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  IV. TRADE POLICIES BY SECTOR 
(1) OVERVIEW  
1. 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.  During the period 2004-2009, exports of agricultural products 
represented, on average, 87.5 per cent of goods e xports and consisted main ly of soya and its 
by-products and livestock products.  A large proporti on of the products are exported in their natural 
state.  In March 2005, Paraguay abolished export ta xes on agricultural products.  The level of tariff 
protection and domestic support for the agricultural sector is relatively low.  Domestic support is 
targeted at small producers and essentially consists of technical assistance, research projects and input 
distribution.  The agricultural policy of the presen t Government places the emphasis on the inclusion 
of family agriculture in the production chains and fairer distribution. 
2. 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 productivity and value added and little 
diversification in products and markets, especially  where exports are concerned, although these have 
been relatively dynamic in recent years.  The princi pal industries are directly related to the processing 
of agricultural products or the production of cons umer goods.  There are several government support 
programmes for the manufacturing sector, including tax exemptions and investment credits, together 
with a programme for the automotive industry.  The Government has prepared a draft law on 
industrial policy which envisages a new incentives regi me and is aimed at breaking the dependence on 
raw materials exports and attracting investment in the manufacturing sector. 
3. Paraguay has abundant hydro-electric resources and is a large exporter of electricity.  On an 
annual basis, the Itaipú binational hydro-electric powe r 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 invest ment in the power transmission and distribution 
infrastructure is needed to meet gr owing demand and eliminate bottlenecks. 
4. 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 these products, provided that they have the necessary le gal 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 producin g biofuels, provided that domestic raw materials 
are used in their production;  furthermore, diesel fuel must be mixed with biodiesel in the proportions determined by the authorities. 
5. Services are still the largest sector in Para guay's economy, accounting for 51.2 per cent of 
GDP and 53.1 per cent of jobs in 2009.  Paragua y's commitments under the General Agreement on 
Trade in Services are limited to financial services a nd tourism.  Paraguay did not take part in the 
negotiations on financial and telecommunicati ons services that followed the Uruguay Round. 
6. 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.  
There is a certain degree of concentration, with the four largest banks holding 60 per cent of bank 
assets.  Banking legislation makes no distinction betw een domestic and foreign capital, and the latter 
plays an important role in the sector.  Lending to th e private sector has increased steadily, while the 
financial spread has lessened, even though it re mains relatively wide.  Only limited companies Paraguay WT/TPR/S/245/Rev.1 
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  established in Paraguay or subsidiaries of foreign comp anies may engage in insurance;  subsidiaries of 
foreign companies may operate under the same conditions as domestically owned companies.  
Cross-border reinsurance operations are allowed. 
7. Paraguay's basic telecommunications infrastructure continues to lag behind in some respects.  
The State-owned company COPACO has a de facto monopoly on fixed telephony.  The mobile market is open to private investment and has gr adually absorbed the unsatisfied demand for fixed 
telephony.  In March 2009, international access to the Internet using fibre optics - previously a 
COPACO monopoly - was liberalized.  Telecomm unications services are provided by means of 
concessions, licences or authorizations.  Foreign comp anies must be domiciled in Paraguay or appoint 
a legal representative.  In late 2010, a new la w on information and communications technology was 
being prepared, together with regulations on number portability and separate accounting. 
8. Being a landlocked country, Paraguay faces some of the highest transport costs in 
Latin America, which adversely affects the compet itiveness of its exports while at the same time 
making its imports more expensive.   To overcome these difficulties, Paraguay participates in various 
regional forums and bodies that promote the phys ical integration of the national transport, 
communications and energy infrastructures within the region. 
9. Over 70 per cent of the country's external  trade goes by river, notably along the 
Paraguay-Paraná Waterway.  The la w reserves river and maritime tran sport of imports and exports for 
Paraguayan-registered vessels.  If the cargo is co ming from or proceeding to a LAIA member country, 
the restrictions are less severe, provided capacity ex ists, and they do not apply to river transport in 
vessels of countries that are parties to the Rive r Transport Agreement for the Paraguay-Paraná 
Waterway.  Moreover, in practice, the restrictions  do not apply to maritime transport since Paraguay 
does not have a maritime merchant fleet.  River cabotage is reserved for Paraguayan-registered 
vessels.  A State-owned company administers the country's public ports;  private companies, both 
domestic and foreign, may build and opera te river ports for commercial purposes. 
10. In the air transport sector, a decentralized St ate entity acts as regulator and manager of the 
public airports that provide commercial passenger and freight transport services.  The authorities are planning to grant airport management concessions to  the private sector in the near future.  The 
legislation stipulates that only aircraft listed and registered in Paraguay and foreign aircraft leased by 
domestic companies can provide cabotage services.  Paraguay has signed 23 bilateral air transport agreements with various degrees of liberaliza tion, two of which provide for up to the 8
th freedom 
(cabotage).  Basically, land transport in Paraguay re lies on the road network;  the development of the 
railway system, as an integral part of an inter-o ceanic linkage project, is one of the priorities of 
government transport policy. 
(2) AGRICULTURE , LIVESTOCK AND FORESTRY1 
(i) General characteristics 
11. The agricultural sector (comprising crop farming, livestock and forestry) saw its share of 
GDP at current prices (Table I.2) fall from 21.6 per cent in 2004 to 19.3 per cent in 2009, mainly due 
                                                      
1 The trade data used in Section (2) are WTO Secretariat calculations based on data from the 
COMTRADE Database (SITC, Rev.3);  the employment data  were calculated on the basis of statistics compiled 
by the Directorate-General of Statistic s, Surveys and Censuses of Paraguay, viewed at http://www.dgeec.gov.py;  
and the production data are based on the Statistical Annex of the Central Bank of Paraguay, viewed at:  
http://www.bcp.gov.py/index.php?option=com_content&task= view&id=148&Itemid=374. WT/TPR/S/245/Rev.1 Trade Policy Review 
Page 102 
 
 
  to a decline in crop farming GDP (-17.4 per cent) in  2009, attributable to a dverse weather conditions.  
However, the situation was reversed in 2010, with some crops reaching record levels.  The 
agricultural sector continues to play an important  part in Paraguay's economy, both as a source of 
foreign currency and as a generator of employment .  In 2009, exports of agricultural products 
accounted for 89 per cent of total merchandise exports .  In the same year, the agricultural sector 
employed 29.5 per cent of the economically active population.2  Moreover, as several economic 
activities, such as transport services and agro-industry , are linked with agriculture, the sector is a 
major source of indirect employment. 
12. Agricultural activity is concentrated in the eastern region of the country, although in recent 
years cattle fattening and the cultivation of certain  crops have expanded in to the western region 
(Chaco).  Various methods of production are empl oyed, ranging from family farming to mechanized 
export-oriented agriculture.  During the period under  review, land consolidation was accelerated by 
the modernization of the agricultural sector.  Acco rding to the agricultural census for 2008, larger 
farms (more than 1,000 hectares) occupied 79 pe r cent of the area farmed, whereas family farms (up 
to 20 hectares) occupied barely 4.3 per cent.3 
13. Since 2003, the high international prices of ag ricultural products have favoured the steady 
growth of the agricultural sector and the nationa l economy, although adverse weather conditions have 
occasionally tempered the rate of growth.  For exam ple, in 2009, the country suffered a widespread 
drought which, combined with the global economic cr isis, led to a fall in GDP.  Nevertheless, this was 
followed by a quick recovery in 2010. 
14. Paraguay's main crop is soya and its two rotation crops:  maize (corn) and, in temperate areas, 
wheat (Table IV.1).  Sugarcane is second in importa nce in terms of volume and, moreover, is used as 
an input for the organic sugar industry and alcohol  production.  Cotton, which until recently was one 
of the most important crops, especially for small producers, has gradually been replaced by sesame.  
Prominent among the subsistence crops is cassava, wh ich is the third product in terms of volume.  
Other important products are rice, the production of which is steadily increasing, sunflower seed and 
certain fruit-growing products. 
Table IV.1 
Primary crop production, 2003-2010 
(tonnes) 
Product 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 
Soya 3,584,000 3,988,000 3,800,000 6,000,000 6,722,297 3,855,000 7,393,500 
Sugarcane (industrial use) 3,637,000 3,020,000 3,200,000 4,100,000 5,079,612 4,800,000 5,000,000 
Maize (corn) 1,120,000 830,000 1,100,000 1,250,000 2,632,396 1,857,840 2,117,000 
Cassava 5,500,000 4,785,000 4,800,000 4,800,000 2,318,797 2,610,000 2,685,000 
Wheat 715,000 800,000 620,000 800,000 799,732 1,066,800 1,402,000 
Sunflower 44,550 64,500 68,000 190,000 191,075 194,000 291,000 
Rice (irrigated) 125,000 102,000 126,000 130,000 145,288 215,000 302,500 
Cotton 330,000 198,000 180,000 105,000 65,666 18,000 14,850 
Kidney beans 65,195 67,000 70,000 70,000 44,628 42,980 48,000 
Groundnuts 33,180 34,000 36,000 36,000 29,988 22,590 22,500 
Tobacco 16,535 15,600  15,000 15,000 3, 774 5,688  5,100 
Source : Central Bank of Paraguay, Anexo Estadístico .  Viewed at:  http://www.bcp.gov.py/index.php?option=com_ 
content&task=view&id=148&Itemi d=374;  and Census and Agricultural Statis tics Directorate of the Ministry of 
Agriculture and Livestock (MAG). 
                                                      
2 Directorate-General of Statistics,  Surveys and Censuses (2009b). 
3 MAG (2008a). Paraguay WT/TPR/S/245/Rev.1 
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  15. During the period 2004-2009, agricultural exports  accounted, on average, for 87.5 per cent of 
total merchandise exports and were concentrated in just a few products, namely, soya and its 
by-products, meat, cereals and other oilseeds (sesam e and sunflower).  During the same period, the 
first 12 agricultural products accounted, on average,  for 80 per cent of total merchandise exports, soya 
and its by-products accounting for 47.3 per cent, meat for 15.6 per cent and cereals for 9.8 per cent.  
Sunflower, rice, sesame and boned meat were the fastest-growing export products. 
16. The main destination for Paraguay's agricultu ral exports is the MERCOSUR countries, which 
took 40.7 per cent of the total in 2009, partly due to the fact that these countries provide ports of 
re-exportation, especially for soya shipments.  W ithin MERCOSUR, Uruguay and Brazil alternated as 
the main recipients of Paraguay's agricultural e xports during the period under review.  Argentina, 
which imports Paraguayan soya beans for making so ya oil, has increased its share as a recipient 
exponentially since 2007.  The authorities have pointed  out that the main multinational companies in 
the sector are investing some US$120 million in th e production of soya oi l in Paraguay and are 
planning to process 70 per cent of soya production in the medium term. 
17. The principal markets for meat are Chile, Ru ssia and Brazil, although diversification has 
increased in recent years with sh ipments to the Middle East and Africa and the recovery of the 
European market.  Other important agricultural des tinations are the Bolivarian Republic of Venezuela, 
India and Switzerland.  Exports of sesame, grown by small farmers, have gained in importance in 
recent years, with Japan and, more recently, Israel  as the main recipients.  Exports of organic sugar 
have also increased, the main des tination being the United States. 
18. In 2004-2009, Paraguay's agricultural imports acc ounted, on average, for 8.3 per cent of total 
merchandise imports;  prominent among them are to bacco, spirituous beverage s and processed foods.  
The main markets of origin are MERCOSUR, especially for tobacco and processed food products, 
and the United Kingdom, the United States, Argentina and Chile, for spirituous beverages.  The inputs 
which Paraguay needs for its agricultural production in clude, in particular, fertilizers;  although these 
accounted, on average, for only 4.1 per cent of im ports of goods during the period under review, 
volumes increased by an average of 12.6 per cent a year between 2004 and 2009. 
(ii) Policy objectives for the sector 
19. The Ministry of Agriculture and Livestock (MAG) is responsible for formulating and 
coordinating Paraguay's agricultural and forestry policy.  In 2008, the Integrated System of Management for Development (SIG EST) was established to enable the MAG to coordinate, at 
national level, the activities of the various public bodies involved in the sector, namely, the 
Agricultural Equipment Bank (CAH), the Nati onal Plant and Seed Quality and Health 
Service (SENAVE), the National Animal Quality and Health Service (SENACSA), the National 
Cooperative Institute (INCOOP), the Development Finance Agency (AFD), the National Forestry 
Institute (INFONA), the Livestock Fund (FG), the National Development Bank (BNF), the 
Environment Secretariat (SEAM), the National Ru ral Development and Land Institute (INDERT) and 
the Technical Secretariat for Planning.
4 
20. The policy for the agricultural sector is laid down in the Strategic Framework for Agriculture 
2009-2018, which itself forms part of the Economi c and Social Strategic Plan (PEES).  This 
framework, based on various presidential decrees5 and laws6, seeks to promote integrative, efficient 
                                                      
4 Decree No. 169/08, Office of th e President of the Republic. 
5 Decree No. 4.100/10, Decree No. 169/08, Decree No. 3.354/09 and Decree No. 3.579/09. WT/TPR/S/245/Rev.1 Trade Policy Review 
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  and competitive agricultural development reflected in the sustained growth of the sectoral product, 
with special emphasis on achieving fairer distribution and a better quality of life.7  The framework is 
divided into five main parts, namely:  (i) sector al institutional upgrading and restructuring of the 
MAG;  (ii) development of family farming and food security;  (iii) development of agricultural 
competitiveness;  (iv) development of agro-energy;   and (v) livestock a nd farming development. 
21. With respect to the Agricultural and Rural De velopment Plan (2004-2008), the predecessor of 
the Strategic Framework for Agriculture, the MAG has reported advances such as the introduction of 
new varieties of soya, maize, wheat, tomatoes, cotton, melons and stevia.8  According to the MAG, in 
some cases the success of the programmes is linked w ith the steady increase in exports of products 
such as maize, wheat and sesame.  Moreover, the M AG stresses the continuity of the line of credit 
offered by the BNF and the CAH.9  In the case of stevia, Paragu ay has won recognition for the 
product as fit for human consumption in the United States (2008), and in the European Union the 
Member States are considering its formal authorizati on.  Where the revitalization of family farming is 
concerned, although some of the products grown by small producers, such as sesame, bananas and 
pineapples, have increased their share of foreign tr ade, at the same time, acco rding to the Agricultural 
Census 2008, these producers now hold less land.10  Moreover, the report on farming year 2009-2010 
indicates that there has been no reduction in rural poverty.11 
22. The main objective of the National Livestock Development Programme (PRONAFOPE), 
established in July 2009 by Decree No. 2.438/09, is  the integration of small-scale livestock production 
into the agro-industrial supply chains.  The progra mme covers fish farming,  dairy farming, small 
animals (poultry, pigs and sheep) and beekeeping and is aimed at providing support for family farms. 
23. Law No. 3.464/08 established the National For estry Institute (INFONA) as an autonomous 
entity linked with the Executive through the MAG.   INFONA is responsible for formulating and 
implementing forestry policy with a view to prom oting development, supervising the extraction, 
processing and marketing of forest products, and prom oting plans for, among other things, forestation, 
reforestation and forest education.  The implemen ting regulations for Law No. 3.464 are contained in 
Decree No. 3.928/10. 
24. Within MERCOSUR, the body responsible for agriculture is Sub-Working Group (SGT) 
No. 8 on Agriculture, which has its own standing a nd ad hoc working groups, as described in the 
previous Secretariat Report, together with  other South American coordination bodies.12  T o  t h e s e  
                                                                                                                                                                     
6 The main laws governing the agricultural sector are:  Law No. 81/92 (organizational and functional 
structure of the MAG);  Law No. 123/91 (regulations on plant health protection - Law No. 2.459/04 repealed its Articles 2, 5 and 37 to 41);  Law No. 385/94 (seeds and protection of cultivars - Law No. 2.459/04 repealed its 
Articles 7 to 10, 38(f) and 81 to 87);  Law No. 494/21 (animal health policy);  Law No. 422/73 (National 
Forestry Service);  Law No. 2.157/03 (National Cooperative Institute);  Law No. 2.426/04 (National Animal Quality and Health Service);  and Law No. 2.459/04 (N ational Plant and Seed Quality and Health Service). 
7 MAG (2009b). 
8 Stevia or "Ka'a he'e" is a plant used as a sweet ener, for example, in beverages and foods and its 
natural sugar (steviosides) is sweeter than the synthetic products sold on the market as substitutes for sugar 
(sucrose). 
9 MAG (2008b). 
10 MAG (2008b). 
11 MAG (2009a). 
12 WTO (2005). Paraguay WT/TPR/S/245/Rev.1 
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  should be added the Specialized Meeting on Family Farming (REAF)13, Plants of MERCOSUR14, and 
the Inter-American Institute for Cooperation on Agriculture (IICA).15 
(iii) Trade measures and other policy instruments 
(a) Border measures 
25. The average MFN tariff applied by Paraguay to agricultural products (WTO definition) was 
9.9 per cent in 2010 (Table III.2), above the 8.3 per cent applied to non-agricultural products and the 
overall average of 8.5 per cent.16  The product categories with the highest tariffs are alcoholic 
beverages and liquids (17 per cent) , dairy products (15.1 per cent), tobacco (14.2 per cent), and fruit 
and vegetables (10 per cent).  The categories who se tariffs have increased during the period under 
review include cut flowers and plants and alcoholic  beverages and liquids.  The simple average tariff 
for the ten most important groups of  imported products was 12.5 per cent.17 
26. In accordance with its Uruguay Round commi tments, Paraguay converted its non-tariff 
restrictions into tariffs on, inter alia , beef, sugar and wheat.18  Paraguay has bound all its tariffs.  For 
agricultural products (WTO definition), th e average bound tariff is 32.4 per cent. 
27. As a member of MERCOSUR, Paraguay applies a common external tariff to agricultural 
products, subject to some exceptions.19  Intra-MERCOSUR trade in these products attracts a 
zero tariff, except in the case of sugar.  Paraguay doe s not use either specific tariffs or tariff quotas;  
nor has it applied special safeguard or counterva iling measures to imported agricultural products. 
28. In March 2005, Paraguay abolished the export taxes on agricultural products. 
(b) Domestic support 
29. The Government's support programmes for the ag ricultural sector consist mainly of technical 
assistance for the creation of organizational capacity , technology generation and transfer, agricultural 
research, the provision of high-quality inputs and credit facilities appropriate to the socio-economic 
conditions of the farmers, and assistance with the adoption of traceability systems (livestock). 
30. This situation is reflected in Paraguay's notif ications to the WTO concerning the "green box" 
and measures exempt from reduction commitments under article 6.2 of the Agreement on Agriculture.  
From 2004 to 2009, the green box support notified c onsisted of research, pest and disease control, 
agricultural advisory services, ag ricultural education and marketing.  Where measures exempt from 
reduction commitments are concerned, the purchase of inputs (including seed and fertilizer) for 
                                                      
13 Dialogue groups, resolutions and technical discussions on questions of agrarian reform, trade 
facilitation, gender, youth, financing and agricultural insurance. 
14 Productive activity diversification project, including products with medicinal uses. 
15 Organization specializing in agriculture and the rural environment whose purpose is to provide 
Member States with innovative technical cooperation to  enable them to achieve sustainable development. 
16 If the ISIC definition is used, the average MFN tariff on agricultural sector products (including fish) 
was 7.2 per cent in 2010, below th e overall average of 8.5 per cent. 
17 These products mainly include cigarettes and tobacc o, beer, malt, soya beans, biscuits and some 
types of food preparations. 
18 WTO (1997). 
19 The exceptions include products such as flowers,  chocolates, some cereal-based preparations, some 
organic chemical products, lactose, glucose, plant extracts, cocoa powder, ca nned vegetables, alcoholic 
beverages (wine, grain alcohol), unmanufactured tobacco and cigars. WT/TPR/S/245/Rev.1 Trade Policy Review 
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  agricultural campaigns targeting small producers of cotton, sesame and sugarcane was notified, 
together with support in emergency situations.20  In 2009, domestic support wa s equivalent to 0.6 per 
cent of GDP (0.35 per cent in 2004) and represented 3.14 per cent of total government expenditure, as 
compared with 2.18 per cent in 2004 (Table IV.2). 
31. According to the report on farming year 2009- 2010, the products and activities receiving 
support in the area of technology, research and experimentation include the production of cassava 
seedlings and plants, stevia, medicinal plants, fruit trees and strawberries, and the production of 
tomato, maize, sesame and cotton seed.  Soil conservation and recovery programmes are being 
maintained;  these include direct sowing, crop ro tation, compost and the use of agrochemicals. 
32. Paraguay has notified the WTO that it did not apply any export subsidies to agricultural 
products during the period 2004-2009.21 
Table IV.2 
Domestic support, 2004-2009 
(US$1,000) 
Measures exempt from reduction commitments 2004 2005 2006 2007 2008 2009 
Total domestic support (I+II) 24,521 17,446 30,977 35,901 28,658 87,678 
Percentage of GDP 0.4 0.2 0.3 0.3 0.2 0.6 
Percentage of total government expenditu re 2.18 1.31 1.71 1.81 1.14 3.14 
I. "Green Box" 11,284 11,941 17,235 23,023 12,532 45,547
Agricultural research, technology generation and 
transfer 1,972 1,571 1,251 1,588 2,084 4,108 
Livestock research 968 487 508 627 793 1,451 
National Plant and Seed Quality and Health Service 
(SENAVE) 632 949 3,248 5,738 837 8,303 
National Animal Quality and Health Service (SENACSA) 3,630 5,538 8,243 9,302 1,054 17,802 
Technical assistance for agricultural producers 1,799 1,583 1,935 2,318 3,147 6,770 
Training of agricultural technicians 2,010 1,539 1,758 3,060 4,028 6,123 
Assistance for agricultu ral producers in the 
marketing chain 273 273 291 389 589 989 
II. Special and differential treatment 
 "development programmes" 13,237 5,505 13,742 12,879 16,127 42,131 
Investment subsidies generally available for agriculture 13,237 3,076 2,503 6,86 15,606 25,132 
Agricultural input subsidies generally available for 
low-income or poor producers 0 2,429 11,239 6,693 521 16,998 
Source : WTO documents G/AG/N/PRY/14 of 24 November 2008, G/AG/N/PRY/16 of 20 Oct ober 2009 and information 
provided by the authorities.   The GDP data come from th e Central Bank of Paraguay, Anexo Estadístico .  Viewed 
at:  http://www.bcp.gov.py/index.php?option=com_c ontent &task=view&id= 148&It emid=374 [29 July 2010].  
(c) Other measures 
33. Another form of government support is the provi sion of lines of credit.  Law No. 2.640/05 
established the Development Finance Agency (AFD ), which serves as a second-tier bank, making 
credit lines available through authorized fina ncial institutions, which include the National 
                                                      
20 WTO documents G/AG/N/PRY/14 of 24 November 2008 and G/AG/N/PRY/16 of 20 October 2009. 
21 WTO documents G/AG/N/PRY/13 of 5 November 2008, G/AG/N/PRY/15 of 21 October 2009 and 
G/AG/N/PRY/17 of 13 October 2010. Paraguay WT/TPR/S/245/Rev.1 
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  Development Bank (BNF), the Livestock Fund (FG) , finance companies, cooperatives and private 
banks. 
34. Since 2009, the Agricultural Equipment Bank (C AH) has implemented, together with the 
MAG, a programme for the progressive qualification of producers as credit recipients, aimed at family subsistence farming producers registered as such with  the MAG.  The purpose of the programme is to 
make it easier for these producers to obtain credit and to rehabilitate tho se who have fallen into 
arrears, through debt restructuring and the provision of financial aid in the form of conditional money 
transfers (from the National Programme of Support fo r Family Agriculture) until they have repaid the 
sums resulting from restructuring, so that they can start producing and generating income again.
22 
35. In accordance with one of the objectives of the PEES, namely, to promote an "inclusive 
financial system", there has been a gradual impr ovement in access to credit for small agricultural 
producers:  from 16 per cent of the rural population in 2004 to almost 19 per cent in 2008.23  For its 
part, the AFD reports that 39 per cent of the US $230.4 million in loans approved between June 2006 
and August 2010 was destined for the agricultural sector.24 
36. The taxes levied on the agricultural sector are th e rural property tax, equivalent to 1 per cent 
of the assessed value of the land25, and the income tax on agricultural activities (IMAGRO).26  The 
sums paid for permits for the movement and marketing of cattle (" guías de traslado ") are treated as 
advances on income tax.27  The amount collected as a result of the application of the IMAGRO during 
the period 2004-2009 accounted, on average, for only 0.28 per cent of the total collected by the tax authority, despite the fact that agricultu re is the country's main economic activity.
28 
37. Commercial transactions, including importation,  involving agricultural products in their 
natural state are exempt from VAT (Law No. 125/91).  Meat and dairy products are subject to VAT at 
the reduced rate of 5 per cent.  Flowe r-growing products are not exempt from VAT. 
(iv) Key subsectors 
(a) Soya 
38. Soya is Paraguay's main export crop.  Since 2003 the country has been the world's 
fifth-ranking producer, with a maximum production of 6.7 million tonnes in 2007/2008 (Table IV.3).  
At the same time, this has resulted in making the Paraguayan economy heavily dependent on this 
product.  For example, the drought that hit Paragua y in 2009 reduced the harvest to 3.8 million tonnes 
and, among other things, caused a 3.8 per cent fall in GDP.  In 2010 the harvest was good, exceeding 
7 million tonnes, which is estimated to ha ve increased total GDP by about 9 per cent.29 
                                                      
22 Law No. 3.767/09 and Campaña agrícola 2009/2010 .  Viewed at:  http://www.cah.gov.py and 
http://www.mag/gov.py, respectively. 
23 Directorate-General of Statistics, Surv eys and Censuses of Paraguay (2008). 
24 Information provided by the AFD. 
25 Article 61 of Law No. 125/91 establishing the new tax regime. 
26 For details of how the IMAGRO is calculated, see WTO (2005). 
27 Article 37 of Law No. 2.421/04 stipulates that:  "The fees paid by livestock owners when movement 
permits are issued will be treated as advance payments on the Income Tax on Agricultural Activities, except for 
those envisaged in Law No. 808/96 (eradication of foot and mouth disease)". 
28 Data of the Under-Secretariat of  State for Taxation of Paraguay. 
29 Paraguayan Chamber of Cereal and Oils eed Exporters;  IMF estimates of GDP. WT/TPR/S/245/Rev.1 Trade Policy Review 
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  Table IV.3 
Soya production, 2003-2009 
Soya 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 
Area (ha.) 1,870,000 1,970,000 2,200,000 2,420,000 2,463,540 2,570,000 
Production (tonnes) 3,584,000 3,988,000 3,800,000 6,000,000 6,722,297 3,855,000 
Yield (kg./ha.) 1,917 2,024 1,727.2 2,696.3 2,728.7 1,500 
Source : Central Bank of Paraguay, Anexo Estadístico .  Viewed at:  http://www.bcp.gov.py/index.php?option=com_ 
content&task=view&id = 48&Itemid=374. 
39. The area under cultivation increased by 32 per cent during the period 2004-2009.  If the 
effects of the drought in 2009 are disregarded,  soya production almost doubled between 2004 and 
2008 and the yield improved by 40 per cent. 
40. Paraguay exports soya beans, oil and waste.  During the period 2004-2009, soya beans 
accounted, on average, for 64.5 per cent of soya e xports, oil for 14.3 per cent and waste for 21.2 per 
cent.  During the period 2004-2009, bean shipments gr ew at an average annual rate of 6.3 per cent, 
while oil shipments grew by 13.6 per cent and waste shipments by 16.3 per cent. 
41. Up to 2006, the principal destination for so ya meal exports was MERCOSUR.  In recent 
years, Chile and Peru have emerged as major mark ets, together with Italy, Malaysia and other 
countries.  The principal destinations for soya bean s are the European Union, Russia and Argentina.  
The biggest markets for soya oil include the Bolivarian Republic of Venezuela, India, Argentina, 
China and Ecuador. 
(b) Cereals and oilseeds 
42. According to the MAG, the production of maize doubled during the period under review, 
thanks to its use as a rotation crop for soya and the introduction of new seed.  Maize is the fifth most 
important export product and its e xport value increased on average by 47.6 per cent a year between 
2004 and 2009.  The principal market is Brazil, whic h absorbed 70 per cent of shipments.  Apart from 
MERCOSUR, other important markets include Switzerland, Algeria and Morocco. 
43. Wheat is grown in the south-east of the country as a winter crop, alternating with soya.  In 
2009, production volume was 49 per cent higher than in 2004, making wheat Paraguay's seventh most 
important export product.  Export value increased, on average, by 35.8 per cent a year (2004-2009), 
with Brazil as the principal destination. 
44. Another promising cereal is rice, the production of which in 2009 was 79 per cent higher than 
in 2004.  The average annual increase in expor t value was 69.9 per cent (2004-2009) and Brazil 
received almost all the shipments.  Sesame h as consolidated its position as the principal small 
producers' export;  from 2004 to 2009 shipments increased  in value by an average of 27.1 per cent.  
The principal market is Japan, which takes 73 per ce nt of sesame exports;  the other destinations are 
Israel, Greece and Turkey. 
(c) Livestock 
45. In 2009, livestock accounted for 6.3 per cent of GDP.  The most important component is the 
bovine animal herd, which numbered more than  12 million head in 2009.  Since 2004, meat 
production has benefited from the im plementation of traceability systems, which has made it possible 
to recapture the markets that pay the best prices.  The principal importers of Paraguayan beef and veal Paraguay WT/TPR/S/245/Rev.1 
 Page 109 
 
 
  are Chile, Russia, the Bolivarian Republic of Ven ezuela, Brazil and the European Union.  Annual 
export value increased on average by 29.1 per cent between 2004 and 2009. 
(d) Sugarcane 
46. Sugarcane production reached a peak of more than 5 million tonnes in 2008, and the 
cultivated area expanded by 31 per cent during the period under review (2004-2009).  In recent years, 
Paraguay has stepped up its shipments of organically  produced sugar to the United States, Switzerland 
and the European Union.  Total exports of the produ ct grew at an average rate of 12.2 per cent during 
the period 2004-2009.  The United States was the main  recipient, absorbing 63 per cent of Paraguay's 
sugar exports.  Sugarcane is also used for pr oducing fuel alcohol and spirituous beverages. 
(e) Forestry 
47. The forestry sector contributed approximately 1. 7 per cent of GDP in 2009.  The forests are 
exploited mainly to supply the domestic market w ith logs, firewood and charcoal.  Between 2004 and 
2009, wood exports accounted, on average, for 3.8 per cen t of total exports, with an annual growth of 
around 5 per cent.  The chief export product is ch arcoal, followed by sawn wood and plywood.  The 
principal export destinations are the Eur opean Union, the United States and MERCOSUR. 
(3) MANUFACTURING SECTOR  
(i) General characteristics 
48. Paraguay's manufacturing sector is still relativ ely small;  between 2004 and 2009 it grew in 
real terms at an average rate of 1.0 per cent per year, less than the 3.0 per cent for the economy as a 
whole (Table I.2).  Consequently, its share of GDP fell from 14.2 per cent in 2004 to 13 per cent in 2009 (at current prices) and its contribution to em ployment declined from 11.3 per cent of total 
employment in 2004 to 11.0 per cent in 2009. 
49. According to a recent study of industrial competitiveness carried out by the MIC, productivity 
in the Paraguayan manufacturing sector is low, being characterized by a limited ability to add value in 
the manufacturing process and a relatively low level of  incorporation of high technology.  There is 
also little diversification of markets and products, especially where exports of manufactured goods are 
concerned, although in recent years these have displayed a certain dynamism.
30  Moreover, 
Paraguayan industry faces strong competition from th e rest of MERCOSUR, China and other Asian 
countries, as well as from the considerable trade in smuggled goods. 
50. The manufacturing industry depends mainly on the processing of agricultural raw materials.  
In addition to the agrifood sector , whose production is mainly for e xport, other industries include the 
production of consumer goods for the domestic market  such as ham, detergents, insecticides, beer, 
clothing, shoes, furniture and building materi als, for the most part by small enterprises.31  In recent 
years, there has been a rapid expansion in the machinery and equipment industry, particularly in 
motorcycle assembly. 
51. According to Paraguay's National Product Classification (CNPP), during the period 
2004-2008, the most important manufacturing activities in terms of generation of value added were 
                                                      
30 MIC (2007a). 
31 According to data published by ANDE, there are approximately 13,500 production units classified as 
industries in Paraguay;  of these it is estimated that so me 12,825 are micro, small and medium-sized enterprises. WT/TPR/S/245/Rev.1 Trade Policy Review 
Page 110 
 
 
  meat production, textiles and clothing, and the be verages and tobacco industry, which together 
contributed almost half of manufacturing value added (Table IV.4). 
Table IV.4 
Value added (VA) in manufacturing, 1997-2002 and 2004-2008 
(average for the period) 
Activity  CNPPa As a percentage of 
manufacturing sector VA Average annual 
growth rate As a percentage of value of 
production 
1997-2002 2004-2008 1997-2002 2004-2008 1997-2002 2004-2008 
Meat production 06 15.2 19.6 -1.5 6.1 23.3 20.9 
Oil processing 07 2.7 3.9 1.2 3.3 7.4 10.1 
Dairy products 08 1.1 1.3 -1.4 3.1 12.5 13.1 
Milling industry and bakery products 09 4.0 3.2 -1.6 -3.2 18.2 18.2 
Sugar 10 1.3 1.3 1.5 3.4 16.0 13.7 
Other foods 11 2.1 1.8 1.1 -4.4 16.2 11.8 
Beverages and tobacco 12 12.5 13.4 2.4 4.4 26.7 27.0 
Textiles and clothing 13 14.6 16.2 0.3 -4.7 32.5 32.9 
Leather and footwear 14 3.9 4.0 -0.5 -0.8 30.5 36.4 
Wood industries 15 5.9 4.6 -4.6 1.8 31.9 26.6 
Paper and paper products 16 4.5 3.4 0.7 7.4 28.4 25.6 
Petroleum refining 17 6.8 1.4 -4.6 -100.0 48.4 55.7 
Chemical products 18 4.0 3.6 -0.4 6.5 19.9 19.9 
Non-metallic product 
manufacturing 19 7.2 8.1 -4.3 1.9 43.9 46.1 
Base metal production 20 3.6 3.4 -4.0 1.5 36.9 35.3 
Manufacturing of machinery and equipment 21 3.8 4.0 -0.2 17.4 21.6 19.8 
Other manufactured products 22 6.7 6.2 -0.3 1.2 36.1 30.8 
Manufacturing sector 6-22 100.0 100.0 -1.0 1.5 25.6 24.1 
a Paraguay's National Product Classification. 
Source : WTO Secretariat calculations, based on data published by the Central Bank of Paraguay, Estadísticas económicas 
del sector real .  Viewed at:  http://www.bcp.gov.py/index. php?option=com_content&task=view&id= 
148&Itemid=250. 
52. Compared with other Latin American countries, Paraguay's manufacturing value added is 
quite low.32  However, it grew at a real annual rate  of 1.5 per cent during the period 2004-2008, 
reversing the decline of 1.0 per cent recorded during the period 1997-2002.  According to the authorities, this change is attributable, among other factors, to increased investment in the 
manufacturing sector and the opening up of regional markets for various Paraguayan products, such as 
dairy products, pharmaceuticals and insecticides. 
53. In terms of value added, machinery and e quipment manufacturing recorded the highest 
average rate of growth (17.4 per cent), followed by the paper industry (7.4 per cent), chemical 
products (6.5 per cent) and meat production (6.1 per cent), whereas the activities that suffered a 
contraction include the milling in dustry and bakery products, the pr oduction of other foods, textiles 
and clothing, leather and footwear, and particul arly petroleum refining, which ceased in 2005 
(Table IV.4).  As a percentage of production va lue, value added in the manufacturing sector is 
significantly lower than in other economic sectors.  T hus, in 2008, this percen tage (23.6 per cent) was 
                                                      
32 For example, in 2005, Paraguay came 16th out of 17 Latin American countries in terms of its 
per capita manufacturing value added (MIC, 2007a). Paraguay WT/TPR/S/245/Rev.1 
 Page 111 
 
 
  considerably less than half those in the primary sector (70 per cent) and the services sector (59.3 per 
cent).33 
54. During the period 2004-2009, manufacturing indust ry grew the value of its exports at an 
average annual rate of 18.4 per cent, much higher than the rate of 0.8 per cent achieved during the 
period 1997-2002.  However, the export offer is still fairly limited:  the five main products exported 
accounted for 83.6 per cent of manufacturing ex ports in 2009, with oil processing and meat 
production alone accounting for 70.5 per cent (Table AIV.1).  The activities whose exports recorded 
the greatest average annual growth during the peri od 2004-2009 were the milling industry and bakery 
products34, meat production, the chemical products industry, and machinery and equipment 
manufacturing.  Prominent within this category ar e motorcycle exports (HS 87.11), which increased 
by 65.1 per cent during the period 2004-2009.35 
55. Another industrial sector whose exports have flourished in recent years is the pharmaceutical 
industry.  Between 2004 and 2009 ex ports of pharmaceuticals increased on average by 22.1 per cent a 
year, and within this subgroup, medicaments (HS 30. 03) grew at an average annual rate of 54.1 per 
cent.36  Important progress was also made with respect to the marketing of natural pharmaceuticals 
such as processed and semi -processed products of stevia.  Neve rtheless, Paraguay's share of world 
trade in pharmaceutical products is only 0.44 per cent.37 
56. The value of imports of manufactured products in to Paraguay grew at an average annual rate 
of 21.3 per cent between 2004 and 2009.  All imports of manufactured goods increased during this period, but the sectors with the highest average gr owth rates were the paper industry, the milling 
industry, machinery and equipment, and leather and footwear (Table AIV.2).  Prominent within the 
machinery and equipment category were imports of information technology equipment, telephone 
equipment and electrical domestic appliances (HS 84 and 85), which grew at an average rate of 
32.7 per cent a year in 2004-2009 and accounted fo r 31.4 per cent of total imports of goods in 2009.
38  
57. MERCOSUR's share of Paraguay's total manufact uring exports has continued its decline, 
falling from 57.8 per cent in 2004 to 26.0 per cent in 2009 (Table AIV.1).  This can be attributed to the increased diversification of the markets for Paraguayan exports recently observed, particularly 
with respect to meat (Russia and Chile) and soya oil (India and China).  Similarly, the percentage 
contribution of goods of MERCOSUR origin to Para guay's imports of manufactured products fell 
from 57.3 per cent in 2004 to 39.0 per cent in 2009, partly because of an increase in the share of 
products from China and other Asian countries.  Ne vertheless, imports of manufactured goods from 
MERCOSUR continued to pr eponderate in the total imports of most manufacturing subsectors, with 
the exception of the paper industry and machinery and equipment manufacturing, among others (Table AIV.2). 
                                                      
33 WTO Secretariat calculations, based on data published by the Central Bank of Paraguay, Estadísticas 
económicas del sector real .  Viewed at:  http://www.bcp.gov.py/index.php?option=com_content& 
task=view&id=148&Itemid=250 [28 July 2010]. 
34 Within the milling industry, the products most  exported are corn starch, cassava flour and 
wheat flour. 
35 WTO Secretariat calculations made using the COMTRADE Database. 
36 WTO Secretariat calculations made using the COMTRADE Database. 
37 MIC (2009). 
38 WTO Secretariat calculations made using the COMTRADE Database. WT/TPR/S/245/Rev.1 Trade Policy Review 
Page 112 
 
 
  (ii) Trade measures and other policy instruments 
58. Generally speaking, Paraguay applies a low le vel of tariff protection to the manufacturing 
sector.  The average MFN tariff applied to non-agricu ltural products (WTO definition) is 8.3 per cent 
(Table III.2), a level slightly lower than the overa ll average of 8.5 per cent.  Manufactures subject to 
MFN tariffs higher than the overall average are te xtiles and clothing (average of 12.4 per cent), 
leather and rubber products, footwear and travel ar ticles (12.4 per cent), metals (10.8 per cent) and 
wood, paper and furniture (10.3 per cent).  Based on the ISIC (Rev.2) cl assification, the average 
MFN tariff for the manufacturing sector is 8.6 per cent, as compared with the 9.0 per cent reported in 
Paraguay's previous Review. 
59. Paraguay's manufacturing sector is the target  of several government support programmes, 
including the tax concessions for investment gran ted by Law No. 60/90, the free zone regime, the 
maquila  regime, and the National Automotive Regime (R AN), as well as the AFD's investment loans 
channelled through authorized fina ncial intermediation institutions.  Industrial enterprises can also 
avail themselves of the benefits of Decree No. 11.77 1/00, which allows raw materials and inputs to be 
imported with a zero per cent customs tariff, when it can be shown that there is no domestic production of these inputs and raw materials and that  they have been used in production processes 
(the programmes in question are described in Chap ter III(3) and (4)).  Moreover, the manufacturing 
sector benefits from a special tariff for the electricity it consumes (Chapter IV(4)(i)). 
60. Under the PEES (2008-2013), the MIC is char ged with formulating an industrial 
competitiveness policy, promoting expo rt diversification, attracting investment in the industrial sector 
and opening up new export markets.  In this c onnection, the MIC has drawn up a draft industrial 
policy law that envisages a new incentives regime aimed at breaking the traditional dependence on 
raw materials exports and trade triangulation, as well as at achieving inclusive economic growth. 
(4) E
NERGY SECTOR  
61. Paraguay has abundant hydro-electric resources, bein g one of the world's largest generators of 
electricity per capita and a major exporter.  Howe ver, significant transmission and distribution losses 
are impeding the development of productive activities in rural and urban areas and suggest the need 
for greater investment.39  Despite the abundance of hydro-electric resources, electricity accounts for 
only 14 per cent of the end consumption of en ergy in Paraguay, while biomass (firewood and 
charcoal) accounts for 52 per cent and hydrocarbons for 34 per cent (2009).40  Paraguay depends on 
imports to meet the demand for petroleum and petr oleum products.  In 2009, fuel imports represented 
14.5 per cent of total merchandise imports.41  To diversify the energy supply, tax incentives are being 
used to promote biofuel production by taking advantag e of the extensive potential for growing oilseed 
crops;  in addition, local content requirements are being applied. 
62. The Ministry of Public Works and Communications (MOPC), through the Office of the 
Under-Secretary for Mines and Energy (VMME), is  responsible for formulating policy on the 
country's energy resources and supervising their proper use.  The State continues to play a predominant role in the management of the en ergy sector via two State-owned enterprises, the 
National Electricity Authority (ANDE) and Paraguaya n Petroleum (PETROPAR).  Several years ago, 
reforms designed to increase the participation of pr ivate investment in the hydrocarbons subsector 
                                                      
39 IDB (2009). 
40 Information provided by the Office of the Under-Secretary for Mines and Energy of the MOPC. 
41 WTO Secretariat calculations made using the COMTRADE Databa se (SITC, Rev.3). Paraguay WT/TPR/S/245/Rev.1 
 Page 113 
 
 
  were introduced, while in the electricity subsector ANDE continues to maintain exclusive control of 
the public electrical energy supply. 
(i) Electricity 
63. Paraguay has an installed capacity of 8,814 MW and generates 8,650 kWh per capita.  In 
2009, total electricity generation amounted to 54,842 GWh.  As only 18 per cent of the electricity 
generated is consumed dom estically, most is exported under the energy transfer provisions of the 
bilateral agreements signed w ith Brazil and Argentina.  In 2009, Paraguay exported around 
44,800 GWh, equivalent to 82 per cent of the to tal produced.  About 98 per cent of the country's 
population had electricity coverage in 2009, whereas in 2003 the corresponding figure was only 90 per cent.
42 
64. The main legal instrument governing the el ectricity sector is Law No. 966/64, which 
established ANDE as an autonomous entity and granted it exclusive control of the public electricity 
supply.43  ANDE controls the generation, transmission, distribution and marketing of electricity in 
practically all of the national territory.  The comp any operates the Acaray hydro-electric dam with an 
installed capacity of 210 MW and owns the Iguazú da m, in which a hydro-electric power station with 
a capacity of 200 MW is being installed.  ANDE h as signed a results-based management contract with 
the State-owned Enterprises Council, the purpose of  which is to promote improvements in the 
standard of customer service, in the asset situa tion and in the management of the enterprise's 
organization. 
65. Paraguay is co-owner of two large hydro-electri c power stations, Itaipú Binational with Brazil 
and Yacyretá Binational with Argentina.  The Itaipú power station is the largest producer of electricity 
in the world, with an installed capacity of 14,000 MW, and supplies 77 per cent of Paraguay's electricity.  The Yacyretá hydro-electric power station has an installed capacity of 3,200 MW.  ANDE 
owns 50 per cent of the equity capital of the binationa l entities that operate the two power stations.  In 
addition, there are two private entities that distribu te energy in limited markets within Paraguay.  
Compañía de Luz and Fuerza S.A. (CLYFSA) buys energy in bulk from ANDE and distributes it in the Villarrica area (east of Asunción), applying tariffs  fixed by ANDE.  For its part, the Association of 
Mennonite Colonies (in central Chaco) operates its own thermal generators and distributes ANDE 
energy in the associated colonies. 
66. Law No. 966/64 requires ANDE to set the tariffs for the supply of electrical energy to the end 
user in such a way that the resulting income en ables it to cover its operating expenses and obtain a 
reasonable return, so that it can pay its debts and expand its services.
44  The tariffs must ensure that 
the enterprise's annual net income is not less than  8 per cent and not more than 10 per cent of the 
value of its physical and intangible assets plus  the working capital it needs to operate.45  The tariffs 
have to be approved by the Executive through the MOPC, after consultation of the National Economic 
Unit.  According to ANDE's Tariff Schedule No. 2046, in 2009, the average tariffs per kWh applied to 
the different types of user were:  G 354. 01 (residential);  G 339.01 (commercial);  
                                                      
42 The data in this paragraph were provided by ANDE. 
43 Article 64 of Law No. 966 of 12 August 1964. 
44 Article 85 of Law No. 966/64. 
45 Article 88 of Law No. 966/64. 
46 Approved by Decree No. 5.400 of 24 May 2005. WT/TPR/S/245/Rev.1 Trade Policy Review 
Page 114 
 
 
  G 232.11 (industrial);  G 279.19 (general);  and G 215.73 (government).47  These tariffs have not 
changed in eight years and are significantly lower than  those charged in other countries in the region. 
67. There is a "social" electricity tariff for low- income residential users.  Law No. 3.480 of 
27 May 2008 establishes three bands of electricity  consumption for these users as a basis for the 
application of subsidized tariffs, which range from 25  to 75 per cent of the nor mal residential tariff.  
Decree No. 1.702 of 23 March 2009, which implemen ts Law No. 3.480, established the Permanent 
Inter-Departmental Social Tariff Commission, coordina ted by the Ministry of Finance, for the purpose 
of ensuring that these subsidies benefit only the ta rget population.  Moreover, Decree No. 1.380 of 
27 January 2009 provides for the application of preferential electricity supply tariffs for 
power-intensive industries with a view to a ttracting industrial investment to the country. 
68. Within the context of this Review, the ANDE management has pointed out that the tariffs 
applied are only sufficient to cover its opera ting costs and not enough to make the necessary 
investment in infrastructure.48 
69. Under the Treaty of Itaipú between Paraguay an d Brazil (1973), the energy generated by the 
binational hydro-electric power station is divided equally between the parties, each of which is 
entitled to acquire the energy not used by the counterparty.49  As Paraguay only uses a small part of 
the energy in question for its internal consumption, the rest is transferred to Brazil in return for the 
payment of compensation, the amount of which was ag reed in the Treaty itself.  For several years, 
Paraguay has considered that this am ount and other terms of the Treaty of Itaipú needed to be revised.  
On 25 July 2009, the representatives of the two countries signed a declaration which, among other 
things, provided for an increase in the amount of compensation for the transfer of Paraguayan energy 
to Brazil, as well as for the possibility of Paraguay gradually selling its corresponding share of Itaipú Binational energy on the Brazilian market.  The exchange of notes relating to the increase in 
compensation for energy transfer has been approved by the Paraguayan Congress, but approval by the 
Brazilian Parliament is still pending.
50 
70. The Treaty of Yacyretá between Paraguay and Argentina (1973) also provides for the energy 
generated to be shared equally between the two count ries and for the transfer of energy not used by 
one party to the other against the payment of comp ensation.  In August 2004, Paraguay and Argentina 
approved the Yacyretá Termination Plan, which dete rmined what works were  necessary to raise the 
level of the Río Paraná reservoir, as this was still below the optimum level and preventing the 
utilization of the full installed capacity of the hydro- electric power station.  In 2010, the generators 
were still operating below capacity.  Delays in the completion of the works and the low levels of 
power generation have resulted in the Yacyre tá binational entity accumulating debts of around 
US$9,000 million, mostly with the Government of Argentina.  Paraguay considers that the debt of the 
Yacyretá binational entity needs to be renegotiated. 
71. In order to meet the increasing demand for el ectricity and eliminate bottlenecks in the 
electricity infrastructure, one of the main objectives of sectoral policy is to invest heavily in power 
transmission and distribution works and exploit th e large existing potential for generation.  In 
August 2010, within MERCOSUR, approval was obtai ned for the use of funds from the MERCOSUR 
                                                      
47 The tariffs correspond to the 1-50 kWh low-voltage consumption band. 
48 Between 2004 and 2008 the average tariffs applied by ANDE covered only between 67 and 88 per 
cent of the long-term marg inal cost (ANDE, 2008). 
49 Article XIII of the Treaty of Itaipú. 
50 Once ratified by both legislatures, the agreement on th e transfer tariff would tr iple the annual income 
received by Paraguay to US$360 million.  Info rmation provided by the Paraguayan authorities. Paraguay WT/TPR/S/245/Rev.1 
 Page 115 
 
 
  Structural Convergence Fund (FOCEM) to finance a project to build a 500 KV transmission line 
between Itaipú and Villa Hayes costing US$555 million.51 
72. There are two draft laws concerning the electricity sector.  The draft Law on the Regulatory 
Framework for Electricity seeks to promote modernization and competition in the sector through the participation of private investment in the generation,  transport and distribution of electricity based on 
a system of concessions.  This draft also provid es for the establishment of a wholesale electricity 
market and a new regulatory body fo r the sector, independent of ANDE.
52  As for the draft Law on 
Strengthening the Paraguayan Electricity Sector , its objective is to provide ANDE with greater 
resources, partly derived from the royalties generate d by Itaipú Binational, for investing in the 
modernization of the transmission and distribution in frastructure.  In December 2010, both drafts were 
before the Chamber of Deputies. 
(ii) Hydrocarbons 
73. Hydrocarbons account for 34 per cent of end ener gy consumption in Paraguay, and of this 
70 per cent corresponds to diesel consumption in th e transport sector.  As Paraguay does not produce 
oil or natural gas, it depends on imports to meet the demand for hydrocarbons.  For several years, the 
Government has facilitated the participation of private investors in hydrocarbon prospection and 
exploration on the national territo ry through concessions.  The authorities have noted that in recent 
years there have been discoveries of reserves of oil and natural gas.  The importation, distribution, 
transport and marketing of petroleum products are regulated by the MIC. 
74. PETROPAR, a company owned by the Paraguayan State, participates in the importation and 
marketing of hydrocarbons  and hydrocarbon products.53  Its imports come mainly from the Bolivarian 
Republic of Venezuela54 and international suppliers.  Private enterprises can import petroleum-based 
fuels, provided that they are legally authorized to  do so, and market the products through distributing 
companies authorized by the MIC.55  To import certain products subject to minimum quality 
specifications (gasoline, kerosene, diesel, fuel oil, aviation naphtha and aviation kerosene) it is first 
necessary to obtain a licence issued by the MIC.56  Decree No. 1.234 of 31 December 2008 establishes 
minimum volumes for the stocks of di esel and gasoline that importers must maintain physically in the 
country. 
75. Up to September 2005, PETROPAR operated the country's only refinery, located in the city 
of Villa Elisa (Central Department), with a capac ity of 7,500 barrels/day.  PETROPAR has a plant for 
producing absolute alcohol in the city of Troche (Guairá Department) with an average capacity of 
240,000 litres/day and an LPG storage plant in the city of Villa Elisa.  In recent years, the company 
has invested in a pilot plant for biodiesel producti on with a capacity of 2,000 litres/day.  PETROPAR 
obtains its hydrocarbon supplies on the external ma rket through competitive bidding and markets its 
products to distributors who sell them on to the end consumer. 
                                                      
51 For further information visit the site http:// www.mercosur.int/focem/inde x.php?id=documentos. 
52 Política Energética del Paraguay .  Viewed at:  http://proyectoargentino.orG/ar/MERCOSUR/ 
page11.html [7 June 2010]. 
53 Law No. 1.182/85 and Decree No. 12.267/85. 
54 Paraguay and Venezuela have signed the Car acas Energy Cooperation Agreement (ratified by Law 
No. 2.616/05.  Under the agreement Venezuela will supply Paraguay with up to 18,600 barrels/day of crude, 
refined products and LPG or the energy equivalent. 
55 Decrees No. 10.911/00, No. 10.397/07 and No. 1.234/08. 
56 Decree No. 11.833/08, which extended Decree No. 10.911/00 Regulating the Refining, Importation, 
Distribution and Marketing of Petroleum-Based Fuels. WT/TPR/S/245/Rev.1 Trade Policy Review 
Page 116 
 
 
  76. The price at which gasoline is sold to the public  has been set freely since 2000 on the basis of 
Decree No. 10.183/00.  PETROPAR's share of the naphtha market amounts to around 30 per cent.  
Three types of diesel are sold on the Paraguayan market:  Type I, Type II and Type III.  The prices of the first two can be set freely, whereas PETROPAR's invoice price (ex-plant sales price) for Type III 
diesel is fixed by government authorization.  PETROPAR holds 80 per cent of the Type III diesel market.
57 
77. For years, PETROPAR pursued a policy of low prices for diesel, which was sold to the 
distributors at below cost;  this resulted in lo sses and serious financial difficulties for the company 
during the first half of the last decade.58  In April 2005, the Government authorized PETROPAR to 
increase the invoice price for Type III diesel and established a maximum percentage mark-up on Type III diesel sold by distributors and service stations.
59  The mark-up plus PETROPAR's invoice 
price constitutes the maximum price at which Type III diesel can be sold to the public.  However, the 
increase in international oil prices above PETROPAR 's invoice price has worsened the company's 
financial situation in recent years.  Within the cont ext of this Review, the authorities have noted that 
PETROPAR is continuing to experience financial diffi culties due to the impossibility of using the real 
import cost for calculating the invoice price for Type III diesel. 
78. In 2009, PETROPAR signed a results-based ma nagement contract with the State-owned 
Enterprises Council.  At the end of 2010, it was in the process of awarding a contract under a national 
competitive bidding procedure for the development of a Strategic Plan for PETROPAR, which should provide an objective assessment of the competitive e nvironment, the market conditions at local and 
international levels, the company's overall situati on and the viability of its present business model. 
79. The Hydrocarbons Law (No. 799/95) allows public ly owned and private enterprises, domestic 
and foreign, to prospect and e xplore for and exploit hydrocarbons.  Prospection requires a permit from 
the MOPC, while exploration and subse quent exploitation require a concession.
60  The conditions for 
obtaining a concession include the requirement that  foreign companies establish domicile in Paraguay 
and appoint a resident legal representative.  Concessi ons are granted by law, subject to the signing of 
a contract with the State, which must be authorized by the National Congress.61  Under Law 
No. 799/95, disputes relating to concession contracts may be submitted to international arbitration.62   
At the end of 2010, six companies were engaged in  prospecting activities;  three were carrying out 
exploration work;  and one was in the exploitation phase. 
80. Concessionaires engaged in exploiting hydrocarbons  are subject to income tax, royalties and 
taxes paid in proportion to the area exploited.  Mo reover, they must sell to the State a specified 
volume of production, determined each year by the MOPC and the MIC.63  The rest of the output may 
                                                      
57 The chemical composition of Type III diesel is char acterized by a sulphur cont ent of more than 2,500 
and up to 5,000 particles per million (ppm) for imports, and more than 2,000 and up to 4,000 ppm for local marketing, together with a minimum of 45 cetanes in bot h cases.  The chemical specifications for the three types 
of diesel can be found in Resolution No. 764/10. 
58 Paraguay's Strategic Plan for the Energy Sector (2004-2013). 
59 PETROPAR online information.  Viewed at:  http://www.petropar.gov.py/documentos/ 
PricesCombustibles2000-2008.pdf [10 October 2010]. 
60 Article 3 of the 1995 Hydrocarbons Law (Law No. 779/95). 
61 Article 13 of Law No. 779/95. 
62 Article 5 of Law No. 779/95. 
63 Article 32 of Law No. 779/95. Paraguay WT/TPR/S/245/Rev.1 
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  be refined, stored, transported or exported.  Refining and storing of fuel must be authorized by the 
MIC.64 
81. Enterprises that market gasoline must mix the g asoline with absolute ethanol in the national 
territory.65  In addition to having environmental obj ectives, this provision seeks to promote the 
production of traditional crops such as sugarcane. 
82. Law No. 2.748 on the Promotion of Biofuels, enacted on 7 October 2005, establishes tax 
incentives for promoting the production of biofuels provided that Paraguayan raw materials are used 
in their production, except in cases of scarcity pr oclaimed by the MAG or "pronounced economic 
advantage in the prices of the raw material".66  Moreover, the law makes it compulsory to mix diesel 
oil with biodiesel in the proportions laid down by the MIC.67  According to Decree No. 3.667/09, 
which governs the incentives regime, in biofuel produ ction the importation of capital goods qualifies 
for the benefits of Law No. 60/90 (investment incentives) and Law No. 2.421/04, which fixes at 
50 per cent the maximum rate of the selective consum ption tax on fuel.  The authorities have pointed 
out that biodiesel purchases have increased consider ably since the law was in troduced.  In 2009, the 
Government drew up a proposed National Biofuels Plan aimed at incentivizing biodiesel production 
with a view to reducing the dependence on fossil fu els and their impact on the bill for imports, while 
exploiting the national potential for oilseed prod uction.  The proposal is now in the public 
consultation phase. 
83. Law No. 3.254/07, which repealed Law No. 1.948/02, establishes a Regulatory Framework 
for Natural Gas to govern the transport, distribu tion, importation, transit, exportation, storage, 
marketing and consumption of natu ral gas and other fuel gases.  The law establishes the rules on 
granting natural gas transport and distribution con cessions to individuals a nd corporations, whether 
private or wholly or partially State-owned.  The la w applies to both domestic and foreign enterprises.  
The concession contracts must be signed by the Regulatory Authority and approved by government 
decree.  Importing and exporting require a licence and the conditions relating to price and access are 
those negotiated between the suppliers and their cu stomers.  To promote investment, the same law 
stipulates that the importation of inputs for the cons truction of infrastructure will be exempt from the 
taxes and charges payable under the investment legisl ation in force.  The relevant regulatory powers 
are exercised by the Office of the Under-Secr etary for Mines and Energy in the MOPC. 
84. At the end of 2008, within the framework of the URUPABOL initiative, Paraguay, the 
Plurinational State of Bolivia and Uruguay issued  an international invitation to tender on a gas 
interconnection feasibility study.  The project was awarded to a private consortium in June 2010 and 
the Andean Development Corporation w ill provide support with the financing.68 
85. Mining in Paraguay is still in its early stages, but prospecting and exploration activities that 
point to the presence of important deposits of gold,  uranium and titanium are being developed.  The 
                                                      
64 Chapters III and IV of Decree No. 10.911/00. 
65 MIC Resolution No. 425/08 establishes the percentage (24 per cent) of absolute ethanol in mixtures 
with RON 85 and RON 95 unleaded gasolines. 
66 Decree No. 7.412/06, which contains the regulations implementing Law No. 2.748. 
67 Decrees No. 7.412/06 and No. 4.925/07, which contain the regulations implementing Law 
No. 2.748/05, make it mandatory for diesel oil to be mixed with 5 per cent biodiesel, within a period of five years. 
68 Andean Development Corporation online information.  Viewed at:  
http://www.caf.com/view/index.asp?  ms=17&pa geMs=39581&new_id=70396 [11 June 2010]. WT/TPR/S/245/Rev.1 Trade Policy Review 
Page 118 
 
 
  objectives of mining policy include the promotion of  investment in the sector and the adoption of 
modern laws and regulations.69 
(5) SERVICES  
(i) General characteristics 
86. Services is still the largest sector in the Para guayan economy.  In 2009, services (including 
electricity and water) accounted for 51.2 per cent of GDP (at current prices), as compared with 
50.2 per cent in 2004 (Table I.2).  The most importa nt subsector in terms of value added is trade 
(18.0 per cent of GDP in 2009), followed by gene ral government services (10.2 per cent), household 
services (5.8 per cent), transport (4.1 per cent) a nd finance (3.5 per cent).  Between 2004 and 2009, 
the services sector grew in real terms at an averag e annual rate of 4.5 per cent, higher than the 3.1 per 
cent for the economy as a whole.70  In 2009, services generated 53.1 per cent of total employment, as 
compared with 50.7 per cent in 2004. 
87. During the period under review, Paraguay mainta ined a positive services balance, thanks 
largely to the revenue from hydro-electric roya lties and licences and from bus iness services.  In 2009, 
Paraguay exported services valued at US$1,148 m illion, while its services imports amounted to 
US$537 million (Chapter I). 
88. The specific services commitments undertaken by Paraguay within the context of the 
Uruguay Round relate to only two of the 12 gene ral sectors defined in the Services Sectoral 
Classification List71, namely, financial and tourism services.72  Paraguay did not specify any 
horizontal commitments.  In the case of financial services, Paraguay undertook to allow commercial 
presence without restrictions on market access or na tional treatment with respect to insurance, 
reinsurance and retrocession, banking services (accep tance of deposits and loans of all kinds) and 
other auxiliary financial intermediation services.  W ith regard to the movement of natural persons 
related with financial services, Paraguay bound only the presence of senior personnel and specialists. 
89. Where tourism services are concerned, Pa raguay permitted commercial presence without 
restrictions on market access or national treatment fo r hotels, restaurants and tourist guides, but not 
for travel agency services, where a limita tion was imposed on inward tour operators.73  Paraguay did 
not bind the presence of natural persons, except for senior personnel (hotels, restaurants and travel 
agencies) and specialists (tourist guides). 
90. Paraguay did not deposit any list of exemptions  to MFN treatment under Article II of the 
General Agreement on Trade in Services. 
91. Paraguay did not take part in the negotiati ons on basic telecommuni cations and financial 
services that followed the Uruguay Round.  In 200 3, Paraguay submitted an initial services offer 
within the framework of the Doha Development Age nda negotiations, in which it indicated that it was 
                                                      
69 For further information visit the website of the Office of the Under-Secretary for Mines and Energy 
at:  ttp://www.ssme.gov.py/vmme/index.php?option=com_content&view=article&id=1204&Itemid=624. 
70 WTO Secretariat calculations based on Central Bank of Paraguay data (2010c). 
71 WTO document MTN.GNS/W/120 of 10 July 1991. 
72 WTO documents GATS/SC/68 of 15 April 1994 and S/DCS/W/PRY of 24 January 2003. 
73 Inward tourism is that involving trav ellers from abroad coming to Paraguay. Paraguay WT/TPR/S/245/Rev.1 
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  prepared to consider adopting new commitments in the business services category (computer and 
related services) and to extend those concerning travel agencies.74 
92. Paraguay is a signatory to the Montevideo Protocol establishing a programme for the 
liberalization of trade in services between  the MERCOSUR countries by no later than 
December 2015.75  However, Paraguay has not yet ratified th e Protocol, the relevant draft law being 
still before the National Congress. 
93. By Decree No. 4.201/10, the Government of Pa raguay created the National Services Forum to 
facilitate the formulation of policy on the development of services with private sector participation.  It 
is hoped that the Forum will make it possible to id entify those sectors with the greatest potential for 
generating employment, with a view to drafting appropriate regulations for their development. 
(ii) Financial services 
94. In 2009, financial services accounted for 3.5 per cent of GDP, as against 2.2 per cent in 2004, 
and generated 3.9 per cent of total employment, as co mpared with 2.8 per cent in 2004 (Table I.2).  In 
real terms, the sector grew at an average annua l rate of 7.9 per cent between 2004 and 2009, higher 
than the rate of 4.5 per cent recorded by services as a whole. 
95. At the end of 2010, the financial sector co mprised 14 commercial ba nks, two development 
banks (National Developm ent Bank (BNF) and Development Finan ce Agency (AFD), the latter being 
exclusively a second-tier bank), 12 finance compani es, 33 foreign exchange brokers, four public 
bonded warehouses76, three sectoral financial entities77 and 33 insurance companies.78  M o r e o v e r ,  
there were more than 450 cooperative associations, a fund administrator and various savings and loan 
societies. 
(a) Banking services 
Market structure 
96. At the end of June 2010, the assets of the banks operating in Paraguay amounted to 
G 41,193,903 million (US$8,661 million79), equivalent to 51.3 per cent of GDP, while bank deposits 
amounted to G 32,618,327 million (US$6,858 million), representing 40.6 per cent of GDP.80  For their 
part, the finance companies were holding G 2, 226,407 million in assets a nd G 1,658,540 million in 
deposits (US$468 million and 349 million, respectively).81 
                                                      
74 WTO document TN/S/O/PRY of 11 April 2003. 
75 The Protocol entered into force for Argen tina, Brazil and Uruguay on 7 December 2005. 
76 Public bonded warehouses are entities whose purpose is  to store, preserve, manage and control goods 
for the account of third parties and to  issue certificates and warrants. 
77 The Bank Employees Retirement and Pensions Fund, the Livestock Fund and the Agricultural 
Equipment Bank. 
78 Central Bank of Paraguay online information.  Viewed at:  http://www.bcp.gov.py/Super 
Bancos/EntidadesSupervisadas/Feb rero_2010.pdf [10 August 2010]. 
79 Exchange rate on 30 June 2010 (G 4,756= US$1). 
80 The percentages of GDP were calculated on the basis of a GDP estimated in June 2010 at 
G 80,306,500 million. 
81 The information in this paragraph comes from Central Bank of Paraguay (2010). WT/TPR/S/245/Rev.1 Trade Policy Review 
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  97. Banks are classified according to the origin of their capital as follows:  "direct foreign 
subsidiaries" are fully foreign-owned82;  branches with "majority foreign participation" are institutions 
in which the majority of the capital is foreign-owned83;  banks with Paraguayan majority participation 
are called "majority locally-owned"84;  and the BNF is classified as "State-owned".  Foreign capital 
continues to maintain a substantial presence in th e Paraguayan banking sector.  In June 2010, direct 
foreign subsidiaries and banks with majority forei gn participation held 51 per cent of bank assets and 
49.5 per cent of deposits, while the majority locally-owned banks had 42 per cent of assets and 43 per 
cent of deposits.85 
98. In June 2010, the four largest banks (two of  them with majority foreign participation) 
controlled 60 per cent of total bank assets;  these we re Banco Regional S.A. (17.16 per cent of the 
total), Banco Bilbao Vizcaya Argentaria (14.71 per cent), Banco Continental (14.49 per cent) and 
Interbanco S.A.86 (14.05 per cent). 
99. In recent years, Paraguay's macroeconomic stab ility has contributed to an increase in private 
sector deposits and loans.  The trend in deposits, in  both national and foreign currency, has been one 
of steady growth since 2003, although the proportion of short-term deposits remains high, at 70 per 
cent of the total in mid-2010 (82 per cent in 2004).  This explains why the banking system operates 
mainly on the basis of short and medium-term credit.   In June 2010, the banks' total loan portfolio 
amounted to G 25,672,665 million and could be broke n down as follows:  agriculture (24.15 per cent), 
trade (19.92 per cent), financial sector (13.02 per cen t), services (11.56 per cent), livestock (11.23 per 
cent), consumption (10.38 per cent) and industry (9.64 per cent).87 
100. The level of dollarization of the Paraguayan banking system fell sharply during the period 
under review, partly due to the strengthening of th e guaraní and the introduction of a higher reserve 
requirement for deposits in foreign currency.  In mid-2010, local-currency bank deposits accounted 
for 58.36 per cent of the total, compared with 43 per cent in 2004.88  The reversal of dollarization has 
helped to reduce the banking system's e xposure to exchange-rate fluctuations. 
101. Thanks to continuous improvements in the fina ncial regulations and s upervision (see below) 
and a stable macroeconomic environment, the Pa raguayan banking system grew stronger during the 
period under review and the solvency and financia l soundness indicators are appropriate.  Moreover, 
given the system's low exposure to "toxic" assets in the international capital markets, it was not 
significantly affected by the global financial cris is.  The level of capitalization of the banks is 
satisfactory:  at the end of 2009 they had a global capitalization ratio of 16.4 per cent and a solvency 
ratio (Basel pillar 1) of 10.1 per cent (higher than  the regulatory 8 per cent), as well as liquid assets 
equivalent to one third of the total.89  Moreover, in recent years, the delinquency rate of the banks' 
loan portfolio has decreased, to an average of 1.65 per cent in mid-2010. 
                                                      
82 Citibank N.A., Banco do Brasil S.A. and Banco de la Nación Argentina. 
83 Interbanco S.A., Sudameris Ba nk S.A.E.C.A., Banco Bilbao Vi zcaya Argentaria Paraguay S.A., 
Banco Integración S.A. and HSBC Bank Paraguay S.A. 
84 Banco Regional S.A., Banco Amambay S.A., Banco Continental S.A.E.C.A., Visión Banco 
S.A.E.C.A., Banco Itapúa  S.A.E.C.A. and Banco Familiar S.A.E.C.A. 
85 Central Bank of Paraguay (2010). 
86 Interbanco has been called Itaú since July 2010. 
87 Central Bank of Paraguay (2010). 
88 Central Bank of Paraguay (2010). 
89 IMF (2010b). Paraguay WT/TPR/S/245/Rev.1 
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  102. Confidence in the Paraguayan banking sector was also bolstered by the establishment of the 
Deposit Guarantee Fund (FGD) in 2003.90  The FGD is financed by contributions from financial 
institutions (including the subsidiaries of foreign banks) and the Central Bank of Paraguay (BCP) and 
guarantees deposits up to an amount equivalent to 75 minimum wages, i.e. some G 113.06 million (US$19,000), per natural or legal person, in the event of a fina ncial institution being liquidated.
91 
103. During the period under review, the difference between lending and deposit rates in local 
currency progressively diminished.  After re aching a maximum of 40 per cent in 2003, the 
intermediation spread, measured as the difference between the weighted average lending and deposit 
rates in local currency, shrank to 26 per cent in November 200992 and to 23 per cent in August 2010.93   
Nevertheless, the spread is still high and appears to  reflect high bank intermediation costs.  According 
to the authorities, the high degree of liquidity of the market, its lack of depth and the lack of hedging 
instruments are some of the factors responsible for this wide financial spread. 
104. The BNF, which is State-owned, is a firs t-tier development bank that provides banking 
services and conducts banking opera tions, including foreign trade operations, nationwide.  In 
June 2010, the BNF held 7.2 per cent of banking syst em assets and 7.6 per cent of deposits.  Its loan 
portfolio amounted to G 775.475 million and was di stributed as follows:  consumption (46.6 per cent), 
agriculture (26.8 per cent), trade (10.7 per cent), financial sector (7.3 per cent), livestock (4.7 per 
cent), industry (2.3 per cent) and services (1.4 per cent).94  The BNF competes on equal terms with the 
commercial banks, is subject to the same limits and prudential requirements, and grants loans at 
market interest rates. 
105. In 2003, as part of a restructuring progra mme, the Government recapitalized the BNF and 
imposed limits on the loans granted by the bank,  assigning it the role of assisting small and 
medium-sized enterprises.95  Since then, the authorities have continued to strengthen the financial 
position of the BNF, which at the close of 2009 ha d a capital adequacy ratio of 34.5 per cent and a 
delinquency rate of 2.28 per cent, as comp ared with 48.6 per cent in December 2004.96  Although its 
operations are limited by law (Law No. 2.502/04), the BNF plans to expand its credit operations, 
targeting them at small and medium-sized busin esses, while maintaining strict compliance with 
prudential requirements.  In 2006, the AFD be gan operating as a second-tie r public bank channelling 
long-term loans from multilateral international financ ial institutions to local banks and other financial 
entities (particularly in the area of mortgage lendi ng).  In December 2009, the AFD's loan portfolio 
amounted to US$172 million.97 
106. The cooperative associations, which offer servi ces such as micro-loans and small-business 
financing, have progressively expanded their par ticipation in Paraguay's financial system.  In 
June 2010, the assets of the country's 20 largest savings and loan cooperatives amounted to 
G 4,786,440 million and accounted for more than 50 per cent of the cooperative sector's loan 
                                                      
90 Law No. 2.334 of 12 December 2003. 
91 Central Bank of Paraguay online information.  Viewed at:  http://www.bcp.gov.py/index.php?option 
=com_content&task=view&id=299&Itemid=341 [November 2010]. 
92 In November 2009, lending rates in local curre ncy averaged 27 per cent, whereas deposit rates 
averaged 1.3 per cent.  (Central Bank of Paraguay, 2009a). 
93 Information provided by the authorities. 
94 Central Bank of Paraguay (2010). 
95 Law No. 2.100/03 and Law No. 2.502/04.  See also Decree-Law No. 281 of 14 March 1961 
(BNF Charter). 
96 BNF (2009). 
97 IMF (2010c). WT/TPR/S/245/Rev.1 Trade Policy Review 
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  portfolio.  The sector's main source of financing is money deposited by members in the form of 
savings, which accounts for 91 per cent of the total.98  According to an IMF report, at the end of 2008, 
the cooperatives controlled 24.1 per cent of the financ ial system's total assets, 23.9 per cent of loans, 
16.0 per cent of deposits and 43.5 per cent of net wo rth.  The IMF also notes that up to 90 per cent of 
the cooperative sector's bank depos its were concentrated in one of Paraguay's largest banks and 
represented about a fifth of that bank's total deposits.99 
Regulatory framework 
107. The BCP is the body responsible for determ ining policy for the financial sector and 
overseeing its stability.  The Banking Supervisory Authority (SB), under the direction of the BCP, 
supervises the financial entities that make up the se ctor, with the exception of the cooperatives, which 
are overseen by the National Cooperative Institute (INCOOP)100 and which, up to August 2010, were 
not subject to the same provisions as the banks and other financial entities. 
108. The main legal instrument governing the financial sector is the General Law on Banks, 
Finance Companies and other Credit Institutions (L aw No. 861/96).  This lays down rules for the 
establishment, operation and closing down of financial entities, as well as for the protection of the financial system as a whole.  Law No. 861/96 inco rporates the Basel provisions on the supervision of 
banks and minimum capital requirements. 
109. To engage in activities in Paraguay, banks, fi nance companies and other credit institutions 
must obtain the express authorization of the BCP, su bject to a favourable opinion on the part of the 
SB.
101  All financial system entities must be set up as public limited companies, except in the case of 
those established under a special law or  as subsidiaries of foreign banks.102  There are no limits on the 
participation of foreign capital in financial entities or requirements with respect to the nationality of 
the members of the board of directors or the sh areholders.  Law No. 861/96 provides for foreign 
investment in financial entities to receive the same  treatment as domestic capital.  Moreover, under 
the law, public banks must compete on equal te rms with private banks and may not receive 
preferential treatment from the BCP.103 
110. According to Law No. 861/96 (Article 23), owne rs of shares in a bank that allow them to 
exercise shareholder control or decisively influen ce the corporate will of the bank, may not hold more 
than 20 per cent of the shares of another bank, fina nce company or credit institution.  On the other 
hand, a bank may be the principal shareholder in an  insurance company.  There is no law on financial 
conglomerates at consolidated level. 
111. The BCP determines the establishment requireme nts for financial entities (Law No. 861/96, 
Article 13);  these include draft articles of association,  an investment plan, internal control and audit 
systems, a list of shareholders indicating their partic ipation in the registered capital, and information 
concerning the integrity and financial standing of  the members of the board of directors and 
administrative bodies.  The same requirements ap ply, where appropriate, to the establishment of 
subsidiaries of foreign banks.  In these cases, the application must be accompanied by the 
                                                      
98 National Cooperative Institute (INCOOP) online information.  Viewed at:  
http://www.incoop.gov.py/file s/ analis_finan_cacs_jun.p df [November de 2010]. 
99 IMF (2010c). 
100 Law No. 2.157 of 2003. 
101 Articles 5 and 6 of Law No. 861/96. 
102 Article 10 of Law No. 861/96. 
103 Articles 7 and 8 of Law No. 861/96. Paraguay WT/TPR/S/245/Rev.1 
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  corresponding authorizations from the parent comp any and from the supervisory body of the country 
of origin, which must comply with in ternational standards of supervision.104  Subsidiaries of foreign 
banks may transact the same business as other banks, including deposit taking.105  Representative 
offices of banks established abroad may not enter into  banking or financial transactions with natural 
or legal persons resident in Paraguay.106 
112. The minimum paid-up capital to be maintained by any financial entity established in Paraguay 
is stipulated in Law No. 861/96 and is adjusted annually on the basis of the Consumer Price 
Index (CPI).  For the year 2010, it was establis hed as follows:  banks (G 28,396 million), finance 
companies (G 14,199 million), building societi es (G 14,199 million), public bonded warehouses 
(G 2,842 million), foreign exchange brokers  (G 2,872 million) and trust companies 
(G 14,199 million).107  In order to promote the stability and efficiency of the financial system, in 
November 2010 the minimum capital was in creased to G 40,000 million for banks and 
G 20,000 million for financial entities (finance co mpanies and building societies), subject to a 
five-year adjustment period starting on 31 December 2010.108  To establish a subsidiary of a foreign 
bank or financial entity it is necessary to maintain the same amount of minimum paid-up capital as for 
banks and financial entities incorporated in  Paraguay (Law No. 861/96, Article 11). 
113. Law No. 861/96 stipulates that the minimum ratio of  the net worth of a financial entity to the 
total value of its assets and contingency reserves, wei ghted by risk, may not be less than 8 per cent.  
This ratio may be increased to 12 per cent by the BCP (Article 56) and is currently set at 10 per cent.  
All financial entities must maintain a legal reserve equivalent to 100 per cent of their capital, built up 
through annual allocations of at least 20 per cent of net profits and used to cover operating losses.109 
114. In addition to creating the FGD, Law No. 2.334/03 established a procedure for closing down 
companies based on a system of transfer of assets and liabilities intended to ensure rapid and efficient 
closure.  For its part, Law No. 861/96 set up a Risk Regi ster as part of the SB, in order to evaluate risk 
information on clients.  Financial entities subject to the supervision of the SB are obliged to disclose 
to the SB the information needed to keep the Register up to date. 
115. During the period under review, Paraguay con tinued to strengthen the regulatory framework 
and supervision of the fi nancial sector.  Reforms include more stringent information requirements for 
the granting of loans, stricter conditions for classifying assets and a higher level of reserves.  The 
"Classification of Assets and Contingency Reserves" (Resolution No. 1, Record of Acts No. 60) was introduced in 2008, providing for improved risk assessment and the establishment of an 
assets/reserves ratio that provides better coverage fo r credit risks.  Moreover, in the same year, the 
"Basic Guidelines for the Management of Credit Risk and Methodology for the Calculation of Generic Reserves" (Resolution No. 1, Record of Acts No. 74), establishing stricter prudential rules for 
the classification of assets, credit risk and reserves, were issued.
110 
116. Other reforms introduced include the adoption of  new regulations on th e opening of financial 
institutions and strengthen on-site and off-site supervision and buildi ng up the supervisory capacity of 
the SB through the creation of the Financial Stability Department.  In order to improve the degree of 
                                                      
104 Article 15 of Law No. 861/96 and BCP Resolution No. 8, Record of Acts No. 31 of 11 May 2010. 
105 Article 15 of Law No. 861/96. 
106 BCP Resolution No. 3, Record of Acts No. 86 of 12 December 2007. 
107 Circular of the Banking Supervisory Authority, SGS.  No. 00001/2010 of 4 January 2010. 
108 BCP Resolution No. 17, Record of Acts No. 78 of 24 November 2010. 
109 Article 27 of Law No. 861/96. 
110 Central Bank of Paraguay (2008). WT/TPR/S/245/Rev.1 Trade Policy Review 
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  compliance with the Basel basic principles, the Paraguayan authorities are planning to continue 
reforming the regulatory framework, inter alia , in order to expand the exchange of information 
between supervisory bodies, improve credit risk asse ssments, establish limits on exposure to risk and 
improve the banks' internal controls.111  The authorities have pointed out that Paraguay's degree of 
compliance with the Basel I principles was 27 per cent and was expected to rise to 50 per cent by the 
end of 2010, within the framework of the ass essments made by the IMF and the World Bank. 
117. Reforms to the General Regulatory and Supe rvisory Framework for Cooperatives (2004), 
which establishes the minimum capital, liquidity  and provisioning requirements and the loan 
classification that cooperatives must follow, have also been introduced, together with a basic 
framework for supervision.112  Moreover, INCOOP is developi ng a programme for strengthening 
supervision which includes the introduction of an  early warning mechanism, stricter financial 
information reporting obligations for cooperatives,  the establishment of a deposit guarantee fund and 
the creation of a stabilization fund.  Neverthele ss, according to the IMF, the rules governing the 
operation of cooperatives are still less stringent than  those for the banking system;  there is no 
adequate framework to deal with individual and systemic problems in the cooperative sector;  and 
INCOOP's independence in ensuring effective supe rvision is compromised by the fact that the 
cooperatives participate in the selection of its governing officers.113 
(b) Insurance services 
Market structure 
118. In June 2010, the insurance sector was contribut ing 1.19 per cent of GDP.  At the same time, 
direct premiums amounted to G 893,625 million (US$187.9 million at the exchange rate for 
30 June 2010)114, more than twice the figure for 2004 (G 401,273 million).  In real terms, direct 
premiums grew by 25 per cent between 2004 and 2009.115 
119. At the close of financial year 2009 (30 June),  the motor vehicle branch was accounting for 
50.8 per cent of the total value of premiums, follo wed by the fire (8.9 per cent) and short-term 
coverage life (8.3 per cent) branches, while long- term coverage life insurance accounted for only 
0.18 per cent of total premiums. 
120. In June 2009, there were 33 companies provi ding insurance services in Paraguay, of which 
three were majority foreign-owned.  All the in surance companies were authorized to sell asset 
insurance and two of them were also authorized to sel l life insurance.  The larg est insurers in terms of 
direct premiums were Mapfre Paraguay Compañía de Seguros S.A. (24.2 per cent), La Consolidada 
S.A. de Seguros (9.5 per cent) and Aseguradora Yacy retá S.A. de Seguros y Reaseguros (8 per cent).  
In 2009, Mapfre Paraguay took over the company with the third largest market share, Real Paraguaya 
de Seguros S.A. 
                                                      
111 The IMF notes the importance of extending the prudential requirements for banks to cooperatives to 
limit the scope for regulatory arbitrage and of converging, in the medium term, to a uniform system of regulation and supervision (IMF, 2010c). 
112 General Regulatory and Supervisory Framework for Cooperatives.  INCOOP Resolution No. 499/04 
of 29 December 2004. 
113 IMF (2010c). 
114 Central Bank of Paraguay (2010a). 
115 Central Bank of Paraguay (2010b). Paraguay WT/TPR/S/245/Rev.1 
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  121. In June 2009, the total net worth of the 33 insurance companies amounted to 
G 360,228 million (some US$71.7 million).116  The three insurance companies mentioned above were 
also the largest companies in terms of net wort h:  Mapfre Paraguay Comp añía de Seguros S.A. 
(19.5 per cent of total net worth), La Consolidada S.A. de Seguros (7.2 per cent) and Aseguradora 
Yacyretá S.A. de Seguros y Reaseguros (5.3 per cent).117 
122. There are no reinsurance companies establis hed in Paraguay.  However, in mid-2009, 
138 reinsurance companies registered with the supe rvisory authority were operating from abroad.  At 
the same time, 588 insurance agents, 21 brokers  and 12 loss adjusters were also operating. 
Regulatory framework 
123. The principal legal instrument governing insurance activity is Law No. 827/96 of 
12 February 1996, which lays down the general rul es for the sector, the procedures for establishing, 
operating and winding up insurance companies, and the responsibilities and obligations of the 
supervisory authority.  Under this law, insurance is divided into two branches:  life insurance and 
asset insurance. 
124. The Insurance Supervisory Authority (SS) is  responsible for supervising insurance and 
reinsurance entities.  Its main objec tive is to ensure the financial and technical capacity of the market 
operators and the proper administration of the sector 's risks and resources.  Its responsibilities include 
framing sectoral policy, regulating, supervising a nd ensuring compliance with all the corresponding 
legal provisions, and intervening in those compani es in which serious irregularities are detected.  
Although it reports to the BCP's Board of Directors, the SS has functional and administrative autonomy in performing its functions.  Through th e Insurance Advisory Council, established by Law 
No. 827/96, insurance company associations, insuran ce brokers and loss adjusters can inform the SS 
of their views on draft laws, accounting system standards and general issues of concern to the 
insurance sector. 
125. Until the publication, in November 2009, of Law No. 3.899, which regulates risk rating 
agencies, the SS had to rank companies accordi ng to their solvency margins and publish these 
rankings.  This task is now assigned to the rating agencies and the SS is only required to publish the 
main indicators of the financial situation of the insurance companies once every two months.
118  In 
2010, there were three rating agencies operating under the supervision of the SS. 
126. Under Law No. 827/96, for a company to be able to obtain authorization to provide insurance 
services it must satisfy the following conditions:  (i) be legally established in Paraguay;  (ii) be 
exclusively devoted to providing insurance, incl uding furnishing bonds and guaranteeing third-party 
operations;  (iii) meet the minimum capital requirement (see below);  (iv) its organizers and authorities must not be legally disqualified;  (v ) the insurance plans must meet the technical 
requirements laid down in the law itself;  and (vi) where foreign companies are concerned, the balance 
sheets for the previous five years must show solven cy margins at least equal to those required of 
domestic insurance companies.
119 
127. Insurance business can only be conducted, subject to authorization by the SS, by firms set up 
as public limited companies in Paraguay or by subs idiaries of foreign companies, unless international 
                                                      
116 Central Bank of Paraguay (2010a). 
117 Central Bank of Paraguay (2010b). 
118 Article 26 of Law No. 3.899/09. 
119 Article 8 of Law No. 827/96. WT/TPR/S/245/Rev.1 Trade Policy Review 
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  treaties provide otherwise.  Th e term "subsidiaries of foreign companies" is taken to mean 
administrative units of foreign insurance comp anies that possess autonomy of management and 
differentiated assets and are separately regist ered in accordance with Paraguayan insurance 
regulations.  Law No. 827/96 specifies that subs idiaries of foreign companies may engage in 
insurance activities under the same conditions as public limited companies set up in Paraguay.120   
Reinsurance services may be supplied by reinsuran ce companies operating from abroad, provided that 
they are registered with the SS.121  Authorized foreign reinsurers may provide services directly 
without the need to set up a representative office or operate through an agent or  broker, although this 
is the most common arrangement. 
128. The minimum capital required to operate an in surance business in Paraguay is the equivalent 
in guaranís of US$500,000, for both life and asset insurance branches.  The legislation does not 
impose any requirements with respect to the nationality of the members of the board of directors of an 
insurance company. 
129. Law No. 827/96 allows reinsurance companies to  be established in Pa raguay to engage in 
both branches of insurance.  Reinsurers wishing to set up in the domestic market must constitute and 
maintain assets equal to not less than the equiva lent of US$2,500,000 for each branch in which they 
operate and, moreover, re gister with the SS.  In 2010 there we re no reinsurance companies established 
in Paraguay.  With regard to reinsurers operati ng from abroad, to register they must, among other 
things, demonstrate their international standing or produce a valid authorization certificate issued by 
the supervisory body of the country in which they are established.122 
130. Locally established insurance and reinsurance co mpanies must demonstrate and maintain as a 
solvency margin a minimum technical capital (or uncommitted equity capital)  in accordance with the 
amounts that result from the parameters established by the SS, as well as a guarantee fund equivalent 
to at least 30 per cent of the uncommitted equity capital.123 
131. Insurance entities may freely establish the prem iums and commissions for the services they 
offer.  However, for life insurance the prior re gistration of the technical terms and conditions 
applicable is indispensable. 
132. Law No. 827/96 regulates the occupation of insura nce auxiliary.  The SS is responsible for 
supervising this activity and maintains a register of insurance and reinsura nce intermediaries, loss 
adjusters and external auditors.  Only persons ente red in the register can engage in these activities 
legally in Paraguay. 
                                                      
120 Article 6 of Law No. 827/96. 
121 Article 95 of Law No. 827/96. 
122 Moreover, there are percentage limits on particip ation in the cession depending on the minimum 
accounting net worth of the reinsura nce company.  Resolution SS.SG No . 013/10 of 9 February 2010. 
123 Resolution SS.SG No. 239 of 21 September 2007, as amended by Resolution SS.SG No. 020 of 
2 March 2010. Paraguay WT/TPR/S/245/Rev.1 
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  (iii) Telecommunications 
(a) Characteristics of the sector 
133. The communications sector (which includes telecommunications and postal services) grew at 
an average annual rate of 9.7 per cent between 2004 and 2009.124  In 2009, it contributed 4.4 per cent 
to GDP and, together with transport, ge nerated 4.3 per cent of total employment. 
134. The basic telephony market, including local fixed telephony and trunk and international 
services125, remains under the control of the State- owned Paraguayan Communications Company 
(COPACO S.A.), which has a de facto monopoly on these services.  COPACO also offers wireless 
fixed telephony, Internet and mobile telephony services, the latter through the recently acquired 
Hola Paraguay.  In 2002, an attempt to priv atize COPACO was abandoned.  In October 2009, 
COPACO signed a results-based management cont ract with the State-Owned Enterprises Council, 
based on a strategic plan to make the management of the company more efficient.  COPACO is 
subject to the Law on Government Procuremen t (Law No. 2.051/03 and Law No. 3.439/07). 
135. The telephone line density in Para guay is still one of the lowest  in Latin America, although 
between 2004 and 2009 it increased slightly from 5.2 to 6.1 lines per 100 inhabitants.  In 2010, there was a total of 387,318 fixed telephone lines.
126 
136. By contrast, the mobile telephony market is qu ite dynamic and competitive.  At the end of 
2010, there were six mobile telephony services licen sees, of which four were operational, namely, 
Telecel, Núcleo, Hola Paraguay (owned by CO PACO since August 2010) and AMX Paraguay.  
During the period under review, the number of  mobile telephone subscriptions increased 
exponentially to reach 5.6 million in 2010 (1.7 milli on in 2004).  As a result, in 2010, mobile 
telephony penetration in Paraguay st ood at 87.1 lines per 100 inhabitants.127  The mobile telephony 
operators provide services in rural and urban areas, th ereby helping to absorb the unsatisfied demand 
for fixed telephony, and have made  progress with the incorporation of third-generation technologies 
to enable mobile Internet use.  Out of the tota l number of telephone lines in the country, 94 per cent 
were mobile and the rest fixed. 
137. With respect to the Internet, penetration is still limited owing to the high cost of the service 
and the low incomes of the population in general.  However, in March 2009 this market received a 
sharp boost with the publication of a new regulation th at liberalized international access to the Internet 
(see (b) below).  Since then, Internet service providers can have direct fibre-optic international access.  
This measure has encouraged the entry of new Inte rnet service providers and has benefited users in 
terms of prices and the speed of the service.  For example, in 2010, the average price for the 
wholesale distributor fell by 50 per cent (to US$350 a month), while the average cost for the user fell 
from US$54 to US$19 a month.128  Nevertheless, these prices are still the highest in the MERCOSUR 
zone.  In 2010, there were 156,857 Internet subscr iptions, including 140,900 broadband.  The Internet 
                                                      
124 WTO Secretariat calculations based on BCP data (2010), Informe Económico , May. 
125 Fixed telephony is regarded as a basic service that can be provided using different kinds of 
technology, including  VoIP technology. 
126 Information provided by the National Telecommunications Commission (CONATEL).  See also 
ITU (2009). 
127 Information provided by CONATEL. 
128 CONATEL online information.  Viewed at:  http://www.conatel.gov.py [8 September 2010]. WT/TPR/S/245/Rev.1 Trade Policy Review 
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  penetration rate was 2.43 subscribers per 100 inhabitants129, which is relatively low compared with the 
rates for the other countries in the region. 
138. There is a COPACO project to establish a new cable link between Paraguay and Bolivia, with 
a view to crossing the rest of the continent as fa r as the Pacific Ocean, where a connection would be 
made by means of a submarine cable to the interna tional fibre optic network.   This connection could 
do much to help reduce broadband prices and increase Internet penetration.  Work on the project is 
expected to begin in 2011. 
(b) Regulatory framework 
139. The MOPC is the ministry responsible  for framing policy for the Paraguayan 
telecommunications sector.  In August 2010, the Pr esidential Commission for the Incorporation of 
Information and Communication Technologies into the National Education System was set up to promote policies for closing the digital gap.  Likewi se, the Civil Section of the Office of the President 
of the Republic is drawing up an Information a nd Communication Technologies Master Plan, which it 
expects to complete in 2011. 
140. The National Telecommunications Commissi on (CONATEL), an autonomous entity linked 
with the Executive thro ugh the MOPC, is the sector's regulatory body.  It is responsible, inter alia , for 
administering the electromagnetic frequency spect rum, issuing regulations, approving technical 
standards, regulating and overseeing the granting of concessions, licences and authorizations, 
proposing tariff regimes to the Executive, est ablishing the terms and conditions governing 
interconnection contracts, approving telecommunicati ons equipment, supervising the introduction of 
new technologies and preventing anti-competitive and discriminatory behaviour in the sector.
130  
CONATEL's Governing Board consists of five members appointed by the Executive and for its 
resolutions to be adopted at least three members must vote in favour.  At the end of 2010, CONATEL 
was in process of drawing up a National Telecomm unications Plan, with August 2011 as the target 
date for its completion. 
141. The legal framework for the telecommunications sector comprises the provisions of the 
National Constitution of 1992, the Telecommunica tions Law (Law No. 642/95), its Implementing 
Regulations, approved by Decree No. 14.135/96 a nd its amendments, and th e various Regulations 
generated by CONATEL.  Article 30 of the Cons titution guarantees free access to the electromagnetic 
spectrum, without any restrictions other than those imposed by the international regulations and technical standards.  Law No. 642/95 establishes fre e access to all telecommunications markets, with 
the exception of those reserved for the State. 
142. Law No. 642/95 lays down general rules for, inter alia , the various ways of providing 
telecommunications services, the tariff regime and interconnection.  The same law divides 
telecommunications services into three categories:  "basic services", i.e. public services (local fixed 
telephony, trunk and international);  "broadcasting services" (including, radio broadcasting, television 
and cable communications);  and "other services", wh ich include mobile teleph ony, Internet and other 
value-added services.
131 
                                                      
129 Information provided by CONATEL. 
130 Article 16 of Law No. 642/95. 
131 Under Law No. 642/95, the following are value-added services:  cellular mobile telephony, 
facsimile, videotex, teletext, remote control, telealarm, data storage and retransmission, and teleprocessing. Paraguay WT/TPR/S/245/Rev.1 
 Page 129 
 
 
  143. To provide telecommunications services it is necessary to possess a concession, a licence or 
an authorization, depending on the service concer ned.  Concessions are granted for basic (public) 
services.  Broadcasting and value-added services (mob ile telephony and Internet) require a licence 
and other services (for example, amateur radio and local and emergency radio) an authorization.  Some telecommunications services are reserved for the State (meteorological broadcasting services, 
air, river, maritime and aerospace navigation, and emergency and safety);  any other service can be 
reserved for the State for reasons of public interest.
132 
144. Concessions are granted on the basis of a competitive bidding procedure or at the request of 
an applicant;  they are executed in the form of a contract with a maximum term of 20 years, which 
must be approved by the National Congress.  At the end of 2010, COPACO held the only concession 
granted for the supply of basic services.  Licences and authorizations are granted by CONATEL.  In 
general, licences for broadcasting services are issued for a once-renewable period of ten years;  
licences and authorizations for other services, in cluding mobile telephony and Internet access, are 
issued for a period of five years renewabl e at the request of the interested party.133  A t  t h e  e n d  o f  
2010, about 60 licences for Internet services had been issued and of these approximately 50 per cent 
were being exploited.  Concessions, licences and authorizations may not be assigned without the 
authorization of CONATEL.  Decree No. 14.135 (Article 6) requires telecommunications services 
operators to extend the service to every concession or licence area, so as to promote the integration of 
localities furthest from urban centres. 
145. The requirements for obtaining concessions, licences and authorizations are the same for 
domestic and foreign enterprises.  However, to provide and operate a telecommunications service, 
foreign enterprises have to establish domicile in Pa raguay or appoint a legal representative in the 
country.134  Only natural persons of Paraguayan nati onality and legal persons incorporated and 
domiciled in Paraguay may hold a radi o or television broadcasting licence.135 
146. Under Law No. 642/95, interconnection between  public services networks is mandatory.  
Interconnection contracts, which must be in writing,  are negotiated between the interested parties and 
are subject to the principles of neut rality, non-discrimin ation and equal access.136  These contracts 
must specify, inter alia , the tariffs and the economic conditions  of interconnection, taking into 
account the cost of the service and a "reasonable profit margin".137  If after a period of 60 days the 
parties have not been able to reach an agreemen t, CONATEL, at the request of one or both of the 
parties, will decide the terms and conditions of interconnection, including the respective charges. 
147. The Interconnection Regulation (Resolution No. 871/2002) stipulates that interconnection 
charges must initially be determined by the pr oviders using the "long-term incremental costs" 
method.138  However, insofar as the providers do not establish interconnection charges based on this 
methodology, the Regulation authorizes CONATEL to  place ceilings on the charges and update them 
regularly.  CONATEL Resolution No. 379/08 set the ceiling on the charge for interconnection to the 
cellular mobile telephony and PCS network (mobile network) at G 5 per second, and the ceiling on 
                                                      
132 Article 60 of Law No. 642/95. 
133 Article 73 of Law No. 642/95 and Article 1 of Law No. 2.478 of 2004. 
134 Article 64 of Decree No. 14.135. 
135 Article 33 of the Sound Broadcasting Regulati on and Article 32 of the VHF and UHF Television 
Broadcasting Regulation. 
136 Articles 77 and 78 of Law No. 642/95. 
137 Articles 139-141 of Decree No. 14.135. 
138 Incremental cost is defined as the average of the cost associated with changes in production, 
calculated at the point at which all the production factors have variable costs. WT/TPR/S/245/Rev.1 Trade Policy Review 
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  the charge for interconnection to the basic service ne twork at national level (fixed network) at G 3 per 
second.139  In addition, by Resolution No. 1.299 of December 2009, CONATEL established a ceiling 
on the interconnection charge for the exchange of communications via SMS at G 40 per unit short text 
message.  At the end of 2010, the above-men tioned charge ceilings were still in force. 
148. Law No. 642/95 (Article 92) and the Genera l Tariff Regulation (Decree No. 16.761/02) 
authorize CONATEL to establish the structure and ta riff levels of telecommunications services.  
There are two tariff regimes:  "maximum prices" and "control of reasonableness".  Public services 
(local telephony and trunk and inte rnational calls) are subject to the "maximum prices" regime, in 
which CONATEL sets ceilings for the different types of services;  these prices are determined in the 
concession contract and reviewed every five years.140  In October 2010, the price for fixed telephony 
services, both local and trunk ("flat rate"), supp lied by COPACO was G 120 per minute + 10 per cent 
VAT. 
149. For other telecommunications services, in cluding mobile telephony, the "control of 
reasonableness" system is used;  in this case ta riffs are fixed freely, as a function of supply and 
demand, unless CONATEL can show that there is no competition in the telecommunications services 
markets or that competition is being adversely a ffected by anti-competitive practices, in which case it 
may take remedial action.  The authorities have pointed out that CONATEL sometimes intervenes in 
a precautionary way, for example, to verify that when services are being promoted the public is not 
receiving erroneous information.  The General Ta riff Regulation is in process of being reviewed, 
which could give rise to an increase in fixed tele phony tariffs.  Moreover, the authorities are in the 
course of drawing up a Regulatory Accounting Regula tion (separate accounting), which prevents the 
use of cross subsidies;  it is planned to complete both projects during the first half of 2011 at the latest. 
150. One of the principal regulatory changes during the period under review was the adoption of 
the Internet Access and Data Transmissi on Services Regulation (Resolution No. 190 of 
11 March 2009), which liberalized international Internet access.  Previously, only COPACO had 
direct access to the international Internet, so th at providers of this service had to purchase their 
international capacity through the State-owned enterpri se.  Under the new regulations, Internet service 
providers, in particular those which use mobile tele phony, can have their own fibre-optic international 
access and are free to contract for links or capacity with any domestic or international provider and 
choose the technology to use for offering their services.   This measure has had benefits for users, in 
terms of the price, quality and speed of the servi ces, and has also encouraged telecommunications 
companies to invest in infrastructure.  Although there are no other fixed telephony operators in Paraguay, the local mobile telephony providers w ill be able to establish new fibre-optic links. 
151. In January 2008, the Regulation on the Protec tion of Competition and the Procedure for the 
Settlement of Disputes within the Context of th e Regulation of Telecommunications (Resolution 
No. 133/2008) was adopted.  The Regulation prohibits  the abuse of a dominant position and collusive 
behaviour that prevents, restricts, distorts or limits effective competition.  Thus, the Regulation 
contains a non-exhaustive list of the forms of anti- competitive behaviour and defines general criteria 
to enable CONATEL to assess, on its own initiative or  at the complaint of a party, whether an 
economic concentration operation is restricting fr ee competition or creating or reinforcing a dominant 
position.  The authorities have pointed out that the Regulation has not yet been applied. 
                                                      
139 Ceilings approved by Resolution No. 379/08. 
140 Decree No. 16.761 of March 2002 and Resolution No. 431 of 5 April 2002, which fixed these 
ceilings.  The latter was rescinded by Resolution No. 1150 of 5 November 2009, which made room for the 
application for reconsideration by COPACO. Paraguay WT/TPR/S/245/Rev.1 
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  152. Paraguayan legislation does not require netw ork unbundling, but service providers share 
infrastructure under many schemes.  Number portability  regulations, to be implemented by the end of 
2011, are being drawn up with the s upport of a firm of consultants. 
153. The Universal Services Fund (FSU), set up under Law No. 642/95, is administered by 
CONATEL.  The FSU promotes the expansion of pub lic telecommunications services in rural areas 
and zones of public and social interest (ZIPS) by  granting subsidies to pr oviders and promoting access 
to public telecommunications services at reasonable prices.141  Universal services are provided under a 
licensing regime, with licences being awarded on th e basis of competitive bidding for a renewable 
period of five years.  The FSU is resourced by 20 per cent of the receipts from the commercial operating fees paid by the operating companies.
142  During the period 2004-2010, the FSU disbursed 
funds amounting to around G 19,802 million (s ome US$4 million).  Although the FSU does not 
establish priorities with respect to type of technology,  most of its resources have been used to expand 
access to mobile telephony. 
154. The Paraguay 2013 Conectado  programme has been in process of implementation since 
2009.  Designed to be implemented in four phases,  the programme aims to provide telephone service 
and Internet access in all the country's localiti es by August 2013.  By Oc tober 2010, disbursements 
amounted to G 19,104 million (some US$3.9 m illion), and G 30,000 million (US$6.1 million) has 
been budgeted for 2011.  The programme's funds come from the FSU. 
(iv) Transport 
155. During the period under review, the transport sect or as a whole grew in real terms at an 
average annual rate of 2.9 per cent and accounted fo r 4.1 per cent of GDP in 2009, as compared with 
4.0 per cent in 2004 (Table I.2). 
156. Due to its situation as a landlocked country, th e long average distance to  the nearest seaports 
and the shortcomings of its transport infrastructure,  Paraguay has one of the highest transport costs in 
Latin America, which adversely affects the compe titiveness of its exports, principally those of the 
agricultural sector, and makes its imports more expens ive.  A study carried out in 2006 found that, in 
Paraguay, the extra costs for transport amounted to some US$327 million, i.e. around 4 per cent of 
GDP.143  Moreover, Paraguayan exports have to be transported an average distance of 1,325 km. from 
Asunción to the nearest seaport.  Weaknesses in the regulatory and institutio nal framework and lack 
of coordination of the policies for the various mod es of transport within an integrated policy have 
been identified as other factors with an adverse effect on the sector's performance.144  Paraguay does 
not have a ministry dedicated exclusively to transport;  instead there are several ministries and decentralized bodies involved in regulating and framing policy for the different modes. 
157. The authorities recognize the need to solv e these problems in order to improve the 
competitiveness of the economy and promote its integrati on into the international markets.  One of the 
basic objectives of the PEES (2008-2013) is to stimul ate development of the transport infrastructure 
through long-term investment, with the participation of the private sector.  The MOPC is planning to 
increase investment in infrastructure to at least 5 per cent of GDP and improve  the quality of existing 
infrastructure.  Moreover, with the support of the IDB, a Transport Master Plan with two components, 
namely, infrastructure and transport services, is bei ng developed;  the plan will make it possible to 
                                                      
141 Universal Services Regulation (Resolution No. 034/02). 
142 Resolution No. 1.499 of 1 November 2006. 
143 USAID (2006). 
144 World Bank (undated). WT/TPR/S/245/Rev.1 Trade Policy Review 
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  define the different modes of transport, draw up medium and long-term infrastructure projects and 
establish a planning system.  On the institutiona l front, the Office of the Under-Secretary for 
Transport, part of the MOPC, has recently been r eactivated to coordinate and draft policies for the 
transport sector in general (Decree No. 3.810/10). 
158. Paraguay also participates in various regional forums and bodies that promote the integration 
and modernization of regional transport and comm unications infrastructure, such as MERCOSUR's 
Structural Convergence Fund (FOCEM) and the Initiative for the Integration of South American 
Regional Infrastructure (IIRSA), through which it  obtains technical and financial assistance for 
projects of this kind. 
(a) River transport 
General characteristics 
159. River transport plays an important role in th e Paraguayan economy, since more than 70 per 
cent by volume of the country's foreign trade is tran sported by river, mainly along the rivers Paraguay 
and Paraná.145  Between 2004 and 2008, the volume of ri ver traffic increased from 5.9 million tonnes 
to 8 million tonnes, of which more than half w as bulk cargo (soya and other agricultural products).146  
Paraguay has some 3,100 km. of navigable waterway s, although not all are available year round. 
160. There are more than 80 river ports and wharves, both public and private, of which 
approximately half are authorized for foreign trad e operations.  The main State-owned port terminals 
include:  Asunción, PETROPAR in Villa Elisa, AC EPAR in Villa Hayes, Villeta and Pilar.  The 
private ports number more than 35, some of th e main ones being Gical-San Antonio, Fénix, 
Caacupemi, Terport and Uniport. 
161. Being landlocked, Paraguay uses warehouses and free ports in several regional seaports to 
load and unload its exports and imports, which are tr ansported by river from a nd to Paraguayan ports.  
These bonded warehouses are located in Argentina (B uenos Aires and Rosario), Brazil (Rio Grande 
do Sul, Paranagua and Santos), Chile (Antofag asta and Iquique) and Uruguay (Montevideo and 
Nueva Palmira). 
162. Paraguay has the largest river fleet in the region.  In 2010, out of a total of about 
1,900 registered vessels, 1,201 were authorized for international river transport;  of these, 66 per cent 
were bulk-carrier barges and 12 per cent barges of other kinds.147 
163. According to the National Shipping and Ports Authority (ANNP), the cost of transporting 
freight by river to the points of access to inte rnational markets is US$14 per tonne, i.e. between 
two and four times less than for land transport.148  Given the large increase in the exportable offer of 
cereals, meat and their by-products expected in the n ear future, together with the high cost of land 
transport, transport by river is regarded as the be st option for maintaining trade flows, by providing 
access to the ports of transhipment for large-volume and low value-added goods. 
                                                      
145 Information provided by the National Shipping and Ports Authority (ANNP). 
146 Information provided by the Merchant Marine Directorate (DMM). 
147 Information provided by the DMM. 
148 According to the ANNP's data, rail transport cost s US$30 per tonne, while road transport costs 
US$40-50 per tonne. Paraguay WT/TPR/S/245/Rev.1 
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  Regulatory framework 
164. The Merchant Marine Directorate (DMM), part of the MOPC, is responsible for supervising 
and coordinating river and maritime  transport activities and the associated industries.  Its functions 
include proposing policies and legislation for promot ing the development of the sector, examining and 
processing authorizations for the construction and e quipment of private port terminals, examining and 
processing applications for the registration of merchant vessels, collecting fees for export and import cargo certificates, reviewing cabotage applications on behalf of foreign vessels, and keeping a register 
of national and foreign vessels opera ting in Paraguay, together with a register of merchant marine 
professionals.  The ANNP operates the public river ports.  The Naval Prefecture-General, part of the Navy, is responsible for the safety of navigation a nd port facilities and the river police service.  There 
is no regulatory body for the port subsector. 
165. The river transport sector is governed by laws , decrees and international conventions.  The 
main laws include Law No. 476/57 establishing th e River and Maritime Navigation Code (CNFM)
149;  
Law No. 928/27 establishing the Harbour Regulations150;  Law No. 295/71 on reserved cargo151;  Law 
No. 419/94 governing the constructi on and operation of private ports;  Law No. 160/93 establishing 
rates and/or authorization for shipping-related services;  and Law No. 269/93 ratifying the River 
Transport Agreement on the Paraguay-Paraná Waterw ay and its additional protocols.  Since the 
previous Review, Decree No. 5.399/2005 has been  enacted;  this lays down the requirements and 
procedures for the registration and flag ging of vessels and floating structures. 
166. The CNFM lays down the rules and regulations for the merchant marine and classifies vessels 
into Paraguayan and foreign.  For a vessel to be c onsidered Paraguayan, the ma ster or owners and at 
least two thirds of the crew must be Paraguaya n nationals (this is not mandatory for seamen).152   
Professionals with foreign qualifications workin g in the merchant marine must have their 
qualifications revalidated in accordance with the r eciprocity criteria laid down in international 
conventions and in Law No. 1.158/85. 
167. To apply for and obtain Paraguayan registration,  ship-owners or builders must be domiciled 
or permanently represented in Paraguay.  Persons wishing to register in Paraguay vessels imported 
from abroad, whether new or used (with up to 12 year s of useful life) must submit an application to 
the DMM and produce the documents listed in Decree No. 5.399/2005, including certificates of 
origin, endorsed by a Paraguayan consulate, which show that the vessel complies with international 
safety standards.  The leasing of foreign vessels by Paraguayan ship-owners may be authorized by 
executive decree if there is insufficien t national capacity.  It is also possible to register vessels leased 
under the capital goods leasing system and eligib le for the tax incentives provided for in Law 
No. 60/90 (Chapter III (4)(iii)). 
168. National cabotage is reserved for Paraguayan fl ag vessels.  To provide services in waters 
under Paraguayan jurisdiction, foreign vessels must obtain a special government permit, be registered 
with and authorized by the DMM and take on a pi lot of Paraguayan nationality when entering or 
leaving port. 
169. Law No. 295/71 and Decree No. 27.371 reserve all maritime and river transport of imports 
and exports for Paraguayan flag vessels.  If the cargo is coming from or bound for a LAIA member 
                                                      
149 Implemented by Decree No. 6.984/59 and amended by Law No. 205/59 and Law No. 1.448/99. 
150 Extended by Law No. 1.158/85. 
151 Implemented by Decree No. 27.371/81. 
152 Article 10 of Law No. 476/57, Decree No. 2.785/59 and Decree No. 5.399/05. WT/TPR/S/245/Rev.1 Trade Policy Review 
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  country, provided that the capacity exists, the requi rement for maritime transport is up to 50 per cent 
and for river transport at least 50 per cent.  The Paraguay-Paraná River Waterway Agreement 
abolished the flag reservation in river transpor t for Paraguayan vessels in favour of a regional 
reservation for cargo transported by vessels of the si gnatory countries (see below), but did not remove 
the restrictions on cargo transported by sea.  Ho wever, since Paraguay does not operate in the 
maritime transport sector, these restrictions are not being applied in practice.  On the other hand, the reservations concerning river transport remain in fo rce for vessels flying the flags of countries that are 
not parties to the Waterway Agreement. 
170. The cargo restriction provisions are enforced by means of import and export certificates 
issued by the DMM.  According to Law No. 160/93, the charge for issuing an import or export certificate is half the minimum daily wage.
153  Export and import certificat es are issued electronically 
through the Single Window for Exports and the Single Window for Imports, respectively. 
171. The Paraguay-Paraná River Waterway Agreement (Puerto de Cáceres - Puerto de Nueva 
Palmira) and its six additional pr otocols were incorporated into  Paraguayan legislation by Law 
No. 269/93.  The Agreement was concluded between  the Plurinational State of Bolivia, Brazil, 
Paraguay and Uruguay for the purpose of facilitating navigation and commercial river transport along 
the Paraguay-Paraná Waterway, there by reducing the cost of transport between the parties.  There are 
provisions applicable to navigation, trade and the transport of goods and passengers involving use of 
the Waterway and a regional cargo restriction. 
172. Paraguay has several bilateral river transpor t agreements with Argentina, namely, the 
Navigation Treaty (1967), the Convention on Cross- Border River Transport of Passengers, Vehicles 
and Cargo (1972) and the Convention for the Avoidan ce of Double Taxation in relation to Air, River 
and Land Transport (1996).  Apart from the Wate rway Agreement, Paraguay has not signed any 
bilateral agreements on river transport with Br azil or Uruguay.  Within MERCOSUR, Paraguay is 
participating in the negotiation of a maritime transp ort agreement.  At international level, Paraguay 
has signed the International Maritime Orga nization Convention, the SOLAS Convention ( Safety of 
Life at Sea ) and its Protocol, as well as the Inter-Ameri can Convention on Facilitation of International 
Waterborne Transportation;  all th ese instruments have been incorporat ed into domestic legislation. 
Ports and auxiliary services 
173. The ANNP is a State-owned enterprise linked to the Executive through the MOPC.  The 
ANNP acts as a port authority, its basic functions be ing to manage and operate all the country's public 
ports, as well as bonded warehouses and free ports abroad, and to keep the rivers navigable.154  Thus, 
the ANNP's responsibilities include planning, design ing, expanding and building ports;  running the 
port services in its charge and collecting the corres ponding tariffs;  and monitoring the navigability of 
the country's rivers and carrying out dredging and buoying work. 
174. The ANNP manages 13 port terminals and more than 30 smaller ports.  It competes with the 
private ports and its strategic objectives therefore include promoting the development, efficiency and 
competitiveness of the ports it manages, modernizi ng the port infrastructure, and implementing new 
practices and commercial alliances to expand its ser vices and improve its le vel of operations and 
revenue.  There is no private participation in the operations of the State-owned ports, but the ANNP 
has contracts, agreements and strategic partnerships  with the private sector.  In 2004-2007, the ANNP 
                                                      
153 At the end of 2010, the minimum monthly wage in Paraguay was G 1,507,484 (around US$300).  
One minimum daily wage is equal to one minimum monthly wage divided by 30. 
154 Law No. 1.066/65 set up the ANNP and established its responsibilities. Paraguay WT/TPR/S/245/Rev.1 
 Page 135 
 
 
  invested around G 21,890 million in frontie r crossing and river port infrastructure.155  Moreover, it is 
preparing a draft law that will improve  its ability to face the competition. 
175. Decree No. 12.297 of 9 June 2008 amended the ra tes charged by the ANNP for the services 
provided in public ports.  The maximum charge fo r vessels using a wharf in the ports of Asunción, 
Villeta, Concepción and Pilar is G 3,000 (per metre of  the vessel's length and per day or fraction of a 
day).  The rates for slinging and handling services ar e:  G 4,000 and G 2,800 (per tonne or cubic 
metre), respectively, for imports and G 3,000 and G 1,500 for exports.  The rates for storing imported 
merchandise are set as a percentage of the taxable customs value and vary with the type of product 
and the length of time it remains within the port area.   The storage charges for exports are 65 per cent 
of those for general imports.  Enterprises operating under the maquila  regime and the laws that benefit 
capital investment pay 50 per cent of the charge fo r imports.  Under the free zone regime, the ANNP's 
charges for services provided in relation to g oods bound for or coming from free zones may not 
exceed the rates charged in the Port of Asunción.156  At the end of 2010, the ANNP was working on a 
project to update and modernize its ch arges to make them more competitive. 
176. To make good the shortcomings of the por t infrastructure, Paraguay promoted the 
development of private ports by enacting Law No. 419/94, which established a regime for the 
construction and operation of private ports, and Decree No. 14.402/2001, which gave the DMM 
responsibility for its implementation.  Authorizations  to build and operate port terminals are granted 
only to companies registered in Paraguay.  Proj ects for building and operating private ports are 
eligible for the benefits available under Law No . 117/92, which guarantees the same rights and 
obligations for both Paraguayan and foreign investor s.  These measures have resulted in the building 
of about 20 private port terminals handli ng some 85 per cent of container traffic.157  Under Law 
No. 419/94 the private ports are free to  fix the charges for their services. 
(b) Air transport 
Characteristics of the sector 
177. Only a very small proportion of Paraguay's foreig n trade is transported by air.  It has been 
calculated that barely 0.2 per cent of export volume is carried by aircraft, although this is equivalent to 
around 10 per cent in terms of value.158 
178. Paraguay's airport infrastructure consists of four  international airports (Silvio Pettirossi in 
Asunción, Guaraní in Ciudad del Este, Augusto Fust er in Pedro Juan Caballero and Dr Luis María 
Magaña in Mariscal Estigarribia) and seven domes tic airports.  Passenger traffic (domestic and 
international) at Silvio Pettirossi and Guaraní air ports increased by an annual average of 9 per cent 
between 2004 and 2009, reaching 629,816 passengers in 2009.  By contrast, freight traffic (exports 
and imports) at the two airports declined by an an nual average of 3.2 per cent during the same period, 
falling to 13,647 tonnes in 2009.159 
                                                      
155 Information provided by the ANNP. 
156 Decree No. 21.309/03. 
157 Wilmsmeir G. (2009). 
158 World Bank (undated). 
159 National Civil Aviation Directorate (DINAC), Datos Estadísticos de Movimiento .  Viewed at:  
http://www.dinac.gov.py/downloads/ histórico_estadisticas_aisp1.pdf. WT/TPR/S/245/Rev.1 Trade Policy Review 
Page 136 
 
 
  179. At the end of 2010, six airline companies we re operating scheduled international passenger 
flights to Paraguay, mainly servicing Asunción160;  five of these companies were foreign-owned and 
in one of them (TAM Mercosur) the Government of Paraguay had a minority stake.  Within the 
context of this Review, the authorities have pointed  out that, with a view to improving connectivity, 
they were negotiating new international connections w ith four other airlines.  They added that they 
were in the process of certifying two new national ai rlines that would make international flights.  At 
domestic level, the passenger air transport offer is restricted to flights between Asunción and Ciudad 
del Este, where the company TAM makes a stopover on the way to Sao Paulo, Brazil. 
180. In addition to the problems of connectivity,  other challenges facing the Paraguayan airport 
system are the need to increase inv estment in infrastructure and navigation systems, create more space 
in the airports for cargo in genera l and, in particular, cold room storage capacity for meat exports and 
other products, and to expand cargo tr ansport operations and reduce freight  rates.  All this would help 
to give air transport a greater role in Paraguay's foreign trade. 
Regulatory framework 
181. The National Civil Aviation Directorate (DINAC), an autonomous body linked to the 
Executive through the Ministry of Defence, acts as  the regulatory authority for the sector.  It is 
responsible for supervising all the regulatory aspect s and for proposing and coordinating air transport 
and civil aviation policy.  It is also charged w ith planning, managing and operating all the country's 
airports, managing and maintaining the air tra ffic control services, assisting air navigation and 
communications, and establishing safety systems.  DINAC represents Paraguay in international air transport forums and negotiations. 
182. The legal framework that governs air transport includes Law No. 1.860 of 2002 (Aviation 
Code (CA)), the instruments establishing DINAC
161, the Manual of procedures and requirements for 
the granting of certificates to operate services (DINAC Manual 600162), and other administrative 
regulations, together with the International Civ il Aviation Convention (Chicago Convention) and the 
bilateral and multilateral air transport agreements  to which Paraguay is party.  The CA governs 
DINAC's activities as the Civil Aviation Authority. 
183. All aircraft must be listed in the National Av iation Register (RAN) maintained by DINAC.  
For an aircraft to be registered, the president, gene ral manager and two thirds of the board of directors 
of the company that owns it must be Paraguayan nationals.163  Aircraft listed and registered in the 
RAN have Paraguayan nationality. 
184. Under Article 20 of the CA, Paraguayan registrati on can be granted to aircraft:  (a) owned by 
natural persons of Paraguayan or  foreign nationality, domiciled in the national territory;  and 
(b) owned by legal persons establishe d in the country and having thei r principal domicile in Paraguay, 
or those leased by a Paraguayan enterprise, or by natural persons of Paragua yan or foreign nationality 
domiciled in the national territory.  Foreign legal persons which become domiciled in the national 
territory in accordance with the civil law may own or lease Paraguayan-registered aircraft. 
                                                      
160 These six companies were:  TAM Mercosur, GOL, Aerolíneas Argentinas, PLUNA, AEROSUR 
and TACA.  The companies offering cargo services were :  LAN CHILE (cargo) and TAMPA at Silvio Pettirossi 
airport, and SKY LEASE, LAN CHILE (cargo), AVIENT and PLUNA at Guaraní airport. 
161 DINAC was established by Decree-Law No. 25/90, approved by Law No. 73/90 (DINAC Charter), 
amended in its turn by Law No. 2.1997/03. 
162 Approved by DINAC Resolution No. 860/04. 
163 DINAC Manual 600 (Article 5.1.6). Paraguay WT/TPR/S/245/Rev.1 
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  185. To operate international air transport servi ces it is necessary to obtain an authorization 
granted by Executive decree, subject to author ization by DINAC, whereas within Paraguay air 
transport services need only to be authorized by DINAC.164  DINAC Manual 600 lays down the 
procedure and requirements for the granting of certificates to operate air services.  Airline companies can set their tariffs freely, but they must register them with DINAC. 
186. Cabotage services are restricted to aircraft listed and registered in the RAN and foreign 
aircraft leased by Paraguayan companies, unless bilateral agreements to which Paraguay is party 
provide otherwise.  Under the legislation, cabotag e services must be operated by Paraguayan natural 
persons or legal persons established in Paraguay. 
187. The requirements for operating foreign air lines in Paraguay are laid down in DINAC 
Regulation R. 129.  They include the original desi gnation to operate the air services requested;  the 
power of attorney of the representative of the forei gn company in Paraguay;  the authorization of the 
aviation authority of origin to exploit the route( s), frequencies and operating procedure for flying to 
Paraguay;  a valid service operator's certificate;  and the operational specifications of the aviation 
authority of origin.
165 
188. Decree No. 8.120/06 lays down the fees and charges for the services provided by DINAC.166  
Where air cargo services are concerned, the decree requires all imports received by DINAC but 
collected before being stored to pay a fixed fee equi valent to 1 per cent of the taxable value indicated 
on the customs document.  Goods kept in storage pay a fee that varies with the storage time, plus an 
additional US$1 per cubic metre or fraction ther eof occupied and the man-hours and machine-hours 
spent handling the cargo.  All export cargoes loaded directly onto the transport aircraft pay a fee 
equivalent to 0.50 per cent of the taxable value shown on the final customs clearance document or 
receipt.  General export cargoes placed in storage pa y 40 per cent of the rate applicable to import 
cargoes and 70 per cent if they require special warehouses (for example, explosives, radioactive 
materials, etc.).  There is a special rate for unloaded air cargo in transit to or from free zones.167 
189. Paraguay is party to the Chicago Convention168 and all its annexes;  the Agreement on 
Subregional Air Services (Fortaleza Agreement)  between the MERCOSUR member countries, the 
Plurinational State of Bolivia, Chile and Peru;  an d an agreement with the European Union on certain 
aspects of air services.  Moreover, Paraguay is partic ipating in the negotiations  on the conclusion of a 
broad-scope regional agreement within the frame work of the Latin American Civil Aviation 
Commission (CLAC).169 
190. Paraguay has signed 23 bilateral air transport services agreements170, with various degrees of 
liberalization, some ten of whic h were concluded, or renegotiate d to extend their scope, during the 
                                                      
164 Law No. 1.860/02. 
165 Information published by DINAC.  Viewed at:  http://www.dinac.gov.py/downloads/requisitos.pdf 
[8 October 2010]. 
166 Decree No. 8.120/06 repeal ed Decree No . 14.229/01. 
167 The rate is US$0.05 for each gross kilogramme of cargo, plus the cost of the labour (man-hours) and 
machinery (machine-hours) used in cargo handling, as laid down in Decree No. 727/03. 
168 Ratified by Decree-Law No. 10.818/45 and Law No. 9/48. 
169 For further information visit CLAC at:  http://clacsec.lima.icao.int. 
170 The air transport agreements are with Argentina, Belgium, Plurinational State of Bolivia, Brazil, 
Chile, Chinese Taipei, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, Germany, Mexico, 
Netherlands, Panama, Peru, Senegal, Spain, Switzerla nd, United Arab Emirates, United States, Uruguay and 
Bolivarian Republic of Venezuela. WT/TPR/S/245/Rev.1 Trade Policy Review 
Page 138 
 
 
  period under review.  The agreements with Chile a nd Uruguay are the most liberal, granting up to the 
eighth freedom (cabotage);  the agreements with  the United States and the United Arab Emirates 
extend to the seventh freedom, and those with Co lombia, the Dominican Republic and Panama also 
grant the seventh freedom, but only for cargo operati ons.  The new agreements with Argentina and 
Brazil cover up to the sixth free dom for passengers and cargo.171  Several of the air transport 
agreements signed by Paraguay in clude double taxation provisions. 
Airports and auxiliary services 
191. Under the Aviation Code, airfields and airports are classified as public or private.  The public 
airports are mainly used for passenger transport, while the private ones are used for agricultural, 
livestock and industrial activities.  According to its  Charter (Law No. 73/90), DINAC is responsible 
for managing public airports, airfields, heliports and hydroports.  Currently, DINAC is managing the 
two international airports and eight of the main do mestic airports.  According to Law No. 73/90, the 
building and operation of airports a nd airfields is subject to DINAC regulations;  DINAC, in its turn, 
follows the ICAO provisions. 
192. Under Law No. 1.618, in each case, public works and services concessions must be 
authorized by law, departmental ordinance or m unicipal ordinance.  Concessions may relate to the 
provision of a service or the construction, repair or maintenance of a fac ility and its operation or 
exploitation, and may be granted for existing faciliti es, new facilities or combinations of the two.  
Public service concessions can be granted only by means of a competitive bidding procedure, in 
which any natural or legal person, Paraguayan or foreign, that meets the requirements laid down in the 
terms and conditions may participate.172  Within the context of this Review, the authorities have stated 
that it is planned to have the management of  public airports put out to concession once the 
corresponding law is approved, which is expected to happen in 2011. 
193. The charges for aviation services and the fees payable to DINAC at airports and airfields are 
laid down in Decree No. 8.120/06;  the resulting inco me forms part of DINAC's resources.  Decree 
No. 10.131/00 authorizes the establishment a nd operation of duty-free shops in Paraguay's 
international airports.  These shops  may be managed by any natural or legal person, subject to the 
twice-yearly payment to the Ministry of Finance of 5 per cent of the value of gross sales. 
(c) Land transport 
194. The regulatory body for freight and passenger transport is the National Transport 
Directorate (DINATRAN), a decentralized entity est ablished by Law No. 1.590/00.  Its functions 
include drafting policies and technical guidelines for a ll levels of transport, formulating regulations 
and standards, authorizing and s upervising transport and promoting the development of the sector.  
DINATRAN communicates with the Executive through th e MOPC.  Paraguay, with Argentina, the 
Plurinational State of Bolivia, Brazil, Chile, Peru  and Uruguay, is a signatory to the International 
Land Transport Convention, which establishes the pr inciples of bilateralism and reciprocity in the 
provision of scheduled and occasional freight and passenger transport services between parties.173 
195. Land transport in Paraguay is based largely on  the road system which, according to the 
Economic Commission for Latin America and the Caribb ean (ECLAC), is used for 70 per cent of the 
                                                      
171 Information published by DINAC.  Viewed at:  http://www.dinac.gov.py/downloads/acuerdos_ 
convenios_dinac.pdf [11 October 2010]. 
172 Articles 2 and 5 of Law No. 1.618 on Public Works and Services Concessions. 
173 Paraguay ratified the Convention by Law No. 1.128/97. Paraguay WT/TPR/S/245/Rev.1 
 Page 139 
 
 
  country's freight movements.174  The road network is composed of 31,729 km. of roads175, of which 
13.6 per cent are sealed.  This corresponds to 10.7 km. of sealed highway per 1,000 km2. 
196. The rail transport system consists of one  376-km. long line connecting Asunción with 
Encarnación.  Out of this total length, only 6 km. ar e in use, for transporting grain in the south of the 
country via the interconnection with the Ar gentine rail system (Encarnación-Posadas).176  According 
to the Directorate-General of Statistics, Surveys and Censuses, in 2008, a total of 344,000 tonnes of 
goods, both imports and exports , were moved by rail.177 
197. The development of the railway system is a priority for the Government, whose main 
challenge is mobilizing large amounts of investment to upgrade a system that has been out of use for a 
number of years.  One of the main infrastructure pr ojects of interest to Paraguay is the inter-oceanic 
linkage of the regional railway networks to facilita te access for its products to the ports on the Pacific 
and the Atlantic.  It is planned by means of this project to integrate Paraguay into the 
Paranagua (Brazil) - Antofagasta (Chile) corridor;  this involves connecting Puente Franco (Paraguay) 
with Foz de Iguazú (Brazil) by building a new railway line from Puente Franco to 
Encarnación (Paraguay), which would link up with the existing Encarnación (Paraguay) - Posadas (Argentina) interconnection.  Execu tive Decree No. 4.557/10 established an 
Inter-Departmental Commission which will coordinate  the works and carry out feasibility and design 
studies of the inter-oceanic rail transport corridor.
178 
 
                                                      
174 ECLAC (2007). 
175 Industrial Union of Paraguay (2010). 
176 IIRSA (2009). 
177 Directorate-General of Statistics, Surveys and Censuses (2009a). 
178 Composed of the MOPC, the Ministry of Foreign Affairs, the SEAM, Ferrocarriles Paraguayos S.A. 
and the MERCOSUR Parliament. Paraguay WT/TPR/S/245/Rev.1 
 Page 141 
 
 
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