991 under the Treaty of Asunción, with the objective 
of creating a common market and ensuring the free circulation of goods, services, capital and labour among member countries.
46  Initially only an agreement with in the LAIA framework, MERCOSUR 
acquired independent legal status in 1995;  since January 1997, membership has been open to other 
LAIA countries.  MERCOSUR's customs union, as yet incomplete, is moving towards common-
market objectives. 
52. MERCOSUR was first notified to the GATT in July 1992 under the Enabling Clause.47  Since 
February 1996, the WTO Committee on Regional  Trade Agreements has been examining 
MERCOSUR in the light of the relevant provisi ons of the GATT 1994, including Article XXIV 
relating to customs unions and free-trade areas.   To date, the Working Party on MERCOSUR, 
established in May 1993, has reviewed the operation of the Treaty of Asunción in three meetings, the 
latest of which took place in May 1997.48  The MERCOSUR countries have supplied the WTO with 
information on numerous aspects of thei r institutional and legal frameworks.49  At its March 2004 
meeting, the Committee on Regional Trade Agreem ents indicated that the MERCOSUR review 
should be completed at the latest by March 2005. 
53. Paraguay sees MERCOSUR as a strategy to overcome the structural limitations inherent in 
the small size of its domestic market and the high cost of transport because of the country's landlocked 
situation.  Paraguay is a member of the Custom s Union and therefore designs its trade policy in 
conjunction with its regional partners.50  It has accordingly supported the adoption of a low CET level 
in order to facilitate the structural adjust ment of domestic industries and increase their 
competitiveness, following economic performance criteria.  The Government is also placing emphasis 
on the search for alternatives conducive to be tter integration in the regional economy. 
54. In recent years, Paraguay's representatives in MERCOSUR's decision-making bodies have 
centred their efforts on developing measures to remedy and lessen asymmetries in the region.  Among the results achieved are the recognition of exis ting asymmetries in the region, as reflected in a 
number of Common Market Council decisions;
51  trade preferences and special and differential 
treatment granted in MERCOSUR's external negotia tions;  and political and social gains within 
MERCOSUR. 
                                                      
46 The provisions of the Treaty of Asunción have been incorporated in the LAIA legal framework 
through Economic Complementarity Agreement No. 18. 
47 WTO document WT/L/127, 7 February 1996. 
48 GATT documents L/7044, 9 July 1992, L/7370, 18 Ja nuary 1994, and L/7370/Add.1, 18 January 1994.  
WTO document WT/COMTD/5/Rev.1, 25 October 1995 and WT/COMTD/1 documents series. 
 49 Most of this information is contained in WTO document WT/COMTD/1 and the addenda and revisions 
thereto dated after 1995. 
50 Giordano (2004). 
51 See in particular:  Decision No. 02/03 (Excepti onal Tariff Measures); Decision No. 28/03 (External 
Negotiations);  Decision No. 29/03 (MERCOSUR Rules of Origin);  Decision No. 31/03 (Common External Tariff);  Decision No. 32/0 3 (Special Import Regimes). Paraguay WT/TPR/S/146 
 Page 25 
 
 
55. MERCOSUR's institutional structure, established under the 1994 Protocol of Ouro Preto 
(in force since December 1995), comprises, in hi erarchical order:  The Council of the Common 
Market, bringing together the Ministers of Foreign Affairs and of the Economy, which meets at least once every six months and is responsible for ma tters relating to the consolidation of regional 
integration and fulfilment of the goals set forth in the Treaty of Asunción;  the Common Market 
Group, the executive body in charge of supervisi ng the implementation of the Treaty of Asunción, 
which issues resolutions that are mandatory for the member countries, and meets in thematic working 
groups;  the MERCOSUR Trade Commission, which meets at least once a month and is responsible for implementing common trade policy instruments and handling matters relating to common trade 
policies, intra-MERCOSUR trade, and trade with third countries;  and the Joint Parliamentary 
Commission and the Economic and Social Advisory Forum, which are two advisory bodies. 
56. The MERCOSUR bodies have undergone some in stitutional changes since the previous 
review of Paraguay's trade policy, with the establishment of MERCOSUR's Commission of Permanent Representatives (CRPM), for example, wh ich is made up of representatives of the four 
member countries and a chairperson.
52  As a subsidiary body of the Council of the Common Market, 
the CRPM has been entrusted with the mandate of  assisting the Pro-Tempore Chairperson;  putting 
forward proposals regarding regional integration, external negotiations and the formation of the 
Common Market;  and strengthening economic, so cial and parliamentary relations within 
MERCOSUR.  Under the mandate received from the Council, the CRPM chairperson is empowered 
to represent MERCOSUR before third countries or international organizati ons regarding matters 
within his competence.  MERCOSUR's Admini strative Secretariat has become a Technical 
Secretariat.53 
57. There have also been changes to the mechanism for the settlement of trade disputes.  The 
Brasilia Protocol has been replaced by the Protocol  of Olivos, signed in 2002 and in effect since 
January 2004.  The new mechanism provides inter alia  for freedom of choice of the competent forum 
(MERCOSUR or WTO);  the possibility of recourse to mediation by the Common Market Group;  
and the creation of a review procedure.  The ma in innovation is the establishment of a Permanent 
Review Court of five arbitrators, which sits in Asunción. 
58. Free circulation of trade within MERCOSUR was laid down in the Trade Liberalization 
Programme, under which virtually all barriers to trade among MERCOSUR members, concerning 
close to 95 per cent of intra-regional trade (excluding  trade in products subject to the final adjustment 
regime, which does not include exceptions such as au tomobiles and sugar), were eliminated between 
June 1991 and 31 December 1994.  The adjustment regime agreed in August 1994 has led to the 
gradual phase-out of remaining tariffs on intra-region al trade.  Sensitive items were placed on separate 
adjustment lists and the changes gradually app lied between 1 January 1995 and 31 December 1998, 
for Argentina and Brazil, and between 1 Janua ry 1996 and 31 December 1999 for Paraguay and 
Uruguay.  The adjustment regime remained in effect until 1999. 
59. With the exception of the sugar and automo tive sectors, Paraguay has removed customs 
duties on intra-regional trade since 1 January 2000.   As agreed, the intra-regional free circulation 
regime should have been extended progressively to  adjust the sugar and automotive sectors to 
MERCOSUR rules, but specific dates for the integr ation of these sectors in the common trade policy 
have yet to be set. 
                                                      
52 CMC/DEC/11/03. 
53 CMC/DEC/16/02. WT/TPR/S/146 Trade Policy Review 
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60. Paraguay enjoys preferential rules of origin within MERCOSUR.54  The Rules of Origin 
regime remained in force until 2003, at  which time a new regime was established.55  As an exception 
to the common discipline, and in order to confer  originating status on Paraguayan products, the 
regional content requirement will be 40 per cent un til 2008, 50 per cent up to 2014, and 60 per cent as 
of 2014 (see also Chapter III(2)(iii)).  
61. MERCOSUR has signed a Free Trade Agreement with Venezuela, Colombia, Ecuador and 
Peru, which provides for diagonal cumulation and u nder which Paraguay enjoys a separate rules of 
origin regime as a LAIA relatively less developed. 
62. MERCOSUR's Common External Tariff has been in effect since January 1995 and, according 
to data provided by the authorities, covers a pproximately 50 per cent of Paraguay's imports from 
outside the region.  As originally foreseen, the CET should have been fully implemented by 2001 for 
Argentina and Brazil, and by 2006 for Paraguay and Uruguay.  In Paraguay's case, application of the 
CET would cause rates to converge upwards.  Th e CET rates may not be modified without the 
consent of all MERCOSUR members. 
63. As explained in Chapter III(2)(iv), Paraguay a pplies a number of exceptions to the Common 
External Tariff, which are specified in the lists of  exceptions to the CET.  These exceptions lead to 
discrepancies between CET tariff levels and Paraguay' s applied levels.  For 80 per cent of tariff items, 
CET levels are the same as Para guay's applied levels, with differe nt rates applying on the remaining 
20 per cent.  In this latter group of tariff lines, 4 per cent of tariffs exceed CET levels (mainly on 
textiles and made-up articles, computer goods, sugar,  and auto parts) and 96 per cent are below the 
CET. 
64. The MERCOSUR members have initiated a process of consolidation of the Customs Union, 
through the Agreement on the elimination of doubl e charging of the CET and the distribution of 
customs revenue within MERCOSUR.56  This Agreement provides for originating status to be 
conferred on products imported from outside MERCOSUR that comply with the common tariff 
policy.  However, this remains conditional inter alia  on interconnection of computerized customs 
management systems, the adoption of a MERCOSUR single customs document, the regional registers 
of offenders database (RIM), the implementati on of common valuation rules, and the actual 
establishment of integrated border control areas. 
65. In 2002, the Council of the Common Market adopted the WTO Agreements on Anti-
Dumping and on Subsidies and Countervailing Measur es with a view to their application in intra-
regional trade.57  MERCOSUR also adopted trade defence re inforcement rules, which apply to intra-
regional trade as a complement to the WTO rules.58  In 2003, the Council adopted a MERCOSUR 
Protocol on Government Procuremen t, which will enter into force on ce the Protocol has been ratified 
by two of the four members;  as at early 2005, it had not been ratified by any of the members.  The Protocol contains provisions on transparency in government procurement procedures and provides for 
asymmetry among member countries as regards nati onal treatment and the most-favoured-nation 
clause.  The corresponding Regulations were adopted in December 2004.
59 
                                                      
54 See Additional Protocols VIII and XXII to ACE (ECA) No. 18, and MERCOSUR Trade 
Commission Directive No. 12/96 and amendments thereto. 
55 CMC/DEC/29/03 and CMC/DEC/01/04. 
56 CMC/DEC/54/04. 
57 CMC/DEC/13/02 and CMC/DEC/14/02. 
58 CMC/DEC/22/02. 
59 CMC/DEC/55/04. Paraguay WT/TPR/S/146 
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66. In 1997, the MERCOSUR members signed the Pr otocol of Montevideo, which aims to 
liberalize trade in services over a ten-year period.  The Protocol has been ratified by Argentina and 
Uruguay and is in the process of being ratified by Braz il.  In Paraguay, it is currently being examined 
by the Senate Foreign Relations Committee.  Its entr y into force is subject to ratification by at least 
three MERCOSUR members.  The structure of the Pr otocol is similar to that of the WTO General 
Agreement on Trade in Services and has four anne xes, i.e., movement of natural persons, financial 
services, land and water transport services, and air tr ansport services.  Concerning the regulation of 
services sectors, the Council of the Common Market  has further stipulated that there will be no 
restrictions on market access and national treatment for services and service providers of a State Party 
where these have been liberalized a nd inscribed in the schedules of the other States Parties.  It has also 
been agreed to create a temporary "MERCOSUR visa"  in order to facilitate the entry and stay of 
natural persons, and a framework agreement has been  drawn up to facilitate the mutual recognition of 
professional licences. 
67. The Ministers of the MERCOSUR countries meet periodically to coordinate their positions on 
trade and macroeconomic and sectoral policies and to  adopt common stances in international forums.  
Coordination is also being stepped up in non-ec onomic spheres, because, in keeping with the 
objectives of a common market, MERCOSUR has a diversified programme which encompasses 
issues relating to the environment, justice, education and the free movement of labour. 
68. As regards the coordination of macroeconomic  policies, the Macroeconomic Assessment 
Group, comprising the Ministers of Finance and the Presidents of the Central Banks, was established 
in 2000.60  Its objectives include the harmonization of macroeconomic statistics;  the monthly 
publication of fiscal indicators;  the establishment of in flation, deficit and debt targets;  and the review 
of national legislation on finance and capital ma rkets.  The goals established for the Group were 
confirmed in the Florianopolis Declaration of 15 December 2000, and this unde rtaking was reaffirmed 
as a long-term objective by the Ministers of the Ec onomy and the Presidents of the Central Banks in 
December 2002.  According to the authorities, Pa raguay is a regular participant in the Group's 
technical meetings. 
69. On the external front, the MERCOSUR members have adopted common positions in 
renegotiating existing LAIA preferential agreements and in negotiating new agreements with partners 
in and outside the region.  In some instances, the so-called "four plus one" method (i.e., MERCOSUR 
members negotiating as a group with individual countri es) has been used and, in this context, 
agreements have been concluded with South American countries, which thereby gained associate 
member status (see below).  The conclusion of ag reements with Chile and Bolivia was communicated 
to the WTO Members in a LAIA Secretariat repor t to the Committee on Trade and Development, but 
no formal notification was made.61  There has been no formal notification of the agreements signed 
with Peru, Colombia, Venezuela, Ecuador and Mexico (see below). 
(b) Latin American Integration Association (LAIA) 
70. Paraguay is a member of the Latin American Integration Association (LAIA), established in 
1980 by the Montevideo Treaty and replacing the Latin American Free Trade Association (LAFTA).  The long-term objective of the Montevideo Treaty is the gradual establishment of a Latin American common market.  The instruments used to attain LAIA objectives comprise two main categories of 
agreement:  regional-scope agreemen ts, in which all the member countries participate according to 
                                                     
 
60 CMC/DEC/30/00. 
61 WT/COMTD/11, 8 October 1997. WT/TPR/S/146 Trade Policy Review 
Page 28 
 
 
their levels of development,62 and partial-scope agreements that bind only their signatories.  LAIA 
countries are classified in the following three categori es:  more developed countries, countries at an 
intermediate level of development, and relativel y less developed countries.  Paraguay has relatively 
less developed status. 
71. Paraguay has entered into partial-scope agreements with all the LAIA members63 and has 
signed economic complementarity agreements (ECA ) with Bolivia, Colombia, Ecuador, Mexico, 
Peru, Venezuela and Cuba.  Together with its  MERCOSUR partners, Paraguay has renegotiated 
several bilateral agreements (known as patrimonio histórico , i.e., the fund of pre-existing agreements) 
into multilateral agreements. 
72. ECA No. 35 for the establishment of a free-tr ade area between MERCOSUR and Chile came 
into force in 1996 and is of indefinite duration.   The Trade Liberalization Programme is being 
implemented according to the terms of the ECA.  Products included in the General Regime and 
Annex 1 ( patrimonio histórico ), covering 80 per cent of the tariff, receive 100 per cent preference.  
The pace of tariff reduction is being maintained in accordance with the ECA.  For tariff headings that 
are considered sensitive, the reduction process will ex tend over periods of 10, 15 and 16 years, lasting 
up to 2006, 2011 and 2012, respectively.  However,  a ten-year period has been set for a limited 
number of products, starting from the date of a pplication stipulated by the Administrative 
Commission.  Sensitive items represent 20 per cent of the tariff. 
73. ECA No. 36 for the establishment of a free-trade area between MERCOSUR and Bolivia 
entered into effect in 1997.  The Trade Liberali zation Programme is being implemented according to 
the terms of the ECA.  Tariffs on products include d in the general timetable and the timetable for 
patrimonio histórico  products are being reduced over a period of 10 years up to 2006.  Longer tariff 
reduction periods, beginning in 2005 and ending in 2011, are provided for MERCOSUR countries in 
the timetables for sensitive products .  Bolivia's timetable for sens itive products establishes a tariff 
reduction period beginning in 2005 and ending in 2014.  Eighty-two per cent of tariff items are 
contained in the general timetable and the timetable for patrimonio histórico  products, and the 
remaining 22 per cent are included in the timetable s for sensitive products.  The 100 per cent tariff 
preference level is due to be achieved by 2006, ex cept for products in Annexes 5 and 6 of the ECA, 
meaning that Paraguay will grant 100 per cent pref erence for 93 per cent of the tariff by 2006.  
Paraguay's exceptions will remain in effect until 31 December 2010.  The Administrative Commission 
of the ECA is currently reviewing proposals to bri ng forward the general timetable and the timetable 
for sensitive products, with Brazil and Argentina pr oviding differential treatment for Bolivia, and 
Uruguay, Paraguay and Bolivia granting reciprocal treatment. 
74. ECA No. 58 between MERCOSUR and Peru was signed in August 2003.  It comprises 
general rules applicable to all the countries and b ilateral appendices including bilateral tariff reduction 
timetables.  Paraguay and Peru ha ve negotiated an eight-year genera l tariff reduction timetable and a 
13-year timetable for sensitive products.  As at early 2005, the formalization process had not been 
completed because Uruguay had not yet concluded its b ilateral negotiations.  Eighty per cent of tariff 
items are covered by the general timetable and the timetable for patrimonio histórico  products, and 
the remaining 20 per cent are listed in the timetabl es for sensitive products.  Since ECA No. 58 is not 
yet in force, trade between Paraguay and Peru is  governed by Partial-Scope  Renegotiation Agreement 
No. 20, the validity of which has been extended until 31 March 2005.  This  Agreement establishes 
fixed preferences.  Paraguay grants preferences ranging between 30 and 100 per cent for 90 items. 
                                                      
62 Document ALADI/AR.PAR/4, 1 August 1990;  Re gional-Scope Agreement No. 4;  and Amending 
Protocol of 12 March 1987. 
63 WTO document WT/COMTD/7, 30 September 1996, and information provided by the Government. Paraguay WT/TPR/S/146 
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75. An Agreement for the establishment of  a free-trade area between MERCOSUR and 
Colombia, Ecuador and Venezuela was signed in D ecember 2003.  The Agreement comprises general 
rules and bilateral appendices for each of the count ries.  Paraguay applies a 12-year general tariff 
reduction timetable for Colombia and Venezuela, while these countries have established a ten-year 
general tariff reduction timetable for Paraguay.  Paraguay and Ec uador have a general and an 
intermediate timetable, applying on a reciprocal ba sis and covering a ten- and a six-year period, 
respectively.  The timetables for sensitive products  extend over a maximum period of 15 years.  The 
Agreement will be of indefinite duration.  As at  early 2005, the formalization of the Agreement under 
LAIA had been completed, and the countries were in the process of incorporating it in their domestic 
legal systems. 
76. In July 2002, MERCOSUR and Mexico signe d a framework agreement for the gradual 
establishment of a free-trade area.  On that same date, MERCOSUR and Mexico signed a partial-scope agreement providing for free trade in the automotive sector following a transition period lasting up to 30 June 2011.  Paraguay has not incorporat ed these agreements in its domestic legislation. 
77. Apart from granting tariff preferences, some of the LAIA agreements are aimed at fostering 
economic complementarity and developing economic co-operation among signatories.  Additionally, 
a Reciprocal Payments and Credit Agreement is in tended to facilitate intra-regional transactions.  
Paraguay uses the reciprocal payments system for its export and import operations, and central bank 
accounts are debited automatically once every four months .  Before the establishment of the WTO, 
LAIA's activity reports were submitted to the GATT.  LAIA submitted its latest report to the WTO in 
1997.
64  
(c) Other preferential trade agreements 
78. MERCOSUR is using the "four-plus-one" method in a number of negotiations currently under 
way with countries outside the region.  Paraguay's position in these forums is dictated by a national 
policy which is first agreed on among the relevant institutions and then with Paraguay's MERCOSUR 
partners;  sometimes it is presented as a comm on MERCOSUR position.  It is customary practice 
before a bilateral or plurilateral meeting to hold a MERCOSUR coordination meeting, at which a 
common position is adopted, with the pro-tempore chairperson in office acting as coordinator and 
spokesperson for MERCOSUR.  On all these negotia ting fronts, Paraguay, as a landlocked country 
with relatively less developed status, seeks market  access through special and differential treatment. 
79. Paraguay takes part in the negotiations for th e establishment of the Free Trade Area of the 
Americas (FTAA), launched in December 1994 with  a view to progressively removing barriers to 
trade in goods and services among 34 countries of th e Western Hemisphere.  The negotiating process 
was due to be completed in January 2005 but more  time was needed to finalize the negotiations.  The 
FTAA negotiations should resume in 2005. 
80. MERCOSUR and the European Union are negotia ting an interregional association agreement 
for the establishment of a political and economic asso ciation between the two regions, on the basis of 
the EU-MERCOSUR Interregional Framework Coope ration Agreement signed in December 1995.  
The trade negotiations are being conducted in the Committee on Bi-regional Negotiations, in which 
Paraguay takes part as coordinator of the positions of the MERCOSUR members.  Since it was impossible to conclude the negotiations by the ta rget deadline of October 2004, the parties have 
decided to resume negotiations at technical  and political level in the course of 2005. 
                                                     
 
 64 LAIA reports to the GATT and the WTO are contained in GATT documents L/6946 of 
20 December 1991, L/6985 of 5 March 1992 and L/6985/Add.1 of 9 April 1992;  and in WTO documents WT/COMTD/7, 30 September 1996 and WT/COMTD/11, 8 October 1997. WT/TPR/S/146 Trade Policy Review 
Page 30 
 
 
81. MERCOSUR and India signed a framework trad e agreement in June 2003 (approved by 
CMC/DEC/09/03) with a view to negotiating an agreement on fixed preferences.  The agreement covers a specified universe of products compri sing approximately 900 tariff headings, with 
preferential margins of 10 or 20 per cent and even  100 per cent for a limited number of products.  
A preferential trade agreement between the co untries was signed on 25 January 2004.  The 
negotiating process is scheduled for completion in th e course of 2005.  This would be the very first 
agreement between MERCOSUR and a devel oping country outside the LAIA region. 
82. MERCOSUR and South Africa signed a framework agreement in December 2000.  The main 
objective is the conclusion of a free trade agreement.   In 2003, the other four members of the South 
African Customs Union (Lesotho, Namibia, Swazila nd and Botswana) joined the negotiations, with a 
view to framing an agreement on fixed preferences as the first step towards creating the conditions 
required for a free trade agreement.  The first st age involves establishing preferential margins for a 
limited number of products, based on an agreement on traditional trade disciplines such as rules of 
origin, safeguards and dispute settlement. 
83. MERCOSUR and Egypt signed a framework agreement on 7 July 2004 (approved by 
CMC/DEC/16/04), along the same lines as those ad opted in other extra-regional negotiations with 
developing countries, which are based on the estab lishment of an agreement on fixed preferences as 
the first step towards a free trade agreement. 
84. Discussions have also begun on the possible conc lusion of trade agreements with the Central 
American Integration System (SICA), the Cari bbean Community (CARICOM), Mexico, China and 
Korea. 
85. Additionally, Paraguay benefits from other trad e-liberalizing preferential arrangements, such 
as the following three LAIA instruments:  the Ma rket-Opening List, which establishes 100 per cent 
non-reciprocal preferences for relatively less economi cally developed countries, such as Paraguay;  
bilateral partial-scope agreements ;  and regional-scope agreements , which provide for special and 
differential treatment for countries with relatively l ess economically developed status.  Official export 
figures show that in recent years some 54 per cen t of total exports were directed to MERCOSUR 
countries and 8 per cent to other LAIA countries;  thus for Paraguay, the LAIA preferential trade 
schemes (including MERCOSUR) cover approximately tw o thirds of total exports.  According to the 
authorities' calculations, the coverage of preferen ces varies considerably according to the trading 
partner, reaching 46 per cent for Paraguayan exports to Bolivia, for example, and exceeding 
98 per cent of exports to MERCOSUR countries. 
86. Paraguay benefits from the Generalized System of  Preferences of Belarus, Bulgaria, Canada, 
the European Union, Japan, Ne w Zealand, Norway, Russia, Switzerland and the United States. 
(5) 
TRADE -RELATED TECHNICAL ASSISTANCE  
87. Within the WTO framework, t echnical assistance activities for Paraguay individually or as 
part of the region have increased from two in 1997 to 21 in 2004.  Since 1997, Paraguay has taken 
part or has been invited to participate in 76 WT O-organized technical cooperation activities.  These 
included a number of seminars and workshops, of wh ich 55 were held at regional level.  Topics 
covered at regional level included a variety of i ssues such as agriculture, cap acity building for trade 
negotiations, customs valuation, development (incl uding special and differential treatment), dispute 
settlement, market access, trade facilitation, trad e remedies, sanitary and phytosanitary measures 
(SPS), services negotiations and the GATS, technical barriers to trade (TBT), textiles and clothing, Paraguay WT/TPR/S/146 
 Page 31 
 
 
trade and competition policy, trade and environm ent, trade and investment, transparency in 
government procurement, and TRIPS. 
88. To address certain priority issues more in de pth, 11 national activities have taken place since 
1997.  They included WTO technical missions (concerning customs valuation, the establishment of a 
WTO reference centre, and training);  national seminars (on issues such as the TBT and SPS 
Agreements, the GATS, the Trade Policy Review M echanism, and trade remedies); and trade policy 
courses.  Paraguay has also participated in va rious conferences and global workshops on the WTO 
and in the regular Geneva-based trade policy courses. 
89. In January 2005, Paraguay was designated as pilo t country for Project 19 of the Standard and 
Trade Development Facility, a mechanism bringi ng together five intern ational organizations, 
including the WTO, which supports developing countr ies seeking to implement international sanitary 
and phytosanitary standards.  Project 19 is specifi cally geared towards improving the circulation of 
sanitary and phytosanitary information, particularly  between the public and the private sector, in order 
to enhance market access. 
90. According to the authorities, Paraguay requir es further technical assistance in training 
negotiators in the different trade negotiation areas and experts in charge of framing multilateral and 
regional trade agreement policies and implementati on programmes.  To achieve that objective, the 
authorities believe that technical assistance is also  needed in setting up the appropriate technological 
infrastructure. 
91. Since 1997, Paraguay has received trade-rela ted technical assistance from non-WTO sources 
as well.  On a bilateral basis, assistance has b een provided by countries such as Canada, the United 
States, Japan, Norway, and EU Member States.  Activities were centred on issues such as business 
support services and institutions;  trade promotion strategy design and implementation;  market 
analysis and development;  trade financing;  trad e mainstreaming in poverty reduction strategy papers 
(PRSP) and development plans;  TBT and SPS;  cust oms valuation;  regional trade agreements;  and 
trade-related training and competitiveness. 
92. Trade-related assistance has also been provided by  various international organizations such as 
the Inter-American Development Bank (on issu es concerning business support;  the system for 
streamlining export formalities;  re form of the insurance sector;  support for the development of a 
public procurement policy;  the programme to stre ngthen the banks' supervisory authority;  support 
for international trade negotiations;  the nati onal anti-corruption national plan;  economic and 
financial statistics;  and studies concerning the As unción airport);  the International Monetary Fund 
(IMF) (on trade facilitation and in other areas of e xpertise);  the Organization of American States 
(OAS) through the Inter-American Agency for Coop eration and Development (IACD) (on issues such 
as the creation of productive employment);  the World Bank (pilot community development project);  and WIPO (on the TRIPS Agreement and facilitating its implementation).